Performance Management: only measuring what is easy to measure
Also, too many organizations are making the mistake of only measuring everything that is easy to measure. For example, they often tend to focus on efficiency measures with the hope that these would somehow equate to customer satisfaction or better financial performance. However, it has long been established that it is dangerous to measure one thing while hoping to achieve another. It is important to remember that measures focus our attention and drive behavior.
A classic example of this performance management trap comes from call centers, where measures such as number of calls and call duration are automatically produced by the system and therefore easily reported. The result is that because they are measured and reported people assume that they are important and relevant metrics for the business. This is all okay until we find out that front line agents continuously transfer customers or even cut them off to meet their measures – while the efficiency targets are being achieved, customer service and with it overall performance is not. Call centers, like most departments and business units, are rarely detached operations with a solitary goal of driving down costs. They are integral parts of organizations and their service or product offerings. Therefore, performance measures need to reflect the strategic direction of the entire organization. To avoid the measurement trap organizations need to put efficiency measures into the context of overall performance. This can only be achieved by clearly understanding the strategy of the organization.
As outlined above, strategy for today’s performance orientated organizations involves not just the management of corporate objectives such as shareholder value but also an understanding of how this can be delivered. Measures have to be developed for the customer value proposition, the core competencies, and the underlying resources. These then become leading indicators for future performance and important components of strategic performance management. One of the problems is that many of these leading indicators are intangible in nature and therefore intrinsically difficult to express in simple metrics. When it comes to concepts like intellectual capital, reputation, or organizational culture it is impossible to ‘measure’ those in a traditional measurement sense. The reason for it is that the word measure is often associated with accounting and mathematics. It therefore works in the simplified world of financial numbers, where we can clearly define things and then reduce them to a number. However, businesses operate in a social context that is more complex and we therefore have to realize that by measuring things we will only capture part of the reality behind it.