BEHAVIOUR ASPECTS OF PERFORMANCE MEASUREMENT

Performance measurement is the process of determining how successful organizations or

individuals have been in attaining their objectives (Seang, 2003). When it comes to managing a
workplace what you do not know can hurt you. More specifically, if a manager does not know
exactly how well or how poorly his or her employees are performing, she will have no idea how
to reward the workers who are excelling. Nor will she know when to assist or even fire those that
are underperforming measuring and managing employee performance is important because it
gives you the ability to properly gauge worker efficiency, identify who is working hard and who
is not, determine how to properly compensate your workforce, and improve your workplace’s
overall productivity. The following are reasons why managers need to consider the behaviour of
employees towards the results of performance measures:

The first one is to maintain increased employee efficiency. According to a 2011 white paper
from new media learning, one of the most important reasons to measure the employee
performance, and then manage it once it has been measured, is to keep your employees working
at a highly efficient and productive rate. Performance measures ranging from annual reviews to
quarterly quotas ensure that employees work hard and well or face a poor evaluation. Once
evaluated, employees can be managed through encouragement to keep up the good work, or else
they might be managed through further training and coaching.

The second one is to identify strong and weak links. The USDA farm service agency suggests
that the continual use of performance evaluation lets you track an employee’s efficiency and
productivity over a period of time. This in turn allows you as a manager to identify which
employees continually outperform expectations, and which consistently fall short. You can then
manage exceptional employees through promotions and additional responsibilities and the
underperformers through probationary periods, demotions or termination.

The other reason is to determine the appropriate compensation. In certain work

environments, performance evaluations can be tied to employee compensation. It makes sense
that if a consistently standout employee deserves a promotion, then she might also deserve a pay
increase. Similarly, if a consistently underperforming employee deserves a demotion, then she
should not be given a pay raise until she raises her level of performance
Apart from above the other one is to improve the workplace productivity. When you have
ability to properly gauge employee efficiency, identify the strong and weak employees then your
business will become more productive and therefore more successful. Employees become aware
of their peers who consistently receive pay increase and promotions and they strive to follow in
those peers’ footsteps. Similarly, employees might look at their peers who have been demoted or
fired and view them as cautionary tales.

Controllability principle

Controllability is one of the core aspects in management control system (Jakobsen & Lueg
2014). The controllability principle states that managers should be held accountable only for the
actions and results that they can significantly influence and are able to control (Drury & El-
Shishini 2004, p. 5). Therefore the accountability of actions should not exceed controllability.
This indicate that there needs to be clearly recognised controllable factors and uncontrollable
factors. In other words, the controllability principle is related to reliable evaluation systems
(Davila et al. 2012). Most measures are inherently difficult to distinguish as to the level of
controllability, so controllability and uncontrollability can be defined by their use and situation
respectively (Davila et al. 2012). Therefore, it is very important to recognise the controllability
level in performance measurement systems to evaluate performance.

The controllability principal is a condition of fairness, which leads to manager satisfaction and
motivation, in turn leading to high performance (Davila et al. 2012). Fischer (2010) provides a
study about the controllability principle affecting managers in organisations. Controllability
principle has different impacts on different level of managers. The lower level managers
experience more negative effects on their performance when there are uncontrollable factors. In
contrast, higher level managers are less affected since uncontrollable factors are a part of their
role and executive always face uncertainty when making decisions (Fischer (2010). Top level
management may even obtain better results due to uncontrollable factors, since they can be more
sensitive and motivated to deal with these factors if the factor is external (Jakobsen & Lueg,
2014). In summary, individual mangers experience different outcomes as a consequence of
uncontrollable factors.
The impact of performance measurement on standard performance

Performance measurement is used to motivate managers to make decisions that benefit the
corporation and themselves. Therefore, the key to good performance measurement techniques is
to set goals that are realistic and that incorporate decisions over which the manager has control.
Then, the company can evaluate the manager based on controllable factors, which are the
components of the organization for which the manager is responsible and that the manager can
control, such as revenues, costs, and procurement of long term assets and other possible factors.
This makes it easier to align the goals of the manager with those of the organization and to
design effective performance measures.

Performance measurement is an increasingly pervasive aspect of organizational life, especially in

the public sector (Townley, Cooper & Oakes, 2003), and according to Hood (1995) performance
measurement system improve the effectiveness, the efficiency and the quality of organization in
the public sector. The incentive-oriented use of performance measurement system is negatively
affects the performance, however, as the contractibility increases this effect becomes less
negative. The exploratory use has a positive effect on the performance and tis effect is unaffected
by contractibility and finally the operational use does not have any effect on performance. The
degree to which the following three conditions (clear organizational goals, measurable outputs
and the knowledge of production function which transforms efforts into results) are met
simultaneously refers to contractibility.

Another impact is improvement of organization performance as there is a significant positive

relationship between performance measurement and employee behaviour, thus performance
measurement significantly contribute to employee behaviour.

There is also an indirect effect of company performance measurement on employee perception of

firm’s performance. Performance measurement system interactive use impacts on organizational
learning and job performance, that is to say interactive use of performance measurement system
has a direct positive effect on both organizational learning and job performance. Also,
organizational learning is positively and significantly associated with the interactive use of
performance measurement system.
The convectional theory on reward schemes and performance measurement

A major part of performance management involves managing employees and managers, as their
performance will have a major effect on the performance of the organization as a whole. The
convectional theory will look at how reward schemes can be used to influence the behaviour of
employees. Reward system refers to all the monetary, non-monetary and psychological payments
that an organization provides for its employees in exchange for the work they perform.

Managers attempting to motivate superior performance among subordinates and within their
organizations and units offer, very often, incentives compensation to their subordinates linked to
the level of performance achieved. These written and unwritten promises of incentive
compensation are called reward systems.

The subordinates’ performance evaluation and reward systems are mechanisms of the
organization control system used to influence individual and group behaviour. These two
different mechanisms may devise a control system with focus on performance evaluation
measures. Therefore behaviour accounting has shown that a control system with a strong reliance
on performance evaluation may lead to a higher level of dysfunctional behaviour.

Problems associated with reward schemes

Some of the problems associated with incentives programs are:

They can crush creativity, by focusing people on a reward we actually make them less creative
since reward tends to narrow a person’s focus, which is fine when there is a clear path to a
solution, but makes them less effective when the task requires a level of creativity something
most jobs today’s economy require.

Not only that but they can also crowd out good behaviour. By adding a reward we remove a
person’s ability to make a decision based on morals, interests and values and force them to make
it based on the reward. This has a tendency to devalue the activity itself. Good example is where
the football players are promised money for each player who score for the Flames, in such
situations some players will be greedy with ball because they want to score in order to receive
the prize of money.
Apart from above reward schemes can encourage cheating, shortcuts and unethical behaviour.
Rewards tied to sales quotas, revenue targets and other short-term, extrinsic targets can
encourage bad behaviour and cheating. For example in manufacturing company where targets
are accompanied with rewards, some supervisors use shortcuts methods in order to produce a
product which might result many returns by the customers due to poor quality.

The other problem with reward schemes is that they become addictive. One of the more
interesting problems of incentives is that, just like a drug addiction, the introduction of rewards
for completing a task creates the need for the same or greater rewards for future tasks of the same
nature. These rewards quickly become less about a bonus and more about what is due, meaning a
greater reward is needed to encourage improved performance each time.

Finally rewards also have a tendency to limit long-term thinking. They encourage people to
focus on immediate tasks, what is required to get the reward at the expense of longer term
consequences or opportunities, this is also what happens in Malawi where many presidents focus
on short term development so that people should also put them into power instead of focusing on
long term development.

Remedies to behaviour aspects of performance measurement

Here are five remedies to address behaviour aspects of performance measurement.

The first one organizations should align system to strategy. Most organizations use performance
management as an umbrella term for a broad set of analytical and management tasks. In fact, no
two organizations regard performance management in exactly the same way, so it is not
surprising that performance management tasks are disconnected from organizational goals. This
also explain why the effects of performance management system on employee performance can
vary widely even within an organization. Therefore, companies must learn to view performance
management systems not just as a tool to measure performance but as a way to align employee
behaviour with organizational objectives.

The second one the companies should prioritise objectives, because one mistakes the companies
often make is to chase multiple goals and use a cascade process to ensure the entire organization
contributes to the same goals. In reality, this approach leaves the workforce misaligned,
disengaged and inefficient. The best organizations simplify and focus performance management
on a few vital goals. Successful companies are explicit about the key causes of improved
employee performance and seek to create momentum to achieve a few clear and transparent
goals.

Another one is to align employee metrics to goals, since performance management system are
often complex and disconnected. Many organizations set targets that only tangentially align to
long-term goals, fail to track the completion of must have tasks and ultimately fail to incentive
the right behaviours in employees. The best companies use tracking mechanism that align
employee metrics to future goals, track tasks completion as well as metric success, measure the
effect of that success and reward those employees who encourage the right outcomes in the right
way.

The other remedy is to take full account of employee contributions. Some human resources
executives believe their performance management process accurately reflect the entirety of
employee contributions, including the way that some employees develop value added
connections among employees, teams and the organization that multiply their contribution to
enterprise performance. Successful organizations align business performance management to
human resources performance management. To achieve improved performance, the best
managers establish a climate of trust, create incentives for joint business objectives and reward
thoise value over individual achievement.

Finally the organization should ensure systems are adaptable. When managers are overwhelmed
with data and overly focused on financial results and past variances, they inadvertently miss
changes in their operating environment which results most companies complicates decision
making instead of clarifying it. Even if managers do see changes they seldom have the decision
making ability to adjust course and relocate resources midstream. Successful firms create ana
adaptable review system that sets escalation and divestment triggers ahead of time, reduces data
metrics to identify the most relevant information, ensures their reviews look at changes to the
operating environment and regularly report on human capital, market and operational factors as
well as financial factors.