Why managers shouldn’t measure individual performance in the digital age

Photo credit: Verkeorg.

“How do you recommend I measure the individual performance of my engineers?”

It was late and I had an hour drive ahead of me. I had no energy left to answer more questions.

But this young engineering manager who asked the question and stayed behind after my presentation  had me hooked. It was as if he had read my mind, dredged up my biggest management gripe, and handed it back to me in the form of a question.

Re-energized, I asked, “First of all, why would you even want to do that?”

The young manager replied, “Well, I have just been promoted to manage a team of engineers who were previously my peers, in fact. I want to make sure that I am doing a good job by them. I want to be able to measure each of them so I can get a baseline for evaluating their performance later on. I want to make sure everyone is pulling their weight.”

Seems perfectly reasonable, right? Too bad it’s dead wrong.

“Well,” I replied, as I heaved my laptop bag onto my cramped shoulders. “Why don’t you walk me to the parking lot and describe for me what you’re doing now. I’ll give you my honest feedback.”

I left him with three concrete practices he could apply to his team right away. But in order for those to make sense, we first needed a quick look at the core challenges companies like his are facing.

We are all software companies now

Marc Andreessen famously quipped that “software is eating the world.” He was referring to the increasing reliance on technology in nearly every industry and not just in software companies.

The rise of SaaS, cloud and big data, AI and machine learning, and the ubiquity of mobile devices with easy access to high-speed internet represent both a threat and an opportunity to traditional companies, particularly those established before the internet revolution. These companies now find an imperative to either “act like a software company” or be crushed by their competitors.

Yet, they encounter significant barriers to achieving change from within. Their very maturity exerts an enormous gravitational pull on new initiatives, making it difficult for internal innovators to reach “escape velocity” with their projects.

There are three main barriers to innovation and flexibility in these companies that I regularly encounter:

1. Organizational structures that prevent collaboration
2. Outdated management theories deeply ingrained in the company culture
3. Legal or regulatory rigidity that discourages risk taking

Traditional management theory is broken

Deming and the new management science