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Issues and Puzzles in Performance Management (pdf file of Powerpoint Slides)

Barbados Group Working Paper No. 05-02

22 Pages Posted: 23 Apr 2005  

Michael C. Jensen

SSRN; Harvard Business School; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI); Harvard University - Accounting & Control Unit

Date Written: September 2004

Abstract

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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.

Keywords: Productivity, incentives, performance, ontology, Barbados Group,

Suggested Citation

Jensen, Michael C., Issues and Puzzles in Performance Management (pdf file of Powerpoint Slides) (September 2004). Barbados Group Working Paper No. 05-02. Available at SSRN: https://ssrn.com/abstract=709561 or http://dx.doi.org/10.2139/ssrn.709561

Michael C. Jensen (Contact Author)

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Harvard Business School ( email )

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European Corporate Governance Institute (ECGI) ( email )

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Harvard University - Accounting & Control Unit ( email )

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