Page 57 - Performance Leadership

46 • Part I A Review of Performance Management

action. Secondly, risk management challenges the intuitive belief of per-
formance measurement that everything will proceed as planned. When
there are discontinuities that threaten corporate objectives, having gone
through a risk management exercise prepares the organization better for
dealing with them. Last, if identifying business risks leads to mitigating
them already, why wait until performance indicators light up in red?

Dare to Break the Rules

Performance indicators should not be used just to judge performance
but also to spark discussion. Current processes aimed at evaluating per-
formance are very aimed at control and are restricted to evaluating the
metrics themselves. The numbers come into the management infor-
mation system, are compared against target, and are color-coded. Supe-
rior performance leads to green numbers, performance on target is
shown by black numbers, and underperformance is shown by red num-
bers. The management information systems apply a filter to manage
by exception and produce a list of indicators where people have under-
performed. They are then warned and, at year’s end, are evaluated to
decide if they get a bonus or not. The results are predictable: people
try to “game” the numbers, coming up with better scores that look good
on paper, but actually damage the business. A more communicative
process is needed. Color coding should not be automatically added the
moment the new data comes into the management information sys-
tem. By comparing results with the target, the responsible manager
assigns the color coding. Perhaps a target is met, but the manager still
assigns the color red to the metric as it could have been done even bet-
ter. Or a target has not been met, but is assigned a green color, because
external circumstances significantly changed. With the analysis at
hand, the managers go into the management meeting where each
manager explains the color coding. The manager then is queried about
choices made and in the end receives a sign-off (or not) by senior man-
agement.
This process may come across as peculiar. “Writing your own report
card” is something we instinctively reject. All managers would imme-
diately score themselves a “green” on all metrics. But in the new process
there is still a sign-off. Senior management approves or modifies the end