Ideally, key performance indicators (KPIs) should help management see progress in meeting the organizational goals that matter most, as well as deficiencies that need to be addressed. The KPIs for the organization’s workforce are often bucketed under the general heading of performance review systems, or some other euphemistic term.

KPIs for human performance are supposed to be a tool for improvement. However, they often instead become like a rod on people’s back — a demotivator, or even a system that encourages behavior that may be counterproductive and harmful to the organization’s long-term expansion and success.

Samuel Culbert, professor of management and organization at the UCLA Anderson School of Management, bluntly describes the performance review as doing exactly the opposite of its intended purpose:

"Help people grow? Hardly. It [the performance review] actually prevents workers from improving. It is a dehumanizing process that leaves workers demoralized, unwilling and unable to address weaknesses. It makes them hate coming to work, let alone inspire them to turn themselves into better employees."

Management consultant Stacey Barr goes further. In her book, “Prove It! How to Create a High-Performance Culture and Measurable Success,” she observes that if KPIs that are not within the complete control of the people being judged, such indicators result in at least two negative consequences: People begin fudging the figures, or they devise ways to scam the system.

Author David Parmenter, in the third edition of his book, “Key Performance Indicators: Developing, Implementing and Using Winning KPIs,” says that well over half the measures of performance implemented by organizations lead to negative consequences.

Consequences of Fear Culture

Bad cultures often are marked by a state of fear or defensiveness. In such an environment, people can't be creative. Without creativity, bold shifts in performance are unlikely.

Performance measures are intended to lead to accountability for actions and results. Though accountability certainly is a desirable outcome, this creates an uncomfortable relationship. The common view is that when people are held accountable for specific performance attributes, they will be motivated to perform well. The reality is that people also see that accountability can lead to blame and punishment if performance doesn’t hit the target.

When a company’s profit doesn’t meet expectations, consequences follow a typical script. The board holds the CEO accountable, with a price paid in loss of bonus, stock options, or even job security and self-esteem. With these consequences in play, it’s easy to guess what type of accountability this drives. The CEO begins cutting costs across the board, instilling a culture of fear that says: Unless everyone starts working smarter, your job might be the next to go.

This dysfunctional system begins to permeate the organization.

Under pressure, customer service agents change the definition of “problem solved” to a more generic “first-call resolution” KPI. Help desk operators begin rushing through calls so they can post better numbers for “calls answered under three rings.” Sales representatives may begin holding sales numbers over to post in the next period if the current quota is met.

The list of system fudges goes on and on in a climate of fear.

Motivating Properly

For strategic changes that truly stick, we have to tackle the ways that performance review systems become long-term contributors to — even instigators — of bad culture.

Human nature being what it is, people don’t like being held accountable, as we all have fear of failure. Yet, can good performance be expected if no one is held accountable? Of course not. We must sort through this uncomfortable relationship to make accountability less threatening and more compatible with improving organizational performance.

There's a good chance that managers haven't considered the causal link between measuring people and the dysfunctional behaviors that come from it.

Is there a solution to this? You bet. But it requires a series of mindset shifts into a culture in which high-performance teams are the focus, backed by evidence-based management that deescalates the attention on individual performance. And that is easier said than done.

 

A sound strategy supporting individuals can smooth the way for introduction of new technologies or processes.

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This post is part of a series explaining the value of change metrics to utility leaders, change practitioners, transformation executives and process professionals. Learn more:

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Dana Houston Jackson is the lead principal change adviser at 1898 & Co., part of Burns & McDonnell. A straight shooter and advocate of new thinking, Dana prides herself in simplifying the complex in a “box-poking,” 25-year career in organizational development and change management. Some of her clients include energy, utility, technology, manufacturing and construction companies, government and academia, and nonprofits.