Thoughts on ways to improve the management of professional services firms

Saturday, July 21, 2007

The Problem with Performance Agreements - Introduction

I have just been looking at a set of performance agreements. All very modern, but they reminded me of the problems that I have with so many performance agreements.

The agreements are meant to cover the 2008-2008 financial year. That's fine, but there is no way of actually forecasting just what will happen over that year, nor of the extent to which priorities will change.

The agreements must be related to the formal duties of the positions. That's fine, but most advances actually come from people doing more than their position demands.

In fact, the greatest advances come, as in the skunk works concept (here one and here two), where people actually work around the limitations of formal positions. But you cannot really put this in a performance agreement. The effect is that performance agreements can get certain things done, but can actually stop real development. Unless, of course, those further up in the chain of command already know the best outcome.

The agreement must have defined outcomes, along with agreement as to how those outcomes should be measured. But again outcomes have to be related to immediate roles.

In most organisational environments, results come from combined actions by a number of people. This means that the value of the contribution made by any individual depends in part upon actions by others. This is not a problem where the individual is in control of the team, but does create issues where the individual has little or no control over other critical actions.

Setting an individual performance target that is dependent upon actions by others over which an individual has no control has very obvious dangers. For that reason, many performance agreements are in fact activity rather than results based, I will do x by y, with results measured simply by the achievement of x by y. This may aid command and control, but actually does very little to drive improvement.

Now none of this means that you should not have performance agreements. However, those agreements need to be carefully thought through if they are to deliver the results that you hope for.

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