Sir Andrew Likierman: professor of management practice at London Business School.
| Position | One 2 One - Interview |
Performance-based measurement has had a bad press recently. Do you think that this is justified?
The subject is rarely out of the news, but, like most things, it tends to get publicity only when things go wrong. With so much focus on performance, it's very important to get things right. We must distinguish between poor measures and pool application. Take league tables, for example: they are potentially a valuable way to identify good performance, but some are of little value and should be ditched. Others are useful, but the pressure to perform (which can mean pressure to improve ranking rather than underlying performance) can distort decision-making. The focus needs to be on improving reporting and control which is where management accountants should be able to make a big contribution. But there are definitely grounds for optimism. After all, performance measurement doesn't only create problems in devising and using the right measures; it also creates opportunities for doing better than the competition.
So we now have lots of measures, many of which are inadequate. The next task, presumably, is to make them more sophisticated.
When organisations "discover" performance measurement they tend to devise lots of measures with great enthusiasm and usually end up with too many that are pretty unsophisticated. They need to move on and improve what they already have. This requires a combination of management skills. Getting it right is surely a mark of good management.
What are you proposing?
Measuring for measurement's sake is not what management accounting is about. I am not seeking to suggest more measures, but to improve what we already have. To do this, I'm trying to get behind the process of devising and using measures. If companies get their performance measurements wrong, they risk making the wrong judgments on important decisions because they don't have the right information. Using measurements badly can undermine all the other good work by management. On the other hand, the right information lets them sort out their priorities so they know where to use scarce resources and can define their aims. Using the information well helps to bring out the best in people to achieve the organisation's goals.
This is quite a new area. It sounds like a real challenge.
I signed on to work at the Treasury for three years and then stayed for 11. Now that I've retired from there and have come back full time to London Business School, I'm relishing a...
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