The Performance of Performance Standards

By James J. Heckman; Carolyn J. Heinrich et al. | Go to book overview

7
Measuring Government Performance
An Overview of Dysfunctional Responses

Pascal Courty
Gerald Marschke

Explicit performance measurement systems may elicit unintended and dysfunctional responses, also known as gaming responses. Understanding when such responses take place, their extent and their nature, is essential for improving the design of measurement systems and the overall effectiveness of performance incentives. This concern is reflected in the recent growth in empirical studies focusing on unintended behavioral responses to explicit incentives. We review this literature and try to provide a unifying framework to put into perspective the various classes of dysfunctional responses that have been identified in practice. We use this framework to discuss implications for the design of performance measurement systems.

The performance measure is the rule used to collect and aggregate the data generated by the agent’s actions. The performance outcome is the value generated when that rule is applied to specific data. The next section proposes a formal classification of dysfunctional responses based on the terminology of the multitasking literature. Dysfunctional responses occur when the performance measure does not communicate correctly the marginal impact of decision making on the true objective of the organization. We distinguish three kinds of dysfunctional responses: 1) accounting manipulations, which are responses that boost the performance outcome but have no other impact on the organization; 2) gaming responses, which boost the performance outcome and have a negative impact on the organization; and 3) marginal misallocations, which have a positive impact on the organization but are suboptimal in the sense that alternative allocations would have a higher impact.

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