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Can Performance Metrics Harm Performance?

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Can performance measurement systems negatively impact performance? A recent study (“Performance measurement, cognitive dissonance and coping strategies: exploring individual responses to NPM-inspired output control”) suggests this, finding that employee behavior can change when performance is being measured. When subjected to such scrutiny, professionals sometimes rather focus on easily measurable tasks, while avoiding activities that are not measured or do that do not yield results in the short term. And that may harm the (long-term) performance of professionals and organizations.

Thanks to new technologies, it has become easier to measure performance: the use of KPI’s (Key Performance Indicators), dashboards, scorecards and other performance metrics have become commonplace in many organizations. Such efforts to measure performance are often intended to increase efficiency and effectiveness, however, they may come at a cost. The effects of performance measurement practices receive increasing attention in the academic literature, which addresses questions such as: “What effect does the use of performance measurement have on professionals?” A recent paper discusses one of these effects, and finds that professionals whose performance is being measured tend to focus on quantifiable tasks, and that this focus may negatively affect intangible aspects such as commitment and collegiality.

Managers have to be aware of the limitations of quantitative performance measures to capture the performance of professionals.

Cognitive dissonance

Professionals may hold different beliefs about performance measurement at the same time. First, they may for instance believe that performance metrics may help to gain insights into various dimensions of individual or organizational performance, and may facilitate decision making. Second, professionals who engage in complex tasks and work together with other professionals to achieve their goals may be skeptical of the potential of a performance measure to “capture” their individual performance because some aspects of their job are hard to measure. Holding such different beliefs about the usability of performance measurement may cause cognitive dissonance.

In the field of psychology, the term “cognitive dissonance” has been coined by Leon Festinger to describe the discomfort, tension or anxiety that people feel when some of their beliefs or attitudes are inconsistent with one another. Cognitive dissonance theory maintains that people who experience such dissonance seek to reduce it in various ways in order to achieve consonance. The theory of cognitive dissonance was used as a novel perspective to shed light on the effects of performance measurement on professionals working in organizations.

Decisions about employee rewards and promotions should ideally not only be based on quantitative, but also on qualitative performance information.

Strategies to achieve consonance

The study, which was conducted in three Dutch public sector organizations, finds that many professionals perceive their work as results-driven. However, they also recognize that those results are not easy to measure. The presence of these two different beliefs can be seen as an indication of cognitive dissonance. The interview data in the study shows that professionals reduce the cognitive dissonance following two strategies:

  1. First, professionals attempted to reduce cognitive dissonance by focusing on quantifying performance in a broad sense. The interviewed professionals changed their behavior by focusing on easily measurable parts of their tasks, hence adapting to the “result-driven” organizational reality.
  2. Second, some professionals chose to pay less attention to other activities that were not easily measurable. For instance, it was indicated in the study that some professionals did not “connect” anymore to colleagues because of the introduction of performance measurement, indicating the erosion of the important organizational practice of “collegiality”.

This study took place in the public sector in the Netherlands, yet its findings may also have two practical implications for private sector organizations that employ professionals:

  1. Managers have to be aware of the limitations of quantitative performance measures to capture the performance of professionals, especially if performance is co-created with other professionals or organizations (e.g. in projects) and if “good performance” is difficult to predict upfront (e.g. in a research and development department).
  2. Given the limitations of quantitative performance measures to capture the performance of professionals, decisions about employee rewards and promotions should ideally not only be based on quantitative, but also on qualitative performance information.

 

Based on research by Dr. Berend van der Kolk (@berendvdkolk), Assistant Professor of Accounting and Management Control at IE Business School, and Dr. Wesley Kaufmann, Associate Professor of Public Administration at Tilburg University.

 


About the research

The data included in the study come from 34 interviews with professionals and their supervisors, located in three municipalities in the Netherlands. The vast majority of the interviews includes indications of cognitive dissonance and efforts to reduce the dissonance. The study aims to be a starting point for future research on cognitive dissonance in organizations caused by the use of performance measurement.

Link to the full paper published in the Journal of Management Control (2018): “Performance measurement, cognitive dissonance and coping strategies: exploring individual responses to NPM-inspired output control”.


 

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