Question

Using appropriate performance measures is crucial for the success of the performance evaluation and incentive schemes. However, using improper performance measures may result in goal conflict problems (e.g., between departments, between managers and shareholders, or between a superior and a subordinate). Describe two goal conflict situations caused by the use of inappropriate performance measures and also discuss potential solution(s) for each situation.

Answer 1

Explanation :

Performance measurement are method to help organisations management to analyse whether the desired goals are being achieved.

The managers are able to understand the effectiveness of the policies and strategies implemented and the required changes to be made in these policies through performance measurement.

The two goals conflict that can occur due to use of inappropriate performance methods are :

• Quality compromise : If there is a use of inappropriate performance measurement method then the production department may be forced to produce more quantity of goods in less given time, leading to quality compromise.
• Lack of coordination: the each department will be involved in achieving its own goals and will not respond to other departments requirement and there will be a lack of coordination within the organisation and entities goals will be hampered.

The measures to be taken to prevent conflicts from performance measurement can be :.

1. The method used for performance measurement should be different for each department as work performed by each department is not interrelated many a times. example Production department focuses on manufacturing unit, where as finance department is involved in financial activities etc.

2. Performance measure must be based on "number of units" for production, sales, marketing and inventory procurement related department and where work based for rest of the department like Finance Department, IT or HR department.