Problems in Performance Measurement at the Edwards School of Business

Table of Content
Executive summary 3
1. Introduction 4
2. Discussion 5
2.1 Problems with performance measurement 5
2.2 Factors that cause problems 6
2.3 Prediction of other institutions 8
3. Conclusion 10
4. References 11
Executive summary
This report is a case study from Edward School of Business to analyze the problems in performance measurement. The point-based merit system is introduced for the purpose of improving faculty members’ performance in academic research when keeping good performance in teaching and motoring students. The reports will first give a general background of Edwards School of Business and the merit system. It then presents three specific problems that the school encounters, namely faculty members focusing too much on getting points rather than improving outputs, unfairness due to quantifying performance into points and confusions and distrust from faculty members. Besides, how these problems generate is discussed and prediction of results in other organizations is discussed.

Introduction
Edwards School of Business is the second largest college of The University of Saskatchewan, enrolling about 2,000 students every year. It is now undergoing institutional transformation to enhance academic research, the student experience and faculty engagement. To support the transformation, a new human resource strategy, the merit system, is made to set standards of performance measuring. It is a point-based system where rewards of faculty members are based on points they earn from achieving various activities. Generally, performance of a business school is measured by two aspects, academic achievements and contribution to the world of work (Starkey et al., 2004; Coopey, 2003). However, the merit system focuses mainly on academic achievements such as teaching quality and academic research. As a result, some problems have been made. This report aims to discuss and understand these problems. It will first figure out three specific problems with reference to management accounting theories. Then analyze what factors cause these problems, why and how these factors cause the problem to occur. Following is to predict why other organizations would likely be affected by these problems in performance measurement. Finally, a conclusion will be made to give a brief summary of this report’s findings.
Discussion
2.1 Problems with performance measurement
Performance measurement is designed to ensure that an organization’s goals can be achieved effectively and efficiently. From management accounting perspective, measurement should be linked to strategic planning and budgeting of the organization (Elg et al., 2013). Although the merit system for Edwards School of Business, ensuring teaching quality while encouraging academic research and additional contribution, as well as rewarding faculty members according to their achievements, is in consistent with its strategy to enhance business school’s performance and strictly control its budgets, it brings various problems due to the design of the merit system. Three problems will be discussed in this report.

First, faculty members may focus too much on gaining the points for rewards and promotion. It means that members may ‘gaming’ the merit system, manipulating results so that they can maximize performance (Wright, 2012). For example, faculty members may rely too heavily on explicit evidence that provides their points rather than pursuing activities that are highly valued. This problem reduces faculty members’ intrinsic motivation to activities that brings benefits to students or the business school. For instance, Pohler enjoys coaching the Excalibur competition team, which costs her lot of time and makes her less available on academic research, which is mainly associated with payment and promotion. As a result, faculty members focus too much on gaining points rather than doing things that really contribute to the faculty (Doran et al., 2006). So it is possible that although faculty members achieve high scores in the point system, actual improvement of performance of business school and anticipated enhancement has not been achieved.

Second, the point system cannot fairly measure activities or achievements with simply assigning points to them. On one hand, not every aspect can be measured by one standard (Wright, 2012). There are some aspects cannot be easily quantified. When measuring two professors’ contribution to educating business knowledge to students, simply assigning points to either teaching hours or students’ exam results is not suitable. One professor may spend just an hour a week on an honors student while another may devote eight hours a week for a below-average student. Both professors gain the same points, but certainly their performance are different. So points may not be suitable for measuring this. On the other hand, performance measurement in education institution may not distinguish inputs and outputs (Gorman, 2013). For the merit system, points are used as convenient tools to measure performance. For example, the number of different courses taught or overload teaching that counts for 1 point and 2 points each are actually measuring inputs of professors rather than results. So it is more likely that points are high, but actual effectiveness and efficiency are not improved.

Third, the point-based merit system brings confusions and distrust to faculty members (Cadsby et al., 2007). For example when measuring contribution on academic research, although quantities of published journals are easy to count, qualities of these journals are hard to measure. The influence of the academic journal, the practical knowledge of the published articles in the business world, the meaningfulness of the research results to the research areas are all criteria that need to be considered. But these criteria vary. How to measure all these fairly cannot be easily designed and be understood by faculty members. So confusions and distrust are generated. In addition, appointments for merits at Edwards are different. Some faculty members have heavy responsibilities on teaching while others have greater focus on scholarly work. So standards for measuring these different performance seem to be unfair. When fairness of measurements exists, internal commitment from faculty members may be destroyed (Jakobsen et al., 2010).

2.2 Factors that cause problems
Problems are not caused by incident. There are many factors that cause these three problems to occur.

To begin with, for the first problem, factors such as financial burden and research pressure are pushing faculty members focusing too much on gaining points rather than pursuing actual outcomes. Salaries for the University of Saskatchewan are relatively less competitive. To attract and retain professors for the university, raising salaries are necessary, as faculty members want to see salary rise to 75 percentile of comparator universities (Pohler, 2011). But increase in salary should result in equal increase in productivity. Otherwise, the decision should not be made as it does not benefit the organization (Lazear, 2010). In addition, Edward School of Business’s new policy focuses more on academic research. When point-based merit system is introduced to faculty members, their major way to get rewards and promotion is to achieve success in the merit system. So faculty members will strive to gain more points for rewards and promotion. This phenomenon is common in pay for performance measurement (Weissert and Frederick, 2013). From management accounting perspective, the increase payment to employees is in consistent with the increase in achievements they gain, which means points in Edward School of Business. When managers see ‘improvements’(increased points) from faculty members, they keep on using merit system to motivate employees. As faculty members see the points work in the merit system, they will focus more on pursuing points.

Second, the problem of assigning points as performance measurement standard is due to complexity of performance and business outcomes. As mentioned before, performance of a business school should be better access through both academic achievements and practical contribution to the world of work. However, the merit system in Edward School of Business focuses mainly on academic research. When measuring performance, focus only on single or few aspects will cause distortion of performance outcomes (Kinh, 2009). In accounting management, managers measure both financial and non-financial outcomes of employees to access their performance so that they can fairly evaluate employees. Edward School of Business measures mainly academic contribution while neglecting other aspects. So it is more likely that the merit system cannot fairly access members’ performance. Besides, even though the point-based merit system is well designed according to development strategy and financial budget, it cannot reveal every aspects of faculty members’ contribution. In other words, not every performance can be evaluated through quantified data. If quantified data is necessary, there should be various set of data so that performance can be presented fairly (Gorman, 2013). But these processes will increase workload and budget to administration when measuring performance because these data needed to be translated into comparable data. In all, the design of pay for performance itself has problem. Not only its interpreting of performance into points is problematic (Gorman, 2013), whether pay for performance is helpful in improving performance while saving financial budget is still doubtful (Galvin, 2006).

Third, the confusions and distrust from faculty members are caused by the complex system design. For example, junior faculty members are best to focus on academic research as it is the most secure way to get tenure and promotion. However, the standards for merit are not totally in consistent with standards for tenure and promotion. So the misalignment makes faculty members confused about their behaviors. Although under assumption, the point-based merit system provides a framework for faculty members that guide their behavior, and the assessment of their effectiveness is based on the framework, it may cause distrust from faculty members if the assessing criteria are not convincing (Horngren, 2004). Evidence from the case has shown that faculty members are not totally agreed with the point-based merit system. In addition, some employees may prefer fixed payment rather than pay-for-performance (Jakobsen et al., 2010). All these show that the merit system designed is not appropriate.

2.3 Prediction of other institutions
Whether the problems are unique for Edward School of Business or will these problems happen to other organizations with different situations. To predict the results in other organizations, the new settings for organizations are hospitals in other countries, such as the United Kingdom. There are some similarities and differences between Edward School of Business and UK hospitals. First, like Edward School of Business, UK hospitals are facing financial burdens as there are limited budgets (Currie et al., 2004). Second, unlike Edward School of Business, performance of hospital is measured mainly based on patients’ result. In other words, there is a more standard measurement for hospital than for business school.

Holding these settings, it is estimated that problems will also exist in UK hospitals if merit system is introduced to hospitals. This is because first, hospital employees face financial pressures as current salaries are not competitive. When rewards and promotion are based on performance, there is no doubt that employees will strive for achieving better in the performance measurement system. Second, when performance is judged by the number of points an employee gets, employees will make efforts in gaining more points (Weissert and Frederick, 2013). To some extent, the problems are caused mainly by the design of point-based merit system. So problems will also occur in other organizations.
Conclusions
Performance measurement for a business school is complex. When Edward School of Business are striving to improve performance through the newly introduced point-based merit system, it encounters many problems such as faculty members focusing too much on getting points rather than improving outputs, unfairness due to quantifying performance into points and confusions and distrust from faculty members. These problems are caused by both external pressure and internal design. On one hand, external pressure from finance, tenure and promotion forces faculty members to improve their performance so that they can gain rewards and promotions. On the other hand, design of point-based merit system gives faculty members a chance to pursue improvement of performance in a special way. These factors act together and cause problems come into being. To some extent, the problem is caused by the point-based merit system itself, so the same problems are very likely to occur in other organizational settings.
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