Work has been corrupted by performance metrics
Scott Allan, James Faulconbridge and Pete Thomas, January 31, 2019
Research over the past decade explains how performance metrics can lead to unintended and harmful outcomes in professional work
Professional services firms – from accountants to lawyers, engineers to management consultants – increasingly rely on a set of metrics to manage their professional staff. These metrics define individualised contributions to firm growth and profitability targets, and have become a dominant concern in the everyday lives of professionals. Based on lessons learned from a series of studies we’ve conducted over the past decade on the management of large professional services firms, we reveal the tensions and contradictions that result from metrics-focused management. We highlight the fear and anxiety felt by professionals as they struggle to maintain their position within an annually-recurring tournament of numbers – a tournament that often clashes with their idea of being a ‘good citizen’. What gets measured may get done, but we uncover behavioural and wellbeing consequences that should be of real concern to leaders of professional services firms.
One of the strongest narratives adopted by HR professionals is the notion that organisations should strive for a ‘high-performance work system’. Attractive as this sounds, tying down exactly what such a system involves is difficult. In particular debate exists about how such systems are adapted to industry- or firm-specific context, something especially important for professional services firms that rely on the expertise and creativity of their employees to produce client-orientated solutions. The idea of a ‘high-performance work system’ intuitively leads us to goal- and target-setting, and then to metrics and ‘key performance indicators’ to measure success. But our research across dozens of large professional services firms over the past decade reminds us that performance assessments can focus on process or outcomes.
In professional services firms the norm until relatively recently was to focus on process – ensuring professionals adopt approaches to work that lead to delivering high-quality advice to clients. In turn this was assumed to create revenue (via repeat/new business) and profits (via reputation/prestige). The move towards metrics with a primary focus on financial performance outcomes is thus a relatively recent experiment. Research is now revealing a range of unintended consequences that harm the wellbeing of professionals and ultimately risk the long-term success of the firm.
Opportunities for career fulfilment become increasingly elusive
Individuals pursue promotion as part of their self-development and self-actualisation. In the professions there tends to be a well-defined career structure, culminating in a senior-level appointment that confirms the professional’s status as an expert in their field and attracts respect and reward. This can take the form of appointment as a consultant in the NHS or a partner in a professional firm. Self-actualisation suggests that until the pinnacle is reached there is in some sense a ‘deficit’ that needs addressing through the next promotion. However, when those managing professional firms are focused on meeting targets, and these include hitting a certain level of revenue and profitability that is translated to targets on a per-partner basis, career structures quickly get disrupted.
Some professional firms have reduced the number of partners to ensure targets are hit. Fewer partners means fewer senior salaries to pay and fewer partners to divide profits among. According to the metrics this equals better performance, but it also leads to fewer senior slots for junior and mid-career professionals – and so a ‘career deficit’ that may never be redressed. Even where an individual appears to display all of the expertise associated with a senior position they may be denied progression because their performance numbers ‘do not add up’. Individuals may simply give up on a career in the firm as they see the demands and/or chance of achieving senior status as undesirable or unrealistic.
Professionals interpret ‘success’ as primarily based on metricised outcomes
When success is defined largely or exclusively in financial terms with quantitative metricised assessments, the ‘cascading’ of financial imperatives to all levels is common. In the past it might have been thought that financial measures were not suitable for assessing professional performance, and firms continue to emphasise a much wider set of desired characteristics. But this is an attempt to have the best of all worlds; professionals who strive to make the numbers but at the same time adhere to standards of collegiality, good citizenship and client service.
Research now shows that professionals interpret the focus on metrics as meaning that hitting performance targets is all that matters. This is the case even for those who have reached the highest levels. Even though in the past they might have been seen to have ‘made it’ and no longer subject to the need to prove themselves, maintenance of their position is now contingent on continuing to make the numbers. Moreover targets tend to increase annually resulting in ever-higher goals that mean the individual is ‘only as good as this year’s numbers’. This poses a major problem: firms have created a group of professionals that are only willing to engage in activities that deliver outcomes measured by metrics. The temptation is then to create new metrics to measure the things being ignored. However, as we outline below, this vicious cycle is self-defeating and harmful for both individual professionals and the firm.
A focus on the numbers leads to undesirable behaviours
Firms expect their professionals to act in a supportive and collegiate way and to consider the interests of the firm when making decisions on a day-to-day basis. This is important both for a harmonious working environment and to ensure the long-term sustainability of the firm. However, a focus on metrics, and the definition of success through quantitative measures of individual performance, has been shown by research to lead to short-termism and a neglect of the standards of professional practice. Examples of such problems at the partner level in law firms were reported in a study by Allan, Faulconbridge and Thomas (2018) and include empire building, work siloing, bloating and blocking.
Each of these stands against an ideal of professional collegiality and support, and contradicts the standards of behaviour firms often promote. But firms tolerate such bad behaviours because, in quantitative metric-based terms, the individuals in question are often classed as ‘high performers’. This leads to an oppressive working environment for everyone else and reinforces the belief that all that matters is what is measured in quantitative metrics.
The wellbeing of professionals is at risk
While it might be easy to characterise professionals as ruthless individuals who are simply pursuing their own fulfilment at the expense of others, research shows that the reality is much more nuanced.
Living under the constant threat of career failure is a source of ongoing fear and anxiety. Professionals constantly worry about meeting targets set in quantitative metrics and the implications of missing them. Even top-performing professionals, who have made it to senior status and appear secure in their positions, live in a state of precarity and insecurity. This in turn leads to very poor work/life balance; fear and anxiety are translated into ever-longer working hours as individuals desperately strive to meet what are often unrealistic (often labelled ‘stretch’) targets. By extension this has been linked to a rise in mental health issues among professional staff.
In a world where each year requires an individual to produce more than the last, and to deliver on multiple quantitative metrics used to assess ‘success’, these issues are only going to get worse.
From research to reality
Most HR professionals will ask what they can do. If metrics are here to stay a rebalancing of performance management approaches is required so as to:
- Create balanced objectives at both firm and individual level – objectives that foreground professional values (development of expertise, service quality, pro bono work, development of staff) as much as financial outcomes. This necessitates a move back towards a greater focus on process and not just outcomes.
- Measure and reward professional standards and process-related priorities in ways that are transparent to employees, including in promotion decisions.
- Be prepared to deal with staff who work against those values and objectives. Do not allow strong performance in outcome-related metrics to trump poor performance or misbehaviour in relation to professional standards and process-related concerns.
- Include balanced process and outcome objectives within internal and external reporting and make achieving a balance a measure of business success.
Scott Allan is a lecturer in management studies at the University of Aberdeen’s business school. James Faulconbridge is a professor and head of the department of organisation, work and technology at Lancaster University Management School. Pete Thomas is a senior lecturer at Lancaster University Management School