A few weeks ago I was having a spirited debate with a global CHRO on the relevance of KPIs and performance ratings in improving the performance of top talent. She was making the argument that performance improvement is necessarily a function of goal clarity and directly linking compensation with target achievement. I was making the argument that … for self-motivated, high performing, ambitious, top talent … it’s not.

To make my point, I started to paint of picture of what it would look like if Cristiano Ronaldo, one of the top performing athletes of our generation was put on a classic performance management platform, similar to what multinationals use to enhance performance. Let’s play it out.

Ronaldo would be assigned at least 5-6 personal KPIs to focus on and 2-3 team KPIs. They would look like these (OTP is short for on target performance)

Personal KPIs

# of goals scored per match (OTP = 1.05) # of assists per match (OTP = 0.3) % of pass completion (OTP = 0.8) Conversion ratio – # of opportunities needed to score 1 goal (OTP = 2.5) Distance covered per match (OTP = 10.2 km) # of interceptions / tackles per match (OTP = 3.4)

Team KPIs

# of major trophies won by team (OTP = 2) % of matches won by team (OTP = 60%) % of home matches won (OTP = 80%)

Now, imagine that Ronaldo will be reporting (solid line) to the team manager. All the above KPIs will be discussed and targets set by the team manager on the basis of

Last 3 years’ performance

Benchmark teams (like Barcelona, Bayern Munich, Juventus etc.)

Benchmark strikers (like Messi, Benzema, Ibra, Neymar, Costa etc.)

Finally, the compensation plan for Ronaldo will be lined up as follows.

Bonus computation:

20% based on Real Madrid’s overall financial results

30% based on Team KPI achievement (average of KPI 1 through 3)

50% based on the overall rating of the 6 personal KPIs assigned to Ronaldo - 30% of KPI a. and b. (his primary objectives), 20% on average rating on KPI c. through f.

Every quarter, the team manager will sit down with Ronaldo and analyze performance based on the KPIs – it would go something like this.

Manager : “This quarter your assists went up to 0.36. Well done, you seem to be creating more opportunities for Karim, James and Gareth. They have shown their appreciation through the 360 feedback process. Unfortunately, your pass completion has gone down from 0.86 last quarter to 0.82 this quarter. You need to watch this closely as you are perilously close to dipping below OTP on this metric. Make sure you practice your passing with more intensity. Your interceptions are still below OTP, at only 2.7 per game. You need to bring this up. Work with the defensive midfielders to see if you can drop back more often and help with breaking up opposition play. But don’t get too caught up in this because your goals-scored-per-match has to keep pace at 1.05. Quarterly goals-scored-per-match was strong at 1.32, but last month you dropped down to 1.1. Be careful you don’t fall below the 1.05 target this month.

And, by the way the team is doing well at 63% win rate, but next quarter we have some tough home games. Make sure that you are focused on the ultimate objective of keeping home wins above 80%”

Ronaldo – “Ok, thanks. Gotta go.”

Now imagine that Ronaldo has ‘dotted line’ reporting to another boss, the commercial director of Real Madrid. He will be focused on the following KPIs for Ronaldo.

# of Ronaldo shirts sold per quarter (OTP = 1.2 Million) # of media appearances per quarter (OTP = 12) YoY revenue growth from Ronaldo merchandise (OTP = 16%)

So, every quarter, Ronaldo goes through a performance conversation with the commercial director that goes like this.

Commercial Director – “Ronaldo, your shirt sales are down again from last quarter. This is not acceptable. Please make sure that you are taking off your shirt more often after you score your goals. And work on the eight-pack for crying out loud … you are down to a six pack – this won’t do. I’ll have our fitness director work with you on a special abs program.

And why are your tweets down 17% over last quarter? We are a commercial organization, Ronaldo, and while you are here primarily to score goals and win football matches, don’t forget the financial impact that you have to create.

So, we are launching some new merchandize with your picture on them this month. You need to get the fans buzzing again, or it will impact your bonus at the end of the year.”

Ronaldo – “Ok, thanks. Gotta go”.

What’s wrong with this picture

You can make the argument that every single KPI listed here makes sense for the ‘role’ that Cristiano Ronaldo is supposed to play for Real Madrid. Every target laid out is sensible, well benchmarked and clearly aligned to indisputable performance drivers. The compensation plan seems fair and balanced. The messages from the multiple bosses seem to be grounded in facts and they provide clear actions for Ronaldo to focus on the levers that will boost overall performance.

So, what’s wrong? Why does all this seem so ... well ... stupid? Why does it not meet our intuitive judgment on what’s going to make Ronaldo perform better?

Think about it and ask yourself if you are not making the exact same mistakes in designing your company’s performance management platform.

Ok, thanks. Gotta go.