A Measure of Success
Sunday 4th August, 2013
Performance measures help people to understand their role and empower them, but financial measures may not be enough, says Professor David Marginson of Cardiff Business School.
Yet financial measures have long played a part in performance management: they provide relatively clear, concise and unambiguous indicators of performance.
In a recent report, we set out to explore whether the use of non-financial measures was more effective than financial measures in performance management.
We found that both measures are important in creating positive psychological experiences for managers, albeit in different ways.
The two key outcomes of successful performance management are lower levels of role ambiguity – the uncertainty about a manager’s duties – and greater psychological empowerment.
“The two key outcomes of successful performance management are lower levels of role ambiguity – the uncertainty about a manager’s duties – and greater psychological empowerment.” – Prtofessor David Marginson
Financial measures help individuals reduce levels of role ambiguity. Pre-set budgetary targets offer some clarity, and this can reduce stress. However, the use of financial measures does not help to empower individuals psychologically.
Similarly, using financial measures in a diagnostic fashion, monitoring progress against key performance indicators, was only helpful in reducing role ambiguity. Good to talk
Non-financial measures were found to be particularly effective in creating psychological empowerment, and helped with the reduction of role ambiguity. But to be most effective, they had to be used in an interactive way, with plenty of opportunity for face-to-face discussion. This interaction allows individuals to think creatively about their roles and test these against their managers’ perceptions.
The rigidity of financial measures, and the use of measures to diagnose and assess performance, help staff to create boundaries for their role. Non-financial measures, used interactively, help staff to feel empowered and encourage them to act creatively. Used together, they create a positive psychological experience for workers, who understand their place in the organisation, and how they can contribute
Source: Cardiff Business School