The disadvantages of performance management
Performance Management using indicators can have several disadvantages, like increasing production goals without tackling the professional organization behind it. With a strategy map and a balanced scorecard, one might prevent this. In our vision, Business Analytics should also be used to develop the organization (learning and growth perspective, internal processes). Below are some possible disadvantages of performance management.
Focus only on the company cash cows
Only being focused on ‘cash cow’ products and services that can be produced easily and quickly, but which may hamper genuine innovation.
Optimizing input through applying ‘excessive pre-selection’ so as to make it seem that our processes deliver better output. A university, for example, can improve its performance by selecting only students that achieved outstanding results in high school, but in doing so a certain complacence towards professionalizing the internal organization is being created. Teachers get lazy and are not challenged often enough.
To much emphasis on quantitative measures
Focusing on quantitative information alone may have a destructive effect on expertise and professionalism. A TV station, for example, only broadcasts programs for a large audience and completely dismisses educational programs. This will often lead to experts and real professionals leaving the company.
Being focused on sub-optimizations may lead to getting left behind the competition as a whole. An organization may perform well within a chain, but may not be willing to share its expertise with others in that chain.
More vulnerable to cost cutting
Performance Management can make things more transparent, leaving the organization more vulnerable to cuts or interventions from outside or above. That same transparency, however, can also work in favor of the organization. For example, when they perform well, they will set an example for others. In that case the company is setting the standard and competitive advantage is not really easy to realize anymore.
Create a bureaucracy
To a certain extent, performance management could lead to bureaucracy: the organization measures just about everything, no matter whether it’s relevant or not. This will cause managers being unable to score anymore because their dashboard is too crowded with useless information.
Balanced short and long-term thinking
An Intelligent Organization will ensure a careful balance between short-term and long-term thinking. The organization will not merely focus on its own issues, but will prioritize measurement of the most essential (external) issues.