Discuss inappropriate performance measures and how to avoid them
When inappropriate performance measures are used, managers may take actions that are dysfunctional to the organization. The actions may succeed in the short run. By the time the problem surfaces, the manager who took the action may be promoted or gone, leaving the problem to his or her successor.
The use of any single-criterion performance measure can impose personal goals on managers that conflict with organizational goals and result in dysfunctional behavior.
Performance measures should consider all relevant aspects of a manager's responsibility. In addition to measures of general performance, such as ROI, management should measure trends in key variables such as sales, cost of goods sold, operating expenses and asset levels. Nonfinancial measures such as product leadership, personnel development, employee attitudes, and public responsibility may also be relevant in assessing management performance.
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