When Performance Measures Go Horribly Wrong

They have a powerful influence. But unrealistic, unreachable goals can produce unethical behavior.

After the scandal erupted over the creation by Wells Fargo employees of more than 2 million bogus bank accounts, for which customers were charged over $2.5 million in unwarranted fees, the bank’s CEO claimed that it never wanted the accounts created, that it had fired 5,300 employees who were involved, and that he was “fully committed to … fix the issue and strengthen our culture.”

But here’s the problem: What happened at Wells Fargo wasn’t about culture. Nor was it about unethical employees, or about one senior executive who oversaw the program that led to these abuses (and walked away with an exit package worth over $100 million). No, this was a case of super-aggressive daily sales goals that were almost impossible to reach and where failure to reach them could lead to firings. As one expert on white-collar crime asserted, “This wouldn’t have happened without pressure from the top.”

We’ve seen this movie over and over in the public sector. Teachers and administrators in several public school systems have been caught correcting students answers on high-stakes tests, as a reaction to the enormous pressure they felt to improve student performance. In one of the worst cases, in 2011, an investigation found that 178 teachers and administrators in Atlanta’s schools had corrected student responses on standardized tests. Several of them went to jail.

The same kind of unethical behavior occurred on a wide scale at the U.S. Department of Veterans Affairs, again because of high-stakes goals that were virtually impossible to meet. Supervisors directed front-line staff to cook the books to make it appear that all vets received a medical appointment within 14 days of requesting it — the department’s all-important performance measure. The huge number of troops who had been injured in the wars in Iraq and Afghanistan made it impossible for the VA to treat all vets so quickly. But there was intense pressure to do so, and that led hundreds of department staff and supervisors to falsify appointment records.

The old saying, “what gets measured gets managed,” is true. Performance measures have a very powerful influence on people’s behaviors. And that raises the key question: How do we know if the measures we use are appropriate? Here’s an example of one person who answered that question in a creative way:

In 1995, an excellent public-sector leader named Bill Leighty was named director of the Virginia Retirement System. He took over a deeply troubled agency. It was in turmoil because of a major scandal, support in the state legislature was almost nonexistent, and employee morale was in the basement. This agency had some of the most rigid silos I’ve ever seen. Leighty knew he had to make major changes quickly to raise morale and performance.

One of his early steps was to create a “dumb rules” contest. He invited employees to identify rules, measures and regulations that were getting in their way and leading them to do stupid things. After reviewing dozens of employee recommendations, Leighty noted that “we found about a third of these were outside our control, a third were rules we had written ourselves, and a third weren’t rules at all!”

By the end of this exercise, the agency staff had been relieved of rules and performance measures that wasted their time and, even worse, led to behaviors that lowered performance and customer service. And Leighty actively involved the employees whenever they developed new measures to ensure that those measures were meaningful and had no unintended consequences.

So when you look at your organization’s performance measures, ask yourself and your team a few simple questions:

• Which of these measures provide staff with operational information that’s truly useful?
• Which of them simply waste people’s time?
• Which ones promote collaboration and information sharing among staff?
• Which lead to unanticipated consequences that are harmful to customers?
• And perhaps most important, are the measures achievable? Do they focus on factors that staff can actually control?

Albert Einstein once said that “not everything that counts is countable, and not everything that’s countable counts.” Do your organization’s performance measures count?