The seven fatal flaws of performance measurement

The design and use of performance measurement systems in most organizations suffer from a number of fatal flaws that can undermine an organization's ability to use its measurement system to improve processes and make better decisions. Seven fatal flaws of performance measurement include: 1. ign...

Full description

Saved in:
Bibliographic Details
Published in:The CPA journal (1975) 2004-06, Vol.74 (6), p.32
Main Authors: Castellano, Joseph F, Young, Saul, Roehm, Harper A
Format: Article
Language:English
Subjects:
Benchmarks
Business planning
Business plans
Financial management
Methods
Noise
Optimization
Performance evaluation
Process controls
Statistical process control
Strategic management
Strategic planning (Business)
Online Access:Get full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary:The design and use of performance measurement systems in most organizations suffer from a number of fatal flaws that can undermine an organization's ability to use its measurement system to improve processes and make better decisions. Seven fatal flaws of performance measurement include: 1. ignoring the performance contributions of interactive system elements, 2. misunderstanding variation, 3. confusing signals with noise, and 4. misunderstanding psychology. Confusing signals with noise, which also relates to variation, is the inability of traditional measurement systems to distinguish between signals and noise when analyzing process results. The financial reporting disasters at Enron, Sunbeam, WorldCom, and many others provide ample evidence of what can happen when the figures are distorted to get better results. Yet in the midst of these devastating failures very little attention has been paid to the enormous pressure that can occur when an organization's performance measurement system is used to align and motivate employee behavior.
ISSN:0732-8435