Wednesday, April 18, 2012

Employee Performance Measurement is Increasing But Will Not Increase Efficiency

Employee performance has been measured since the start of the industrial revolution in the late 18th century. By 1910, scientific management—the attempt to improve efficiency by applying engineering principles and measurement, in manufacturing —was reaching its peak. 

Although scientific management as a school of thought had faded by the 1930s, it continues to influence the way we measure and manage, and it provides fascinating historical insights into industry. Scientific management was largely focused on per-worker output, how to increase output by finding the right employees, incentive schemes and best practices to ensure that systems function optimally. 

Does this sound familiar? It should. Management, and our society in general, continually focus on these topics. Our use of measurement has only expanded. Today, 97% of organizations have an employee appraisal process, and many organizations are working to increase the number of appraisals to several times each year.  

With current social and technological trends, I expect human performance measurement will continue to increase. I also expect that people will continue to be surprised at the real outcomes and consequences of measurement. I’ll make another prediction: We’ll see little value from all this measurement, unless we start cultivating wisdom in our use of measures.

Frederick Taylor’s Underestimated Influence

The influence of Frederick Taylor, generally considered the founder of scientific management, has been compared to Darwin and Freud.  As Taylor wrote in his 1911 best seller Scientific Management:
… the end of our coal and iron is in sight. But our larger wastes of human effort, which go on every day through such of our acts as are blundering, ill-directed, or inefficient … are less visible, less tangible, and are but vaguely appreciated. … And for this reason, even though our daily loss from this source is greater than from our waste of material things, the one has stirred us deeply, while the other has moved us but little.

Taylor is the father of modern management.  At the turn of the century, management primarily were concerned with budgeting and hiring. Teams of workers defined the tasks. Workers in a sense were still in somewhat of a guild system and had some level of autonomy. Ideas presented by Taylor, and then Henry Ford’s production line, changed things considerably.

   Frederick W. Taylor

While famous for time and motion studies, Taylor had two bigger ideas associated with measuring employee performance:
  • System improvement (also known as organizational learning)
  • Employee accountability (to achieve targeted levels of performance).
These ideas continue to drive improvement efforts to this day. Taylor believed that per-individual output should be measured, and that the measure should be studied to understand both the system of work and how it can be improved. He also advocated for developing challenging targets for employee output.  

Taylor’s most famous example was of moving pig-iron, which was made completely by men’s labor.  To illustrate scientific management, he described an intervention at Bethlehem steel. He found that the average man moved about 12 ½ tons of pig iron each day, but the best handlers loaded 47 ½ tons. (I find both values astounding.)  By selecting the right men for the job, specifying how the loading task should be completed, and setting appropriate goals, he was able to improve per-employee pig-iron loading output. The loading tasks were streamlined and proper rests were enforced to ensure that a high level of output could be maintained for the entire day. Pig-iron handlers were accountable to achieve the goal of 47 ½ tons per day. Failure to consistently achieve the goal would result in reassignment.

Similarly, through careful study Taylor found the optimal shovel load was 21 pounds. This finding suggested many system-wide changes—in tools, team organization, and supervision. The organization provided different shovel sizes and shapes for different material density and characteristics. Workers that had been managed as teams were now managed as individuals, each accountable for performance targets.  Management structures changed to oversee these major changes.  

While Taylor’s time-and-motion studies are no longer relevant, given robotics and increasing service work, the measurement themes continue, and the themes of system improvement (organizational learning) and employee accountability continue to this day. In fact, these are two ideas with growing currency.

Organizational learning, which goes by many names, is simply the idea that organizations are entities that can learn and adapt. By looking deeply at the organization’s environment, processes, structures, routines, and culture, we can understand and improve them. There are many methods for encouraging organizational learning.  Whole conferences and societies have been developed around organizational learning, feedback, and measurement. In many situations, measurement of employee performance is the basis of organizational learning. 

Given the increased need to adapt organizations in our changing political, economic, social, and technical environment, I expect that measurement will increase. I worry, however, that organizations do not think clearly about the performance measures they track.

As organizations grow more complicated and employees more specialized, accountability for results has replaced the idea of managing tasks. Taylor was concerned with a moving pig-iron and micro-tasks such as lifting and carrying between stations. Now an employee is likely to have more complicated assignments comprised of dozens of tasks (for example, creating a new software feature or maintaining a database). Now we measure value-added and organizational results.  

Today, the essence of progressive management thinking could be stated as, “I do not want to micro-manage, so I am going to assign accountability for results and let my employees use their creativity and capability to get the job done.  In order to hold them accountable, I am going to measure their performance or productivity.” Many management theorists, such as Daniel Pink, argue for a result-oriented/only work environment (ROWE).  (Note that Taylor was indeed a micro-manager, so the parallel ends quickly.)  

I am a fan of managing results, not tasks. If you have ever been micro-managed, you’re probably a fan of managing results as well. I’m not completely sure, however, that we have the expertise to make it work. I see many organizations struggle with measures of performance—with pushback from employees and a blind push from management. ROWE works best when there are clear measures of performance that are linked to valued organizational outcomes.  These measures do not exist in many situations-- for example in support functions.

The final driver of increased measurement of employee performance is the computer-based work environment. Due to increasingly inexpensive databases, this environment allows more measurement and data-tracking. As computers facilitate more work, keystrokes, conversations, tasks, and transactions can be—and often are—automatically recorded. These digital trails can be compiled very cheaply. Footsteps, driving routes, and bathroom breaks can all be easily recorded with easily available technologies. It is inevitable that new measures of performance will be dreamed up, developed, and implemented. 

What Have We Learned About Managing and Leading With Measures?

My concern is our ability to manage, learn from, and improve from all this measurement. If we’re not careful, the additional performance measurement will only lead to additional misunderstanding and organizational chaos, misalignment, gaming of the system, and, in general, dysfunctional behavior. I’m not sure that our wisdom has kept pace with the amount of data and performance measures.  

In fact, problems associated with employee performance measurement appeared soon after the advent of scientific management.  Measuring employee performance often leads to strange outcomes. 
This is demonstrated by what’s known as the Hawthorn Effect, which showed, as far back as the mid-1920s, that when you measure employees’ performance, they react. Sometimes they react positively, sometimes negatively. Not surprisingly, it can be difficult to predict which outcome you will find.

The Hawthorn plant manufactured telephone equipment, and was attempting to identify the best practices to increase employee output. In one study, they focused on lighting. They increased the brightness of the lights in the plant, and employee output increased. They dimmed the lights, and, surprise—the same thing happened. Employee output increased whether the lights were brightened or dimmed. It wasn’t the quality of the lighting, but the change that employees were reacting to.

Additional studies from the Hawthorne plant, referred to as the "bank wiring room studies," revealed that social forces were affecting the output. Employees were aware of the measure and how they were studied by management. As a result the employees used the measure to communicate to management that they were, in fact, doing a reasonable job. Concerns, such as layoffs based on the measures, affected employee output. In these studies, employees attempted to communicate to management that they were working in a steady and reasonable manner.  

These studies have made it clear that measurement does not cause efficiency —there is always an underlying and very human mechanism that is a reaction to measurement. The reaction may or may not be improvement. These very human processes hinge on reactions to the measures that include communication and messaging, image management, and social interaction.
In day-to-day work environments, we continue to ignore what studies published 90 years ago clearly demonstrated. Many attempt to improve performance with measures, without giving adequate thought to managing the underlying human processes that will lead to improvement. 

Consider the testing mania present in American public schools.  These schools are expected to improve, largely because they are being measured and expected to improve. There is a blind belief in accountability. 

Similarly, consider the 97% of organizations that have performance appraisal systems that attempt to provide feedback to individuals in the hope that it will automatically improve performance, learning, and motivation.

Unknown to most, the ghost of Fredrick Taylor is alive in many of our modern organizations. Blind beliefs in simplistic ideas about measurement continue. We need to use measurement to increase efficiency, but a naive belief that productivity will increase without addressing the very human element of work is defeating the purpose, and the effectiveness, of the measures.

If you have examples of simplistic thinking behind employee performance measurement, I’d love to hear your story.

Charley Morrow

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