The Pitfalls of Performance Measurement Technology
While interest and investment in measurement-related technology is growing exponentially, technology is one of the most misunderstood, and poorly managed, areas of performance measurement. How much is technology really helping? Is it making measurement better, or just more automated?
Organizations have gone fairly rapidly from having too little data to having much too much, and from depending on spreadsheets for data collection and analysis to having enormously powerful enterprise-wide information technology systems.
Source: Dean Spitzer (2009) Keynote Address to Business Performance Conference
Breakthroughs in the availability and cost of storage media has meant that databases are now capable of retaining a virtually infinite amount of data. Furthermore, advances in data processing capacity and speed and analytical software have given rise to the spectacular growth of the data warehousing and data analytics industries. However, this capacity is part of the problem, as well as being part of the solution.
Few business people fail to accept the importance of performance measurement, but few want to be actively involved in it. They know that it is vital to be compliant, but they also want to reduce unnecessary labor and drudgery. That’s why automated systems sound like such a good idea. But, too often leaders say: “Give me the answers.” “Give me the wisdom.” “I don’t want to struggle through turning data into knowledge, and knowledge into wisdom…That takes too long…It’s too difficult.”
Technology seems to make this all so easy—“Let’s let the software do the thinking.”
There is a prevailing attitude among many of those accountable for performance measurement to try to extricate themselves from the responsibility. Because the level of commitment to measurement and measurement sophistication in most organizations is very low, it is very tempting to want to delegate it. When this is done, it too often leads to valid, reliable, and precise measurement of the wrong measures!
In recent years, there has been a tendency for organizations to become infatuated with impressive automated scorecards and dashboards, which are usually the visible front-end of performance measurement technology tools.
But like the Wizard of Oz, technical “solutions” can be quite impressive on the surface, but surprisingly misleading when one looks “behind the curtain.” If you remember what happens in the Wizard of Oz, once the Wizard is “busted,” he now has to tell the truth—that he really is a good man, but he's not a very good wizard! I like the Wizard of Oz analogy, because it dramatizes the lack of substance that often exists “behind the curtain” of many technology implementations, especially in performance measurement. In companies, as well as in Oz, the appearance is no substitute for substance.
That is why many organizations have impressive scorecards, dashboards, and mind-boggling analytics that provide them with little or no insight.
No matter how impressive or automated the measurement system, people are still the key to its success. Once they get the data, most people ask, “Now what do I do?” Measurement software can perform the functions of data collection, analysis, and reporting, but it can’t do the thinking for you!
This will never come from technology’s “bells and whistles”—no matter how impressive they might be. And, furthermore, that’s not the job of technology; it’s the role of people! It is the appropriate use of technology by people that brings value.
Technology is undoubtedly helpful for enabling people to better deal with the complexity of organizations and the proliferation of data, and to assist in mining data for insights. Technology can assist in performing some tasks that people can’t do effectively themselves, or do inefficiently. For instance, technology can measure more, more quickly; it can automate data collection; reduce data handling errors; perform intricate analytics (including modeling "what-if" scenarios); enable simulation and predictive modeling; present data in virtually any form, with impressive visualization capabilities, even customized for each stakeholder group; zoom in on detail, zoom out to see the big picture.
However, if your organization doesn’t have a sound “business architecture” (a coherent business strategy, or haven't translated that strategy into a series of interrelated objectives and measures), a performance dashboard might help to drive your organization faster, but it will probably be in the wrong direction, leaving behind a trail of frustrated and demoralized employees. That is why executives must be willing to dig into the business and understand what drives internal company behavior and external customer behavior.
Without doubt, technology is a key enabler of performance measurement, but it isn’t technology that makes performance measurement powerful. The most important determinant of performance measurement effectiveness is what I call the “socialization of measurement” – how technology is used by people. Without the necessary organizational and individual capabilities to use technology, the technology will fail to produce the promised results, or may actually inhibit the desired changes.
Constantly and interactively redefining your organization’s set of performance measures, and their relationships, encourages people to make closer, and more critical, assessments. In addition, this distinctly social process generates a higher degree of ownership, and plants the seeds for the ongoing performance improvement you're looking for throughout your organization.
Further reading:
Transforming Performance Measurement presents a breakthrough approach that will not only significantly reduce those dysfunctions, but also promote alignment with business strategy, maximize cross-enterprise integration, and help everyone to work collaboratively to drive value throughout your organization.
The book also provides 34 TMAPs, Transformational Measurement Action Plans, which suggest both well-accepted and "emergent" measures (in areas such as marketing, human resources, customer service, knowledge management, productivity, information technology, research and development, costing, and more) that you can use right away.
