How can performance measurement systems create behavioural issues, and what is a remedy?

• A. They can lead to gaming and short-termism; remedy with balanced scorecard, multi-period evaluation, and employee involvement.
• B. They always motivate long-term planning; remedy with quarterly targets.
• C. They have no impact on behaviour; remedy by more KPIs.
• D. They only affect senior management; remedy with tighter controls.

Answer: (A)

Performance measurement systems shape what people pay attention to and how they act. When the measured targets drive the behavior, people may game the system, chase the numbers at the expense of real value, and focus on short‑term results rather than sustainable performance. This can lead to tunnel vision, ethical slips, and neglect of important but less easily measured areas.

A good remedy is to use a balanced approach to measurement. A balanced scorecard broadens the view beyond a single financial metric by including multiple perspectives such as customers, internal processes, and people or learning and growth. This reduces the pressure to optimize one target at the expense of others. Evaluating performance over multiple periods helps counteract short‑termism, since results are assessed over a longer horizon and the temptation to manipulate a single period is diminished. Involving employees in setting targets and interpreting results aligns incentives with actual performance and makes measures more credible, reducing the likelihood of gaming. Together, these elements create a more holistic, sustained focus on value creation rather than quick, metric-driven tricks.