Measurement has the potential to be a very powerful, highly functional, and extremely positive force in organizations and for their employees. When used well, no other single aspect of management provides greater functionality than performance measurement. But there is a flip side. Unfortunately, when used poorly, not only does it not live up to its positive promise, but performance measurement can be highly dysfunctional.
Because measurement is the lens through which most performance is viewed, because it is the most fundamental management system upon which other management systems are based, and because it is the triggering mechanism for most of what happens in organizations, it should be apparent that there is the potential for both unintentional and intentional distortion and manipulations. If your lens is out of focus or focused on the wrong things, if your most fundamental management system is being poorly used, and if your triggering mechanism is triggering the wrong actions, then bad things are virtually guaranteed to happen.
Here are just a few of the practices that deserve to go down in the measurement “hall of shame.” Rewarding the Wrong Behavior
The weaknesses of most measurement systems together with the need to base rewards on measurement cause a lot of measurement dysfunction. One of my favorite stories comes from the world of sports. Vasili Alexeyev, a famous Russian super-heavyweight weight lifter, was offered an incentive for every world record he broke. The result of this contingent measurement was that he kept breaking world records a gram or two at a time to maximize his reward payout! Can you imagine what would happen in almost any business organization if the measures and rewards encouraged that sort of behavior?
While you might find some of the following examples of dysfunctional measurement unbelievable—even unbelievably stupid, at least in retrospect—sadly these situations are all true and surprisingly common.
- A manager of a fast-food restaurant striving to achieve an award for attaining a perfect 100% on the restaurant's "chicken efficiency" measure (the ratio of how many pieces of chicken sold to the number thrown away) did so by waiting until the chicken was ordered before cooking it. He won the award, but drove the restaurant out of business because of the long wait times.
- A company's measures showed a near-perfect delivery record, yet some 50% of customers complained of their products arriving late. To attain rewards the company had adopted a measure of on-time delivery that only reflected whether the product had left its plant on-time.
- An automobile industry executive explained that to receive his quarterly bonuses "all that mattered was meeting production quotas and getting the cars out of the factory." What happened after that was somebody else's problem.
As these examples illustrate, people tend to do what they are paid to do—even if it's the wrong things. When managers and employees are striving for rewards—anything from "employee of the month" to a pay raise or stock options—they will often revert to self-serving behaviors, even when they know the behaviors are harming the customer, the company, or both. Even when there is minimal dysfunction, very rarely does measurement with strong incentives lead to healthy outcomes or continuous improvement.
Measuring the Wrong Things
Dysfunctional measurement is often caused by organizations doing the wrong things for the right reasons. In order to reduce customer wait time, an insurance company, known for its customer focus, invested in a device to measure average customer wait time for each call center team. They mounted a digital scoreboard above the office cubicles for all to see. This caused employees to get their customers off the phone quickly, even if their issues had not been completely resolved, just so that the customers in the queue wouldn't have to wait! It also compromised customer service behaviors (like empathy for a customer who had recently experienced a death in the family). To his credit, when he realized the problem, the CEO immediately acknowledged it and replaced the "wait time" measure with one that measured the percentage of customers who completed their business on the first call, with no need for follow-up.
Measuring Too Much
Today, some organizations seem to take measurement to an extreme. However, measuring too much can be as dysfunctional as measuring too little. One employee described the situation in her organization in the following way: "We measure everything that moves, but little that matters!"
It seems as if every function, every area, and even every team in an organization has its own scorecard, instrument panel, and idiosyncratic measures of success. That means that many organizations can have literally hundreds of different sets of measures. It is a sad fact that much of the measurement data being collected today is never acted upon because organizations don't know what to do with it. For example, one supermarket chain collected 340 million different data points per week, but used only 20% of the data.
Why are leaders so reluctant to change the measurement system, even if it is not working? Because they are deeply invested in the existing measurement system and being rewarded by it, they don't know how, and they are afraid that they might create an even more dangerous monster—better the devil that you know!
Given the examples cited, it is no wonder that employees are cynical about measurement and its positive potential, but those who avoid or criticize measurement are really just reacting to the way they have traditionally experienced it. The positive power of measurement remains just an unrealized promise. Most companies still have a long way to go to make measurement both useful and relevant to their employees. It is a challenge, but a worthy one.
Adapted with permission of the publisher from Transforming Performance Measurement by Dean R. Spitzer. Copyright 2007, Dean R. Spitzer. Published by AMACOM, a division of American Management Association. For information about other AMACOM books, visit http://www.amanet.org/books/