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Measuring and Managing Performance in Organizations Paperback – January, 1996
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It was a revelation.
I have long been leery of most metrics used in software development, particularly when used to motivate (or punish) developers. This is particularly true since I've been working since the mid-1990s both as a consultant to organizations with troubled IT projects and as an expert witness in lawsuits that involve troubled, disputed, or failed IT projects. Developing software is hard, and measuring what's been accomplished in useful ways is even harder. But my objections have been largely intuitive, observational, and anecdotal.
Austin, by contrast, brings tremendous rigor and a remarkable depth and breadth of research to his approach. His use of the principal-agent model is particularly effective; I will probably be sketching figure 9.2 (or related figures) for years to come.
This is not an easy book to read; it's not a collection of breezy success (or failure) stories with some extrapolated maxims to explain them. It is almost like reading a work of philosophy, but there is nothing abstract or ethereal about it. I learned much, even as I had my own observations and suspicions confirmed. It has my strongest recommendation.
He also assumes that an agent's job consists of two activities and the customer is happy if the agent performs well in both. Austin looks at the cases where the principal can monitor neither of the two activities, where she can monitor only one of the two activities, or where she can monitor both activities. According to the model the agent will behave differently in all three cases.
If the principal cannot (or will not) measure either activity, then we have delegated management, if she can measure both activities, then we have a fully supervised model, and if she can measure only one of two activities, we have a dysfunctional model.
When delegating management, the assumption is that agents want to work well, that they are not deriving maximum satisfaction by exerting the least amount of effort.
When supervising, the principal evaluates overall performance by measuring certain aspects of the agent's activity. Austin's conclusion is that measuring performance won't work unless you can measure everything employees should be doing (i.e. full supervision). Incomplete measurement is not only useless, it is dangerous since it motivates agents to make efforts only for what is measured.
For example, if a help desk line measures performance by the number of calls an employee takes, then employees are motivated to spend very little time per call. The customer is left dissatisfied, but the measurements show that the agent is providing first class results. Austin calls this situation dysfunctional.
Throughout the book, Austin emphasizes dysfunction to the point where it seems he dismisses any and all attempts at measurement, but to quote Austin, the central message of the book is that "organizational measurement is hard". It's not impossible.
He suggests one method, probabilistic measurement, to mitigate dysfunction. For instance, if dysfunction comes from being unable to measure everything an agent does, e.g. you just can't have your supervisors listen to all help desk calls, the principal can carry out random samplings of performance, e.g. you can record all the calls and listen to a random selection of them each day. The agent will then expend effort along those dimensions that cannot be completely measured simply because he knows they might be.
All in all, an effectively simplified model of organizations sure to spark healthy and constructive debate.
Vincent Poirier, Dublin
There is a lot of good information in the book about management styles, use of measurement, and the possible dysfunction that can occur. Unfortunately, the author leaves us with no real answers, only a list of ways things can go wrong. I wasn't looking for a panacea or silver bullet, but the author states they've seen measurement used in a fashion that creates resounding success, but fails to ever share what that looked like in any detail.