by Barry Marcus

Created on: May 04, 2009   Last Updated: May 13, 2009

Performance Management and the use of Key Performance Indicators (KPIs) in particular, has brought the science of management back to the rather outmoded use of fixed job descriptions. In a KPI driven company every employee from the messenger to the chief executive is measured against a set of pre-defined objectives. This has led to the emergence of a culture that encourages employees to do only what is required to achieve these objectives.

Achievement of KPI objectives governs the payment of performance bonuses. Taking on additional tasks, even when these are crucial to the effective performance of the company, actually works against an employee. Additional tasks are taken on at the expense of KPIs. They reduce the chance to achieve objectives.

Is it possible that these performance measures are partly to blame for the failure of these companies? The Royal Bank of Scotland provides an illustration of the KPI paradox. This banks' doors should have been closed by now. But the consequences of allowing the bank to fail would have put the economy at even greater risk. The first thing that the bank did on receiving the taxpayers' money was to use about ten percent to pay bonuses.

To an outsider the news of massive bonuses to executives came as a shock. Bonuses for what? Bonuses for bringing the business to its knees? AIG is another example of the walking dead. This one was in the USA but a very similar scenario. The insurance giant saw fit to pay out massive bonuses amounting to about US $165 million.

Why?

The executives had achieved their KPI objectives.

How is it possible that the Chief Executive Officer has met his or her objectives if the business has failed?

The executives did not do what was required when required. Instead, they did what was required by their KPIs.

A KPI driven organisation does not do what is needed. Employees and the executive follow one route. They do what the KPIs specify. This will earn your bonus. Don't waste time pursuing anything else. All sorts of contracts govern the issue of bonuses. Achieve a high rating on the defined performance measures and you are assured of that bonus.

South African energy giant Eskom executives also achieved their KPIs at a time when South Africans were suffering frequent power cuts.

Presidents and Prime Ministers have been outraged at the bonus payouts of bailed-out corporations. In some cases, the bonuses have been returned.

Others have risen to the defence of the bonus payments. They argue that

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