Originally posted on Management Focus by Dr Andrey Pavlov

One of the UK’s major airports was looking to cut the time passengers spent inside the terminal following landing, and the management identified that the longest part of the passengers’ journey was spent waiting at the luggage carousel.
To solve this problem, a performance measure was quickly introduced for the airport’s baggage handlers – ‘first bag to the belt’. The team were measured on how long it took them to start delivering the luggage after the plane arrived. The performance against this measure was climbing steadily, and the managers were pleased, until they noticed what was happening on the ground.

The plane would arrive, the baggage handlers would pull up, take a smallish bag and give it to the youngest member of the team. He would then sprint to the terminal and slam it onto the belt – target met! The team then leisurely unloaded the rest of the plane, while the first bag continued to circle on the carousel. Not the outcome the management were trying to achieve.

Measures will change behaviour. On one hand, this is good news – we introduce performance measures hoping that they will help people take actions that are aligned with the organisation’s purpose. On the other hand, they often encourage dysfunctional behaviour, as in the airport example.

The trouble with performance measurement is that it tempts us with an illusion of control and a promise of accountability. We begin to believe that organisations can be engineered according to our desires and that measures and targets can give us the ultimate control over what happens tomorrow. But when measurement becomes a substitute for judgement, disaster is often just around the corner.

There are three principles of performance measurement that will help you steer clear of such disasters:

Numbers are not the reality

When we look at reports, graphs and league tables, it is tempting to believe that they give us a clear picture of what is going on. However, more often than not they mask dozens of decisions, assumptions and concessions that make the information vague and difficult to interpret. For example, when comparing average pay in the public and private sectors, it’s easy to conclude that public sector employees are overpaid. However, this simple comparison does not take into account the fact that many public sector jobs, for example healthcare and education, require highly skilled people. This makes the conclusion flawed. When the age, education and qualifications of the employees are factored in, the pay gap practically disappears.

Similarly, league tables, adored by politicians and regulators, always hide important differences and can mislead by presenting the information as less ambiguous than it really is. Treating these numbers as reality and using them blindly to make decisions can have disastrous consequences.

Behaviour will change – but rarely in the way you expect

The example of the baggage handlers is known as ‘gaming’ and can potentially do serious damage to an organisation. Gaming is always a reactive behaviour – it springs up in response to managers’ attempts to introduce performance measures and targets.

Gaming can be found in any organisation. For example, in order to meet targets for seeing patients in Accident & Emergency within four hours, some NHS hospitals placed patients into a specially designated area, often in the same room, where the target would technically not apply. In other hospitals, patients were kept in ambulances so as to delay their arrival in A&E which would set off the clock on the fourhour target.

It is often difficult to predict which shape the gaming behaviours will take. So after a performance measure is introduced, it is important to remain engaged and observe the impact that the measure is having.

The tougher the control, the bigger the consequences

It is not the measures themselves but the use of them for control purposes that produces dysfunctional consequences.

The recent inquiry into evidence of police manipulating crime data, along with similar inquiries in the UK healthcare and US education systems, produced the same conclusion – gaming and cheating are driven by the extraordinary pressure to meet performance targets. As Warren Buffett once said, “Managers that always promise to ‘make the numbers’ will at some point be tempted to make up the numbers.”

This, however, is not the only way. Performance measurement is a powerful tool for providing feedback, learning about an organisation, discovering trends and patterns, and enabling informed dialogue. It is when this power is overtaken by the desire to control that it turns into a catalyst for dysfunctional and destructive behaviours.

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