Page 21 - Performance Leadership

10 • Part I A Review of Performance Management

The consequences of not understanding the behavioral effects of per-
formance management can be witnessed in most organizations on a
daily basis. One of the most common mistakes people make is focus-
ing on what is easy to measure, not what is important.
For instance, salespeople in many businesses are compensated on
the basis of the revenue that they bring in, instead of on their contri-
bution (revenue minus the cost of sale). The reason for this is that it is
harder to measure the cost of sales than it is to measure revenue alone.
At the end of the quarter the revenue measurement may very easily lead
to excessive discounting, undermining the company’s margins.
Often managers care more about the numbers than about the busi-
ness. Over the years, managers have created an endless collection of
number games to play. Numbers are easy to manipulate. We can
change definitions; we can decide to count certain things while ignor-
ing others; we can make the numbers look perfect on paper. If you
make your target early, it makes sense to push new business to the next
quarter. If there’s money left in the budget toward the end of the year,
let’s make sure we spend it; otherwise it’s gone.
In short, our performance management practices themselves often
lead to suboptimal performance. If people are made responsible for just
a few targets and have available all the means and resources in order
to make that target—as conventional wisdom suggests—they will care
about those targets only. The question therefore arises of whether it is
possible to redeploy resources somewhere else in the process to opti-
mize the organization’s overall performance and whether there is a way
to do this easily.
We act surprised and shocked when we discover all the unwanted
behaviors I have mentioned happening, although I am sure you have
witnessed them time and again, just as I have. We blame it on the peo-
ple and their opportunistic, political behavior. However, performance
management should drive the right behaviors, and we should be able
to predict the dysfunctional ones so that we can counter those behav-
iors. Performance management is there to support performance, not
hinder it. The top-down approach to performance management, aimed
at management, focuses on goals, objectives, and objective measures—
it simply doesn’t take human behavior into account. Performance man-
agement should draw from the experience in the social sciences,