Chapter 8 Performance Measurement Systems in Organizations: A Good Measurement Should Tell a S.T.O.R.Y.

In implementing strategies to achieve ambitious goals, managers use tools such as performance measurement systems (PMS) for their proven ability to motivate and drive employees’ behaviors. However, many strategies fail during implementation, partly because managers pay insufficient attention to PMS design, tending to devote too little attention to characteristics of the metrics they use to evaluate and provide feedback on their subordinates’ performance. This chapter discusses the management control literature on metrics, the psychology behind the behavioral effects of measurements, typical managerial errors in choosing performance metrics, and previous attempts to define characteristics of good measurements. It suggests that good measurements should exhibit a set of characteristics associated with a novel and easily remembered acronym, STORY, and tests this typology by analyzing empirical data gathered on 1,159 metrics from 293 survey respondents, including characteristics of the people measured (e.g., age, position, and functional department) and the organizations employing them (e.g., firm size, industry, scope, and type of organization).