Performance measurement needs innovation. Here's why

If you have been following expert studies and employee surveys in recent years, you might have recognized how many recommend change in performance measurement for the benefit of the whole firm.


Most global corporations start with their yearly evaluation process soon. Unfortunately, too many still focus on individual performance measurement where employees also get ranked among each other in some ways. In sales organizations or revenue driven roles, this might make sense. However, many if not most roles are not suitable for isolated performance measurement. They require team work and information sharing to succeed and yet, those roles are still evaluated on an individual basis. What’s the challenge and why we need to innovate here?

First, let’s look at 5 positive intentions about individual and ranked performance measurement:

  1. Motivate individuals for peak performance

  2. Allow comparisons among peer groups and identify the best

  3. Link reward and recognition to performance

  4. Hope to identify and manage the low performers

  5. Drive talent and succession planning

Reviewing above points, it seems logical why so many corporations still follow this path. The objectives might be honorable but do they yield the desired results?


Here are some downsides:

  • Individual appraisals drive individual behaviours. People focus on their objectives, achievements and visibility only. What you measure is what you get

  • Competition arises in the wrong direction. Why should people collaborate if their performance is directly linked to how well their colleagues do?  Increasing the outcome of the whole team does not benefit the individual, so why bother?

  • Sometimes employees start to actively hinder each other because they benefit from others failing.  Forced, prioritized or weighted rankings enable many firms to define a tail-end. Employees in that tail-end are then the first ones to let go if workforce reductions are required. This obviously drives behaviour

  • It kills innovation. Innovation requires teamwork, trying out new things and accept to fail early in order to succeed faster. Furthermore, innovation often contributes to a bigger company goal which cannot be individually measured. If this negatively impacts reward, innovation becomes unattractive for the individual. And this hurts a firm on the long run. In 2012 Vanity Fair had published an interesting article about Microsoft and how performance measurement had affected behaviour

How to improve?


There is nothing wrong with performance measurement. And it would be pretentious to claim one way to be better than the other. The real question is whether your intentions are achieved by how you measure. And more important whether your employees perceive the process as fair, political or nontransparent which could negatively affect their performance. At the end, shareholders look for best performance on company level anyway. Corporations should re-ask the following questions:

  • What do we want to achieve by measuring our employee’s performance?

  • What’s the higher purpose?

  • What are the risks with our current measurement system?

  • Could we measure differently?

  • What motivates or demotivates our staff?

  • Which values do we want to foster?

Those answers should reveal the key areas for required change and innovation in this space. This is especially important for those firms who talk collaboration. We should measure what we really promote and promote what we really measure.


How does your company measure performance?


Chris Frey