How Objectives Drive Unintended Consequences
We’ve written before about the real issue with performance management (‘Performance Management and its Very Tricky Problem’).
The basis of any performance management regime is, of course, the agreement of objectives. Objectives though are ‘a very tricky problem and not an easy as they sound.’ For example, they quickly become out-of-date and, often, those on the receiving end have little or no real influence over whether they’re achieved or not.
But, most concerning, is that objectives can have unintended consequences. They can drive the wrong behaviours – especially if pay and bonuses are involved.
Take the events in South Africa earlier this year with the Australian cricket team.
Last month’s report by the Ethics Centre traces how Australia cricket officials and players had to resign following the ball tampering incident. The episode brought national scandal and self-examination, which is still playing out.
The culture of ‘winning without counting the costs’ (Ethics Centre) is traced back to a report in 2011 when the team was performing badly. The earlier Argus Report (led by Sir Don Argus, ex-Chairman at BHP Billiton and CEO of National Australia Bank) urged cricket administrators to copy business and link monetary bonuses to objectives along the lines of matches won and world rankings. ‘The link between financial rewards and winning is regularly cited as evidence of a win at all costs mentality in elite Australian cricket.’ (Ethics Centre).
The Ethics Centre report that a shadow set of values arose – ‘a set of values and principles at odds with an ethical framework.’ For example, players didn’t call others out if they saw bad behaviour. They were concerned that would impact team and individual performance.
There is another recent example.
The ongoing inquiry into Australia’s financial services has found a relentless drive for performance linked to bonuses and rewards. Banks lent money to customers without doing basic checks to see if they could afford the debt. They took fees from accounts but provided no services and had staff referral programmes that encouraged poor advice to customers.
The ‘Financial Times’ in an editorial on 3rd November 2018, draws parallels between Australian cricket and banks. They sum it all up by saying that ‘the drive for performance has been relentless and has lacked ethical restraint. Ethical dimensions have been overlooked as irrelevant to the pursuit of enhanced performance.’
These are high profile cases, but we can all think of parallels in day-to-day business.
For example, one of our consultants recalls working in a contact centre some years ago where it was common practice for agents to rush through customer calls. The reason - agents were measured and bonused on the number of calls taken each shift. Other agents failed to report the worst offenders. They were also bonused on team performance.
So, our advice is ‘take care with the objectives you agree with your direct reports for 2019’ especially if pay rises or bonus payments are involved. Think them through very carefully. The last thing you’d want is for the wrong behaviour to be encouraged or a set of ‘shadow values’ to arise as a result.