Target culture hinders performance
A long-running CIMA study provides evidence of the negative impact of performance targets within an accountancy firm.
Counter-productive health service and public sector reforms and business-distorting bonus schemes have illustrated the impact of an excessive reliance on performance targets in recent years, but a new CIMA study has illuminated the managerial side-effects within a large accountancy practice.
CIMA’s report The use and consequences of performance management and control systems investigated the impact targets had on employee behaviour at a large UK-based accounting firm and found that an excessive focus on financial objectives caused staff to take undesirable actions to meet budgetary targets.
Using a web-based survey, professor David Otley and a team from the University of Lancaster collected questionnaires from 236 accountants within the firm about their perceptions of the targets used, how they were applied in performance assessments and the behavioural consequences of these targets at different hierarchical levels. Support staff, graduate-level associates and managers were invited to take part, but partners were excluded from the survey for confidentiality reasons.
The project focused on an accountancy firm for several reasons. Practices tend to be hierarchical in structure and place a strong emphasis on targets in everyday work. Recent financial and corporate failures have also raised public interest in the diligence of accounting firms.
But the “up and out” nature of the profession where many leave their training firm after they qualify creates additional management problems, as motivation and work quality can drop among employees who have already decided to leave in the near future.
Because of the need to maximise utilisation, firms tend to focus on time taken to complete tasks. Tight time budgets inevitably lead to undesirable employee behaviour. When placed under pressure, employees either cut corners and sign off incomplete jobs, or misrecord the time taken to complete the necessary checks, the researchers found.