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"At Schwab, we have three possible ratings for employees. The bottom one is never assigned," says Maureen Hilts, Vice President of compensation at Charles Schwab & Co. The San Francisco-based discount broker has about 14,200 workers ([7] Ruiz, 2006). That creates a disconnect between what managers write in performance reviews and the reality of how well, or poorly, employees do at helping the company achieve its goals, Stiffler says. He warns that not leveling with people about their performance cements an entitlement mentality. That hampers a company's ability to move forward with a performance management plan, let alone adopt a variable compensation structure in the future ([7] Ruiz, 2006).
Employees complain that management fails to intervene when someone is not performing well. This leads them to conclude that their managers do not notice poor performance or worse yet, that they notice but do not care ([8] Wall, 2007). The importance of measuring performance and setting standards is well known. Peter Senge, Stephen Covey, and Tom Peters are probably the best-known management authors who emphasize this point. All three have suggested setting standards and using self-evaluation as a way to improve team performance. All believe that, as in sports and in the performing arts, it is best to have a combination of individual and team performance that needs to be measured ([5] Mahoney, 1997).
A visible performance measurement system helps groups, departments, or organizations communicate their current situation and future needs. Identifying and integrating these critical few measures can only come about once discussions have clarified an organization's vision and reason for being. A good performance measurement system tracks and compares the behaviors, efforts, and capabilities by which everyone in the organization will be judged. But it is not simply good enough to measure something; rather it is most important to measure the right things. Consider what happened when a big company forgot to measure the big picture.
Ford and the big picture
Ford Motor Company's development of a luxury model in 1991 provides a good example of the pitfalls of a poor measurement system. Ford's product development team's measurement system, like so many other measurement systems, was a collection of isolated outcome measures that each department's function (styling, body engineering, power train, purchasing, and finance)...