The Five Traps of Performance Management
The Five Traps of Performance Measurement by Andrew Likierman
In an episode of Frasier, the television sitcom that follows the fortunes of a Seattle-based psychoanalyst, the eponymous hero’s brother gloomily summarizes a task ahead: “Difficult and boring—my favorite combination.” If this is your reaction to the challenge of improving the measurement of your organization’s performance, you are not alone. In my experience, most senior executives find it an onerous if not threatening task. Thus they leave it to people who may not be natural judges of performance but are fluent in the language of spreadsheets. The inevitable result is a mass of numbers and comparisons that provide little insight into a company’s performance and may even lead to decisions that hurt it. That’s a big problem in the current recession, because the margin for error is virtually nonexistent.
So how should executives take ownership of performance assessment? They need to find measures, qualitative as well as quantitative, that look past this year’s budget and previous results to determine how the company will fare against its competitors in the future. They need to move beyond a few simple, easy-to-game metrics and embrace an array of more sophisticated ones. And they need to keep people on their toes and make sure that today’s measures are not about yesterday’s business model.
In the following pages I present what I’ve found to be the five most common traps in measuring performance and illustrate how some organizations have managed to avoid them. My prescriptions aren’t exhaustive, but they’ll provide a good start. In any event, they can help you steal a march on rivals who are caught in the same old traps.
Trap 1: Measuring Against Yourself
The papers for the next regular performance assessment are on your desk, their thicket of numbers awaiting you. What are those numbers? Most likely, comparisons of current results with a plan or a budget. If that’s the case, you’re at grave risk of
In an episode of Frasier, the television sitcom that follows the fortunes of a Seattle-based psychoanalyst, the eponymous hero’s brother gloomily summarizes a task ahead: “Difficult and boring—my favorite combination.” If this is your reaction to the challenge of improving the measurement of your organization’s performance, you are not alone. In my experience, most senior executives find it an onerous if not threatening task. Thus they leave it to people who may not be natural judges of performance but are fluent in the language of spreadsheets. The inevitable result is a mass of numbers and comparisons that provide little insight into a company’s performance and may even lead to decisions that hurt it. That’s a big problem in the current recession, because the margin for error is virtually nonexistent.
So how should executives take ownership of performance assessment? They need to find measures, qualitative as well as quantitative, that look past this year’s budget and previous results to determine how the company will fare against its competitors in the future. They need to move beyond a few simple, easy-to-game metrics and embrace an array of more sophisticated ones. And they need to keep people on their toes and make sure that today’s measures are not about yesterday’s business model.
In the following pages I present what I’ve found to be the five most common traps in measuring performance and illustrate how some organizations have managed to avoid them. My prescriptions aren’t exhaustive, but they’ll provide a good start. In any event, they can help you steal a march on rivals who are caught in the same old traps.
Trap 1: Measuring Against Yourself
The papers for the next regular performance assessment are on your desk, their thicket of numbers awaiting you. What are those numbers? Most likely, comparisons of current results with a plan or a budget. If that’s the case, you’re at grave risk of