The Inadequacy of Performance Measures: A study of the problems of incomplete performance measures in decoupled reward systems

Sammanfattning: This paper examines to what extent managers perceive the inherent incompleteness of performance measures to be an issue in the context of established reward systems. Drawing upon data from the Swedish Corporates & Institutions division of a northern European wholesale bank, we study managerial attitudes towards the incompleteness of performance measures. Utilizing the framework of enabling and coercive forms of control, we highlight the distinctive and enabling features of reward processes by demonstrating how the incompleteness of performance measures is regarded as less of an issue when the decoupling between evaluation PMSs and reward PMSs is strong. In contrast, when this decoupling appears to be weaker, managers tend to be more concerned about the inability of performance indicators to reflect operational performance. Consequently, incompleteness is not perceived as an issue as it sparks the emergence of a network of action, which acts to serve the purpose that the incomplete performance indicators cannot, namely to facilitate managerial decision making in the reward allocation process. Our findings thus suggest that incomplete performance measures are inadequate to the purpose of allocating rewards. Our research nuances previous findings on the practical significance of incomplete performance measures by emphasizing the disconnect between the use of performance measures for the purposes of performance evaluation and reward allocation. In doing so, we add to the understanding of whether and when incompleteness is perceived as an issue in practice.