This relates to the ‘management’ part of performance management. If one knows that one’s performance is being measured (and very often one’s rewards are tied into the performance measure) then it is human nature to concentrate on those aspects of the work that are being measured. Indeed many would claim that ‘what you measure you change’ with the implication that what you do no measure will not change.
It is important therefore that the performance measures encourage goal congruence (i.e. encourage working for the overall good of the company) and that they encourage long-term as opposed to short-term thinking.
Recap of earlier chapters
We have already discussed in earlier chapters the use of Return on Investment, Residual Income, and Economic Value Added, NPV and IRR as ways of measuring financial performance, and the effect of these on long-term and short-term thinking.
We have also discussed in earlier chapters the importance of having a range of performance measures, looking at non-financial as well as financial performance.