• Managing people

Performance Measurement Is a Tool for Learning, Not Control

A future without performance appraisals?

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Accenture’s dramatic move to abandon performance appraisals is welcomed by Andrey Pavlov, Dina Gray, and Pietro Micheli the authors of ‘Measurement Madness’:

A couple of weeks ago, Accenture made a big announcement – starting from September 2015, it will give up its decades-old system of individual performance management. That’s it – there will be no annual performance appraisals, no employee rankings, and no standardized paperwork to fill out. What will replace it is an arrangement ensuring that the employees get the relevant feedback in real time, when and where they need it most.

Although this move has been described as ‘revolutionary’, Accenture is not the first major organization to take this path. Microsoft has already relinquished its appraisal and ranking system, and Deloitte is developing a breakthrough approach to managing performance that does not involve cascaded objectives, annual reviews or 360-degree evaluations. So what is going on?

We think that these bold decisions taken by the flagship companies reflect the growing realization of the fact that numbers by themselves do not automatically lead to performance improvement. In other words, performance measurement is not the same as performance management. On the contrary, the desire to quantify everything often generates dysfunctional behaviours. Recall the recent banking crisis with its revelations about numeric targets driving employees to secure lucrative deals at any cost or, as in the case of Lloyds, even to sell financial products to themselves. The public sector has also seen its share of ‘measurement madness’, with police downgrading crimes or even asking crime victims not to file the complaint so as not to mess up the reporting statistics. When performance measurement is used for control, it tends to backfire. As Warren Buffett once said, “managers that always promise to ‘make the numbers’ will at some point be tempted to make up the numbers!”

What companies like Accenture, Deloitte, and Microsoft are beginning to realize is that there is another way. Instead of being used as a tool for controlling behaviour, performance measurement can provide relevant and reliable information to facilitate learning and inform action. It is there to support decision making, not to replace it. The caveat, however, is that in order to do that, the information provided by performance measurement needs to be timely and relevant. Only then can the emphasis shift from evaluating past actions to informing the actions going forward, and only then can performance measurement become a truly effective instrument for managing and improving organizational performance. Speaking to the Washington Post, Pierre Nanterme, Accenture’s CEO, noted that “Performance is an ongoing activity. It’s every day, after any client interaction or business interaction or corporate interaction. It’s much more fluid. People want to know on an ongoing basis, am I doing right? Am I moving in the right direction? Do you think I’m progressing? Nobody’s going to wait for an annual cycle to get that feedback. Now it’s all about instant performance management.”

What Pierre Nanterme’s view suggests is that performance management is above all about continuous learning, and numbers are useful only in so far as they can facilitate such learning. When instead they hinder it, they become a liability, and that is a trap to avoid.

Andrey Pavlov, Dina Gray from Cranfield School of Management, and Pietro Micheli, from Warwick Business School are the authors of ‘Measurement Madness: Recognizing and Avoiding the Pitfalls of Performance Measurement’ published by Wiley in December 2014.


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