An Anatomy of Performance Monitoring

Performance monitoring is a mainstay management tool in most organizations. Yet we still know little about whether—and why—better monitoring yields better performance in practice. To shed light on these questions, we study the introduction of a performance monitoring technology that enabled managers to track the progress of drive-thru orders in real time in a large quick-service restaurant chain in Puerto Rico. Sales increased by nearly 5%, but this rise was on average short-lived: impacts diminished to roughly half their initial magnitude within two months. Investment in and depreciation of worker skills play an important role in explaining this pattern. Managers responded to the availability of real-time data on bottlenecks by providing greater training inputs to workers at key workstations, particularly in the kitchen. But only a subset of managers provided “refresher” training to counteract skill depreciation over time. Conditional on baseline store productivity-by-time interactions to account for dynamic effects of general managerial quality, stores in which managers utilized refresher training intensively prior to the technology implementation had more persistent gains in sales, suggesting that managers’ attention and responses to worker skill dynamics matter for productivity. These results provide a look inside the “black box” of the management-productivity relationship, and highlight the critical role of on-the-job human capital investment in realizing and sustaining productivity gains from better performance monitoring.