How to Improve Performance Measurements

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motivational problems: managers might feel constrained by multiple performance measures as they prescribe what to do and thus do not leave much entrepreneurial freedom => decreased intrinsic motivation. Furthermore: measurement systems with strong cause-effect relationships where different financial and non-financial targets/tasks are clearly specified and strongly linked -> decrease autonomy/empowerment in managerial work because less independence in how the power is done.

Because some aspects of performance are more difficult to quantify and measure, (R&D productivity, employees’ satisfaction => all crucial to long-term growth), the main danger inherent in modern control systems design is that it is these aspects that get relatively less emphasis, and that we show an almost inevitable tendency towards various forms of short-termism. Also, measures become less useful once people have learned to manipulate them for their own benefit, it seems inevitable that the design of performance measurement and control systems will be a continually evolving process. We therefore need concentrate on understanding the dynamics of these processes rather than hoping to create one system that will remain valid over time.

Quantitative performance measurements – whether single, multiple, or composite – are seen to have certain undesirable consequences for overall organizational performance. Esp for large organization: higher complexity requires better knowledge of organizational behaviors for managers to make the best use of personnel available. Even where performance measures are instituted purely for purposes of information, they are probably interpreted as definitions of the important aspects of that job or activity=> have important implications for the motivation of behavior => manager’s research into possible intended and non-intended effects of measurements on behaviors crucial to accomplishment of the organization’s goals.