Performance substitution refers to a phenomenon that occurs when staff substitute activities that lead to achievement of goals for activities that do not lead to their achievement because they reward the wrong activities. Administrators, like most other staff, focus more on performance that is clearly quantifiable than performance. Frequently, employees receive little or no recognition for participating in activities that are difficult to measure, such as cooperation and initiative. However, activities that are easy to measure may have little or no relation to the desired good performance. All in all, rational people tend to work for the rewards offered by the system.
Consequently, they replace the performances that are recognized and rewarded by others that are underestimated, regardless of their contribution to the achievement of goals. A research study conducted among 157 corporations revealed that most companies made few attempts to identify areas of non-financial performance that could boost their chosen strategy. Only 23% constantly created and verified cause and effect relationships between intermediate controls and business performance.