The commercial world and the public sector have become obsessed with measurement. I’m all for a bit of performance evaluation, but these days you can’t move for kpis, efficacy indicators, metrics, incentive schemes, outputs, targets and the like. It’s a wonder anybody gets any real work done.
The performance management culture is most visible within public sector services such as education and health, where the emphasis on measurement has become the metaphor for all that is wrong with a meddlesome, opinionated and ill-informed Whitehall elite. But beyond the rhetoric there lies real danger with an ill-conceived and poorly implemented set of performance measures.
We have a saying in finance; ‘what you measure is what you get’. If you incentivise a sales team with a revenue target of £10m, then you are very likely to get £10m of revenue, especially if you link people’s bonuses to the achievement of the target. The problems is that single, qualitative indicators like this are too much of a blunt instrument, and the unforeseen side effects on other outcomes could be catastrophic.
As a case in point, take the recent debacle over the Work Capability Assessment contract. DWP outsourced the task of assessing disability claimants ‘fitness for work’ to Atos, the French services company. The fee structure was very simple; Atos were paid for every completed assessment. Having effectively incentivised Atos to get through as many assessment interviews as quickly as possible, it should have been no surprise to DWP that they did just that. But quality was sacrificed for speed, and errors, re-referral rates, stress levels for claimants, and public outrage, went sky high.
Fair’s fair though. Sometimes government does get it right. I recently read the NAO report on the privatisation of Royal Mail (it’s been a slow month). The Coalition had one very clear stated objective with that deal, simply to get the transaction done well within the current parliament. And that is what happened. The recent media driven navel gazing on whether the taxpayer got value for money on the price is a red herring. That was never the point. Lazard & Co, the lead consultant, were incentivised on the one simple metric of getting the deal done, which they delivered on 100%. And with that the Coalition gained massive bragging rights by achieving something that the previous Labour administration had not achieved in twelve years of power; the removal of the toxic asset that is The Royal Mail from the government balance sheet.
In hindsight, these mistakes look obvious and deeply embarrassing, but at the time I am sure everybody thought that they were doing the right thing. What’s needed here is a little less clever performance management theory and a little more ‘nous’. The moral for government and indeed any organisation that parachutes in a new performance measurement system is ‘be very careful what you wish for’. You are almost certainly going to get it…
 Well, not entirely. The government and by extension the taxpayer still retain the great privilege of funding the pension deficit, which according to recent calculations is roughly the size of the GDP of a small South American country