Breathing Space

A very large parastatal organisation has spent hundreds of millions over the last five years developing so-called Business Intelligence (BI) systems to measure KPIs or key performance indicators.

Each division spent years employing an army of consultants to develop KPI measurement systems. Then corporate management decided that the process should be standardised across the entire organisation. A brand new system was developed using another consulting company and some brand new business intelligence tools. A corporate-wide system was the next solution. After three years of work by a team of thirty, the project was abandoned. A better system was available, prompting a new BI initiative.

The company is KPI driven. Staff are measured and rewarded according to their KPI scores. A task that is not on the list just doesn’t get done.

The way this task is approached is:

• measure anything that can be measured - these will serve as KPIs
• leave a “back door” open to allow management to “correct” the KPI measures that the system got wrong

Western industry is always pre-occupied with performance management and almost every company conducts annual performance appraisals.Both staff and management look forward to the annual appraisal process with apprehension. Few believe that an appraisal is truly objective. If you are the blue-eyed girl you will get a good score.

All sorts of systems are in place.

• Automated measures,
• subjective measures,
• 360 degree appraisals

- the list goes on.

The idea is that you get what you pay for. A high score means a good salary increase. A low rating means you are doomed. Probably forever.

Japanese companies do not have these annual appraisals. Their products are higher quality and generally cost less. Ever wonder why?

Deming has much to say about performance appraisals. They are one of the deadly diseases of Western industry. He points out that they produce the opposite of the desired effects. They create an environment of manipulation, of fear, of mistrust. 90 % of performance is the result of external or team factors anyway! Much performance measurement may be due to chance or natural variation. For more detailed analysis of this, particularly Deming’s view, see How performance management may be to blame when companies fail.

While clinging to these outmoded and counter-productive management methods almost universally, Western industry attempts to embrace the notions of TQM (Total Quality Management) and Continuous Improvement. In fact, they simply play lip-service to these highly effective means of producing a top-quality organisation.

Do they not realise that the choice is either TQM OR Performance Appraisals? The two can never be combined and expected to work.

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