Designing performance measures: a structured approach

TLDR

Inadequately designed performance measures can cause dysfunctional behavior by incentivizing inappropriate actions. The study develops and tests a framework to aid in designing performance measures. The framework, grounded in literature, was developed and tested via action research projects with aerospace and automotive collaborators, and includes a record sheet that structures measures by purpose and data source. The record sheet enables auditing existing performance measures and facilitates designing new ones.

Abstract

Describes the development and testing of a framework which can assist in the process of designing performance measures. Grounds the framework in the relevant literature and explains how it was developed and tested through a series of action research projects involving collaborators primarily from the aerospace and automotive industries. Notes that inadequately designed performance measures can result in dysfunctional behaviour often due to the method of calculation encouraging individuals to pursue inappropriate courses of action. The performance measure record sheet presented provides a structure which considers factors such as the purpose of the measure and the source of data. Notes the advantages of the record sheet, such as its use to audit existing measures of performance and to facilitate the process of designing new ones.