Different design choices in the controls used to manage performance often lead to a range of unintended consequences, which have profound effects on individuals and organizations.
Performance management systems: Set of control mechanisms (planning, measurement, targets, review, performance-related rewards) used to facilitate the delivery of organizational goals by influencing people’s behaviours and performance.
A recent literature review (Franco-Santos et al., 2018) synthetizes the unintended consequences of performance management systems, and explains how and why they occur.
Unintended consequences: Effects of purposive action which are different from those expected and intended
Unintended consequences (desirable and undesirable) are inevitable
Undesirable consequences can turn to be perverse
Undesirable consequences can be minimized, never eliminated
Under directive performance management systems, main unintended consequences are the following:
Gaming (81% of selected literature).
Information manipulation (74%).
Selective attention (55%).
Illusion of control (24%).
Alter social relationships (81%).
Other: Administrative overload and managerial time costs (14%); ‘ossification’ (14%); de-professionalization (10%); decreasedwell-being and morale (10%); stifled innovation (5%); unfairness and inequality (5%).
These consequences depend on limiting factors such as:
High pressure.
Design and use issues.
Complexity and uncertainty.
Underlying assumptions (false assumptions about people, importance of relationships and context complexity).
Often, the choice of control mechanisms is based on two key assumptions concerning goal-alignment and goal-uncertainty. In designing the performance management systems, “the more the assumed reality about the state of goal-alignment and goal-uncertainty diverges from the real state of affairs, the more the resultant system is likely to create perverse unintended consequences, leading to poor organizational outcomes”.
Unintended consequences of PMSs: Organizations relying on directive PMSs (i.e. agency theory related) in highly uncertain contexts are likely to experience more undesirable unintended consequences not just for the actors but also for their stakeholders.
Franco‐Santos, M., & Otley, D. (2018). Reviewing and theorizing the unintended consequences of performance management systems. International Journal of Management Reviews, 20(3), 696-730.
