Strategic objectives are usually somewhat vague and ambiguous. Performance measures provide more tangible concepts for employees and managers to work with. Saying “Delight the customer” might not make sense to an employee (“How exactly do you want me to do that?”), but measuring customer satisfaction survey scores provides a tangible measure that is easier for employees to work with. That said, measures are almost always imperfect representations of the strategy. The more a measure is misaligned with the strategy, the more surrogation is likely to occur.
Many companies tie compensation to performance measures to ensure that employees are motivated to work hard at the tasks the company wants them to do. But Wells Fargo (WFC) has been criticized for not being more aware of the ways in which its employees could take advantage of the compensation structure and engage in unethical activities to maximize their individual performance on the cross-sell measure. Use of incentives requires careful consideration of all activities, good and bad, that are incentivized. Further, incentives tend to increase the focus on measures, potentially increasing surrogation.
Surrogation is most likely to happen when strategy is relatively inaccessible to employees and when any given measure becomes very salient. Involving employees in the development of strategy can help make strategy more understandable and more accessible. Tying compensation to more than one measure (or not to any measure at all) can decrease the salience of any one measure, potentially decreasing surrogation.