Reasons why performance management systems fail

MOST performance management systems suffer from two main perennial problems; measurement problem and feedback problem. Regardless of what your system is called these are the main problems that make most performance and measurement systems useless. I know a lot of organisations have different systems, some very old and others new and with fancy names.

Unless and until the two problems are addressed the system will not work. You may have noticed that some organisations are abandoning performance assessment completely. Here are the major problems related to performance management.

The measurement problem

Regardless of the system you are using Observed Performance = True ability (effort) + Error (Luck). If your performance measurement system at any level is to be good it must minimise the amount of error in the measurement system. It is impossible to get rid of all the error in the measurement of performance. To reduce this amount of error the system must be as objective as possible. In practice, we know that most of the systems are very subjective making them unsuitable to differentiate between good performers and bad performers. When your measurement system can capture the true ability or effort of the individual in the observation of performance half your job is done. One of the true characteristics of good performance is that whatever is being measured must show some element of consistency. Variation in performance is mainly as a result of an error in the measurement instrument. As an example “playing lotto” does not reflect the true ability or effort of the individual. Whether you win lotto or not is a function of luck more than skill. Most of the performance measurement systems we are seeing on the market are like playing “loto”. ey do not reflect the true ability or effort of the employee, instead, they show that luck or measurement error is at play. If your system cannot objectively distinguish between good performers and poor performers it means it’s not a good system.