Performance Measurement | Don’t Let Metrics Undermine Your Business

- Harvard Business Review’19.

Performance can be defined as the action or process of carrying out or accomplishing an

action, task, or function by an employee in order to reach organizational goals and mission. It
also encourage and reward behaviors aligned with organizational growth. In order to ensure
that goals are consistently being met in an effective and efficient manner Performance
Management comes into picture. Performance Management is an iterative process of goal
setting, communication, observation and evaluation to support, retain and develop
exceptional employees for organizational success.
As we have learned what Performance Management is all about, now let us move ahead to
the main agenda that Is metrics undermine your business? Metric based performance
measurement in any organization can be effective but if we only focusing on metrics then
organization can easily lose sight of goals and strategy.
In business the intent behind metrics is usually to capture some underlying intangible goals.
If any company selects “Customer Delight” as their objective for strategy and goals and
decide to track the evolution on it using customer survey scores. These survey do help the
manager to see the performance of their respective employees. But as employees start
thinking the strategy is to maximize survey scores, rather than to offer the best experience to
the customers. Hence you can conclude from this how an effective way of meeting the
organizational goal and measuring the performance of employees can turn into such a disaster
because there are plenty of ways to boost scores while actually displeasing customers.
Considering the case of Well Fargo, where employees opened 3.5 million deposit and credit
card accounts without customers’ consent in an effort to implement its now-infamous “cross-
selling” strategy. Company had to faced lots of legal and financial issues due to its
employees, later with close examine it was found that “Cross Selling” is not the major
problem instead it was company’s “Cross Metric” which landed up Well Fargo here.. Well
Fargo has a strategy of building long-term customer relationships, and management intended
to track the degree to which it was accomplishing that goal by measuring cross-selling.
Unlike other banks who believes in creating long run relationship with its customers.
Root cause for Well Fargo issue:
 The company has an incentive-compensation program that made it possible for its
employees to pursue underhanded sales practices.
 The sale culture of the company was very challenging and relentless pressure to meet
them.
 The real source of issue was the Performance Measurement system.

Metrics provide evidently defined path where strategy seem too vague to have an impact.
Because they can coordinate activities and actions, metrics are crucial. But as the Wells Fargo
case shows, unless the in-built alterations of metrics are seen, they can be dangerous—and
the distortions can be amplified precisely because the inconsistent metrics coordinate
performances. It turns out that the tendency to replace strategy with metric
called surrogation—is quite universal. And it can destroy company value.
 Performance Measurement | Don’t Let Metrics Undermine Your Business
- Harvard Business Review’19.

Guarding against Surrogation:

 Work culture plays a vital role in any organization, Employee performance has huge
impact with respect to the culture which the organization create.
 The organization invest more time in helping employee to gain board view of
company's vision and mission then employee will be more participative and feel
motivated.
 The metric of the strategy is concrete and noticeable. The employee should admits,
the replacement of the metric for the strategy.
Considering all the measures to avoid surrogation Intermountain Healthcare who believes in
offering high quality at low cost care deicide to implement. This helps reduce surrogation
because those elaborate in implementing the strategy will then be better able to clench it,
despite its intellectual nature—and to avoid swapping it with metrics.
Implementation of the Strategy:
 Employee should ask to contribute or come up with ideas that could help company to
grow, because then employees will show more interests if they get involved in the
actual workflow.
 Loosen the link between metrics and incentives. Avoid tying compensation with
metrics based targets.
 Use multiple metrics.
 Build trust and give employee the sense of responsibility to make good decisions and
take a charge.
Conclusion:
It might be difficult for a managers to find out the correct path to take both organization goal and
performance measurement simultaneously. But having a wrong method could lead the organizational
towards an end. As the Well Fargo case illustrates, considering only metric for compensation could
lead us nowhere and prevention is always better than cure.

Reference:
https://hbr.org/2019/09/dont-let-metrics-undermine-your-business
Performance Measurement | Don’t Let Metrics Undermine Your Business
- Harvard Business Review’19.