André A. de Waal
Holland Consulting Group, The Netherlands &
University of Amsterdam, The Netherlands
-Published in A. Neely, A. Walters & R. Austin (ed.), Performance Measurement and Management: Research and Action, Cranfield School of Management, UK. This paper received the Highly Commended Paper award at the Third International Performance Measurement & Management Conference, held in July in Boston, USA. The paper is a summary of the first part of the book Quest for Balance (John Wiley & Sons, 2002). -
This paper examines the role behavioral factors play in the successful implementation and use of performance management systems that are based on critical success factors, key performance indicators and the balanced scorecard. Case study research was performed which identified 18 individual behavioral factors to be important. The research also showed that the use stage in a systems implementation project has to be performed well in order to assure a regularly used performance management system.
Performance management systems are defined as “the formal, information-based routines and procedures managers use to maintain or alter patterns in organizational activities” (adapted from Simons, 2000). These systems focus on conveying financial and nonfinancial information that influence decision making and managerial action. The recording, analyzing, and distributing of this information is embedded in the rhythm of the organization and is often based on predetermined practices at preset times in the business cycle. These systems are designed specifically to be used by managers. According to Neely (2000), there is a natural evolutionary cycle at work in the development of theory and practice in the field of performance measurement and control systems. During this cycle, managers were first concerned that they were measuring the wrong things (late 1980s and early 1990s). After struggling with the adoptation of new and alternative systems, like the balanced scorecard (throughout the 1990s), they now turn to the issue of how to use the data provided by these new systems (late 1990s and early 2000s). Zairi and Jarrar (2000) state that the main reason for managers to use data from the performance management system is to influence the behavior of subordinate managers and employees. To do so successfully, these managers need a clear view of human nature and behavior in organizations. Simons (2000) gives several assumptions about the nature of human activity in organizations: (1) people in organizations want to contribute to an organization of which they can be proud of; (2) people employed by business organizations also know the difference between right and wrong, and generally choose to do right; (3) people strive to achieve – even in the absence of external inducements (money, promotion, praise) people often set a personal goal for themselves; (4) people like to innovate – they have an innate desire to experiment by creating new technologies and new ways of doing things; and (5) people want to do competent work, a job well done allows them to exercise their skills and receive satisfaction from their competence. Simons concludes that people like to have and show good performance.
Performance can be considered an outcome of both organizational and human activities. Originally, performance measures were used as surrogates for these outcomes, and a direct link between performance management systems, human nature, and outcomes was not made. This omission was addressed by Argyris (1952) and later on by Simon et al. (1954). They explored the human behavioral side of performance management system use, looking specifically at the budgeting system. Both concluded that budgets and budgeting processes could be associated with important human relation problems. These included worker–management separation, cross-boundary conflict, and job-related tension. Their conclusions were substantial departures from the mechanistic approach to performance measurement found in traditional management theory.