Performance Management Systems in Business and Government

What steps would you recommend be taken to ensure performance management systems succeed in ensuring strategic goals are achieved, and avoid the danger of unintentionally undermining them? Use examples to illustrate your answer.

The creation of policy is only one aspect of achievement, seeing that something gets done with that policy is the actual desired result. To do this, performance management systems are put in place. It's also important to make sure that it doesn't undermine the desired results. While going through what a useful performance management system can look like we'll draw from examples in the local municipal government of Dalton Township, MI, USA, and a business in the nearby area.

Some years ago I stocked groceries. I was also an inventory analyst. As part of the performance management system, a stocker would load up a cart to take out to the aisles. They scan in the number of boxes on the cart. After stocking they dispose of the empty boxes, pull the overflow into backstock, then take the next cart and do it again. This was the theory. You had to do a certain number of boxes per hour or you would get written up. There was a large variance in the output of employees. This was due partially to the philosophy of the company changing between generations of owners.

To improve metrics the company raised the minimum number per hour. After a while they raised it again. Then again. A problem developed because people couldn't meet their numbers. This was especially true during the day when skids couldn't be left on the floor and because it was a policy that you were supposed to greet all of the customers and if anyone asked you where something was you were supposed to accompany them until they had that item. Eventually it was impossible for anyone to meet these standards. Stockers stopped taking people to items and greeting people. They stopped putting things in backstock. People started having to run back and scan another ticket before they had finished the previous one to keep up with the numbers, and eventually the numbers on the scanned tickets became lies. This grew to such an extent that a third-shift crew once stocked more inventory in one night than had both come in on the trucks and was in backstock; they stocked more than was available to stock. This was noticed by a corporate inventory analyst.

We can assume that the actual desired results of this company are to have customers greeted and helped, high levels of in-stock and on-shelf, organized backstock, good employee morale, an accurate measurement of performance, and accurate inventory. The way this performance measurement was implemented resulted in undermining all of these things. Seven perverse effects of performance measurement have been noted: provide an incentive for gaming behavior; block innovation; block ambition; veil actual performance; drive out professional attitudes; lead to copying, not learning; result in agencies being punished for performance improvement. (Wanna, Butcher, Freyens, 2010, pg 276-277) A good system must seek to avoid these negative outcomes.

A basic control cycle can be put into as little as four steps: carry out strategic planning process; produce a strategic plan document; use strategic plan to shape budget and make operational decisions; monitor plan implementation using performance measures. (Joyce, 2017, pg 231) When the decision maker and the doer are different, as is often the norm in any organization, then you encounter the principal-agent problem and must deal with the difficulties contained therein. Of importance is to look at the efficiency of the inputs to the outputs, the effectiveness of the inputs to the outcome, and the impact on social and economic conditions. (Flynn and Asquer, 2017, pg 75-77) These will be different depending on the organization and the goals, with marked differences between private companies and governments.

Organizations can be characterized in different ways, organizations as: machines, organisms, brains, cultures, political systems, psychic prisons, flux and transformation, and instruments of domination. (Morgan, 2006) Organizations can be configured in different ways, organizations as: entrepreneurial, machine, diversified, professional, innovative, missionary, and political. (Mintzberg, 1989) This means that a right way cannot be found for all situations, but must be found for each situation.

A park that was recently done in Dalton Township is an example. After various discussion for months I wrote up a proposed amount that the board approved, I then chose which equipment to order. I worked with the maintenance department to arrange getting the equipment put together and installed. I did not keep track of work hours on the project or the number of days between events in the project process explicitly, but because I was close enough to the ongoing development of the project I was able to keep implicit note of the developments while monitoring and guiding through informal conversations. This allowed us to achieve the desired result while continuing to make balanced progress on other projects that are also sensitive to weather and season. This is a successful result, with few measurements. This certainly does not work in all organizations or on all projects, but it did in this situation.

A key piece is to have mutual shared expectations. Deception is often used to maintain a relationship by avoiding an uncomfortable truth. To counteract this, a match between both stakeholders' expectations, with both being aware of that shared expectation, is key. This internally incentivizes both meeting the expectations and not lying about actual performance. (Millar and Tesser, 1988)

Through the whole process of strategic and performance management it's important to implement procedures and mechanisms that lead to the desired outcomes and impacts while avoiding unintended and undermining side effects. To this end, the context of the organization and situation must be matched with the methods used. There are differences but also similarities, as in the matching of expectations, throughout these decisional items to consider.

Reference List

Flynn N & A Asquer (2017) Chapter 5 ‘Managing performance’. Public Sector Management. 7th Edition. London: Sage.

Howlett M (2011)‘Organizational implementation tools’. Designing Public Policies. London: Routledge.

Joyce P (2017) Chapter 10 ‘Monitoring’ in Strategic Leadership in the Public Sector. 2nd Edition. Oxford UK: Routledge.

Millar, Karen and Tesser, Abraham (1988) Deceptive Behavior in Social Relationships: A Consequence of Violated Expectations, The Journal of Psychology, 122:3, 263-273, DOI: 10.1080/00223980.1988.9915514

Mintzberg, Henry (1989) Mintzberg on Management. New York, NY, USA: Free Press.

Morgan, Gareth (2006) Images of Organization. Thousand Oaks, CA, USA: Sage Publications, Inc.

Palfrey C, Thomas P & Williams C (2012) Chapter 3 ‘Designing evaluations’. Evaluation for the Real World: The Impact of Evidence in Policy Making. Bristol UK: Policy Press.

Wanna J, J Butcher & B Freyens (2010) Policy in Action: The Challenge of Service Delivery. Sydney Australia: University of New South Wales Press.

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