1. Performance Measurement, Regulation and UK Productivity A Multidisciplinary Overview of Unintended and Indirect Effects Joseph Antony, Gerben Bakker, Kim Tan, Kathryn Walsh and Alan Williams Leeds-Essex-Nottingham-Loughborough-Exeter

2. Performance Measurement, Regulation and UK Productivity Performance Measurement And Regulation Rosalind Rae Kim Tan

3. 3 Performance Measurement (PM) Aims & Objectives What are the effects of PM and Regulation on productivity? Specifically, what are the unforeseen, unintended or indirect consequences? What are the links between regulation and performance measurement? Rosalind Rae, Kim Tan – Jan 2006

4. 4 Systematic Literature Review Keyword generation Electronic Database Searches Ebsco, Proquest, Web of Science… Website searches Specific journal searches Categorisation of journals A, B, C Read journals and identify key journals Rosalind Rae, Kim Tan – Jan 2006

5. 5 Issues and Challenges Not one journal found specifically covered the unintended consequences Meant large search of possible ‘related’ journals Search felt very fragmented Previous research was industry specific, case study specific Small number of journals related PM with regulation Rosalind Rae, Kim Tan – Jan 2006

6. 6 Some consequences of regulation Increase in operating costs Increase in time needed for understanding & implementation Increase in recording, measuring & reporting information Increase in resources required Increase in bureaucracy Firms measure what’s easy as opposed to what is useful but more difficult to measure Trade-off between maximising one goal to the detriment of another goal or achieving all goals to some extent Firms will prioritise goals in accordance with what is important to them Rosalind Rae, Kim Tan – Jan 2006

7. 7 Consequences of regulation Regulation can reduce productivity Environmental restrictions on aircraft noise mean runways operate below maximum efficiency Seen as an added burden, which slows the process down Regulation can stifle innovation & reduce the production of new ideas Excessive PM can result in short- term myopia forgetting the bigger picture and longer term objectives Rosalind Rae, Kim Tan – Jan 2006

8. 8 Consequences of regulation Competing & conflicting PM’s Regulation on aircraft noise (reduction) versus increase in environmental pollution Commercial pressure for increase in retail activity versus UK policy to maximise the use of existing airport capacity Regulation restricts return to shareholders Airports focus on growing unregulated activities Rosalind Rae, Kim Tan – Jan 2006

9. 9 Consequences of regulation The cost of measurement exceeds the benefit derived from improvement through measuring it Employees learn to manipulate the perf. result to achieve the goal to the detriment to other goals (achieve the measure but not the goal) Over emphasis on the financial objectives dehumanizes the workforce who feel less valued Rosalind Rae, Kim Tan – Jan 2006

10. 10 Consequences of regulation In response to regulation, firms: Adapt the company structure Change the company goals Change how people perform tasks Individuals performance / Reward Degrading of status / competencies are marginalised Professional Activity & Administration work merges Empowerment back to control Man-management tensions Rosalind Rae, Kim Tan – Jan 2006

11. 11 Themes linking performance measurement and regulation The move from public to private ownership More commercial orientation More financial accountability Regulated industries are taking on practices and processes used by private industries Firm & Individual objectives Appraisals/Reward Systems Performance Management Rosalind Rae, Kim Tan – Jan 2006

12. 12 Factors to take into account Timeframe Short-term effects versus long term effects Different regulation can impact on firms in different ways Different environmental context Different social contexts Research has been: Industry specific Country dependent Increase in regulation for firms operating globally – different PM’s

13. 13 Initial conclusions…….. Research is quite fragmented Little as been done from the firms perspective Little focus on the links between PM, Regulation and Productivity Less on the unintended consequences Rosalind Rae, Kim Tan – Jan 2006

14. 14 Possible next steps……? Focus on one industry sector Water or telecommunications At what level should the research be conducted Firm level (top) Corporate governance level Financial accounting Feedback - please Rosalind Rae, Kim Tan – Jan 2006