Issues and Puzzles in Performance Management (pdf file of Powerpoint Slides)
Michael C. Jensen
Social Science Electronic Publishing (SSEP), Inc.; Harvard Business School; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI)
Barbados Group Working Paper No. 05-02
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Performance management is critical to the functioning of all organizations. It is a poorly understood phenomenon characterized as much by what people know that is wrong as it is by what people know that is right. Moreover, it is an area in which almost everyone views themselves as experts while having little idea about what they do not know. I review my recent thinking on the almost universal counterproductive effects of the ways most organizations tie rewards and punishments to budgets and targets (what I call paying people to lie), the damaging effects of stretch budgets, the apparently beneficial effects of breakthrough thinking, the puzzle regarding when and why breakthrough thinking does and does not devolve into paying people to lie, and some new ideas on the basic source of performance that come from the philosophy of ontology.
Number of Pages in PDF File: 22
Keywords: Productivity, incentives, performance, ontology, Barbados Group,
Date posted: April 23, 2005