Performance management systems and practices

¶ … HBR's "It's time to make management a true profession."

Traditionally, performance management has been thought of in terms of securing a sound 'bottom line' for a business. According to one management guru: "Simply put, performance management includes activities to ensure that goals are consistently being met in an effective and efficient manner. Performance management can focus on performance of the organization, a department, processes to build a product or service, employees, etc." (McNamara 1997). However, according to the Harvard Business Review's October 2008 issue, in the wake of the seismically shaken, constantly changing current business climate, conventional wisdom has been shifted to take into consideration ethics as well as money when evaluating organizational performance. Unsound ethical practices regarding mortgages and credit lending are at the heart of the modern economic meltdown

Thus, argue Rakesh Khurana and Nitin Nohria: "To regain society's trust, we believe that business leaders must embrace a way of looking at their role that goes beyond their responsibility to the shareholder to include a civic and personal commitment to their duty as institutional custodians. In other words, it is time that management finally became a profession. True professions have codes of conduct, and the meaning and consequences of those codes are taught as part of the formal education of their members" (Khurana & Nohria 2008, p.1). Hence the title of their article: "It's time to make management a true profession."

Some business professions, such as accounting have tried, and one could argue, have failed to forestall crisis through the use of such governing bodies. However, there is an advantage to having certain standard operating procedures and method of conduct for a profession -- these regulations give guidance regarding ethics. However, business is so broad and over-reaching in its modes of professional education and the issues CEOs and managers are required to address, that even higher education strains to encompass them. "Although the MBA has been the fastest-growing graduate degree over the past 20 years, it is not a requirement for becoming a manager. Managers do not have to sit a formal exam to demonstrate their knowledge even at the end of an MBA, let alone stay current in their field. There is no obligation for them to know anything about investing in innovative new financial derivates or special purpose vehicles, for example, even if they serve on boards required to approve such potentially risky transactions. To the contrary, data on enrollment in executive education programs offered by business schools suggest that people who already possess an MBA are less likely than those who don't to invest in lifelong learning in the form of continuing education. " (Khurana & Nohria 2008, p.1). Standardization, argues Khurana and Nohria, would also give added value to the MBA degree in the eyes of the business world and restore confidence in businesses and the quality of education in business schools.

At present, the main standardized requirements for MBAs are modest accreditation requirements for business school programs, and the Graduate Management Admission Council use of the GMAT exam in an effort to gauge a potential MBA student's intellectual ability. But the Advance Collegiate Schools of Business (AACSB) according to the Khurana and Nohria plan, could devise and administer an exam that all graduating MBAs would have to pass before they were licensed to practice in ethics and other forms of knowledge, much like the bar exam. This way, to have an MBA would imply an understanding of 'credit default swaps' for example, just as a lawyer must understand torts.

The fact that such regulation does not exist perhaps has at its source the reflexive dislike of any additional regulation endemic to the business profession. In the upcoming years, this instinctive distaste is likely to abate. However, although Khurana and Nohira's proposal seems laudable and reasonable, rather than idealistic, they fail to present convincing evidence that having such professional boards and regulations have made the professions of medicine and law more ethical than that of business and that graduates of MBA programs are less knowledgeable than doctors and lawyers who graduate from similar-caliber business schools as their CEO counterparts. If MBAs do seem less well-versed in some aspects of modern business, this may be more due to the broad nature of what constitutes commercial enterprise, and the constantly changing nature of the field.

Business is more volatile than either the law or most forms of general medical practice. Given this volatility, regulations regarding what business graduates must know might quickly become obsolete. The authors dismiss the notion that professionalism chokes creativity, which seems like one of the weaker arguments against general certification for managers, but, unintentionally weakening their argument as well as the value of the degree, they vacillate and say perhaps life experience could be used to contribute to the requirements certification, to acknowledge the diverse experiences of business professionals: "positions would be attainable by individuals with varying credentials, depending on the job responsibility: none; experience only; experience plus education; MBA only; MBA plus CBP; CBP only (which might be granted to an experienced manager who passed the certification exam without having completed the MBA, as people without a law degree are allowed to pass the bar and practice in some states). (Khurana & Nohria 2008, p.3).