KPI 101

 

Analysing the history of performance management illustrates that its evolution for most of the 20th century was driven by command and control and mechanistic thinking (Seddon. 2008).

The roots of performance management as a discipline can be traced back to the advancements made by Taylor (1911) in defining management as a science and the new approach to manufacturing and plant management promoted by Henry Ford at the beginning of the century.

 

Command and control and mechanistic thinking emerged as simple solutions to respond to the needs of the social, technological and economical environment of those times. A mostly uneducated workforce and ever-increasing demand from customers focused priorities on volume, standards and control through product standardisation, work process specialisation and the use of targets. This approach suited both the profile of the workforce, which contained a low number of educated agents and the limited understanding of organisations as entities, enabling considerable increases in productivity. Managers set targets for employees and monitored their achievement using a command and control approach. Performance management was mostly driven by financial indicators and production quotas, used for checking if people were completing their tasks as assigned by managers.

 

However, environmental conditions today are very much different. Customer needs are more diverse and the work is more complex. The workforce is more educated, more mobile and has different aspirations. Also, the concept of organisation/corporation has matured beyond the initial presentation of the concept in mid 1950's by Peter Drucker.

 

The nature of work has changed from mechanical work in most of the production facilities to knowledge work in the services industry. In this regard, at the beginning of the 20th century the majority of industrial workers were involved in the production of sub-components and their assembly in a finite product (Ackoff, 2008). However automation of industrial work and the growth of the services sector dramatically transformed the socio-economic landscape. Thus by the beginning of the 21st century the vast majority of the workforce is active in technology intensive, services industries, which involve human interactions, stakeholder management and regular, fast decision making made by each employee (Drucker, 1999).

 

Performance management frameworks have been slow to adapt, most of them still emphasizing financial measures and a command and control approach, based on monitoring the achievement of targets. There are numerous instances in organisations of conflicting priorities and targets within the same organisation and ineffective performance management due to too much emphasis on managerial control.Command and control thinking sees organisations as top-down hierarchies, where managers make decisions using budgets, standards and targets. Work is specialised in functions that complement each other, however are not completely integrated. Workers are controlled with an ever increasing array of management tools and practices - rules, specifications, procedures, inspections, performance management reviews, etc.

 

An alternative to command and control/mechanistic thinking is Systems Thinking which became popularised by Peter Senge's (1990) "The Fifth Discipline". Systems Thinking promotes a holistic approach to managing organisations. Organisations managed as systems and not as functional hierarchies put people at the heart of the enterprise, enabling them to contribute. Seddon (2008) describes this organisational arrangement as putting the workers in control rather than controlling the workers. If staff members control the work, they need managers to be working on the things beyond the control of the workers which affect the system conditions - "the way the work works".

 

A Systems Thinking approach to performance management focuses on the definition of the system, its purpose and the measuring of how its purpose is achieved. Instead of an isolated approach, the focus is on integrating all components of the system and mapping the relationship between them in addressing and satisfying demand. System thinking places more focus on the learning and human relationships in organisations, in line with Theory Y of Douglas McGregor (Eccles et al, 2003). Such an approach requires new personal and professional skills from a workforce already entrenched in a command and control mentality. This is one of the reasons why a direct shift from command and control to systems thinking will be difficult for organisations. Depending on organisational capabilities and the internal / external conditions, command-and control might be more appropriate for some organisations (such as the army and the public service, as they are slower to change), while systems thinking for others (such as the ones operating in manufacturing and eCommerce). Alternatively, an approach that balances both might be a suitable first step towards improved organisational performance management systems.