Supply chains

performance indicators do not tell everything

In the discussion about performance and indicator-oriented work, unwanted effects are increasingly emerging. These are the result of the tunnel vision that is related to performance measurement. About the fox and the hare.

Measuring is knowing.

“Performance measurement forces people to perform on predefined goals and indicators. Performance measurement thus contributes to targeted action and the ability to account for effectiveness and efficiency.” Thus the literature on performance measurement.

On the basis of this wonderful objective, many organizations set up beautiful management and control systems. From Balance Score Card to the INK Model. From this position it is assumed that as the system functions better, the performance indicators develop, the quality of the organization also increases.

However, after some time organizations realize that the organization does ‘perform’ on certain measured points, but that the overall performance of the organization has barely improved. The organization is confronted with the limitations of the system. On the one hand, there is a one-sided focus on what is measured. On the other hand, people often do not understand what they actually measure.

Not measuring is not knowing.

The increased complexity of organizations in recent years has led to organizational management becoming increasingly difficult. This has often led to ‘fat’ organizations with a huge middle layer. It has also led to a strong formalization of the organization, which is driven by performance indicators. However, it is an impossible task to measure everything. The ideal indicators are then determined through long sessions. The fact that many things are ignored is inherent to the process.

Often it is mainly the quantitative indicators that win. Because how do you quickly and effectively measure people’s behavior. Or the development of the level of knowledge and experience in the organization? Often people in the organization also withhold information that works to their disadvantage. For fear of being paid. The system generates its own unwanted effects, ultimately leading to perverse behavior.

The black hole.

The other major problem is business and information blindness. People are not aware of all factors that can influence. The perception of the organization is limited to what one measures. In addition, it is partly realized what is not measured, but where a conscious choice has been made in the control model. Beyond it is the unknown terrain that has never been explored. People don’t know, they don’t see it, so they don’t measure it. So there is always a black information hole in the organization.

Performance models are therefore limited in their scope and ability to function as performance drivers for organizations. Yet organizations, private and public, persistently cling to the idealism of performance models. Certainly in the current time when “transparency” is the magic word, and lists of good and bad organizations are emerging everywhere, such as those that RTL4 is continuously driving for example. The effect is a facade, which is often separate from the actual organization. Another waste of time, and even worse a source of cynicism among the people who really know how it is.

Recommendations.

Where performance models fail, people can make a difference. Too often people’s quality is underestimated or ignored. A well-performing organization starts with well-performing people. Their capabilities, motivation and commitment are more important than the performance model, which in almost all cases only says something about yesterday’s performance and not about the future. In addition, people are more aware of the decline of the organization, where the model does not yet give alerts.

Not scale or complexity leads to better organizations, but simplicity. Overdeveloped performance models lead to far-reaching formalization and increasingly less space for behavioural innovation. The “rule is rule” principle is gaining ground and throttling any initiative. The formalization or bureaucratisation of the organization leads to a rigid, customer-unfriendly organization in which fewer and fewer employees identify and feel involved.

Strive for long-term goals and measuring points. It is not that difficult to improve the company’s margin in the short term. [profit maximization] But in most cases this leads to robbery on the organization. The core objective of organizations is not profit or growth, but long-term continuity.

This means that the relationship between the various stakeholders of the organization must be examined and balanced. Board and management should become aware that the growth and profit maximization model is an illusion and offers no guarantee for the future. Investing in people, developing their capacities, involvement and motivation, offering space for informal solutions does lead to a structural improvement of your organization.