Establishing Performance Measures

Chapter 1 click here: Why Accountability Matters

Chapter 2 click here: Setting an Example of Accountability

Chapter 3 click here: Creating a Culture of Accountability

Chapter 4 click here: Setting Team Goals

Chapter 5

Once you have collaborated with your team to set aligned, clear, motivational, and individualised goals, it is time to work with them on measuring their progress so that you can improve performance and build accountability. You can do this by establishing a performance measurement system (PMS). This is a set of measures which provides objective, quantitative evidence of the the current efficiency and effectiveness of your team’s processes and forecasts these for the future. The measures you use will be the basis of your ongoing accountability—you will use them to determine whether your team is on track to meet their goals, you will reward individuals when the measures exceed expectations, and you will impose consequences when they fall short. Measures also send a message to your team about the larger goals and strategies of your organisation and encourage behaviours that are in line with them.

The characteristics of effective measures

Since measures are crucial indicators of past and future performance, it is important to make sure that you are measuring the right things in the right way. Good performance measures should be balanced, strategic, and employee-driven.

Balanced performance measures

No single measure can give a clear view of your team’s performance, and neither can a set of measures focused on a single area. Measures need to be balanced. The most important balance to strike is between results and leading indicators.

Results indicators (or lagging indicators) are backwards-looking measures that quantify what you have achieved—for example, the number of sales, profit, social media views, or customer ratings. (75) Results indicators are important, but they are unlikely to drive success on their own. To succeed according to your results indicators, it is necessary to measure how you are going along the way—that is where leading indicators come in. These are forward-looking measures that demonstrate your performance in key areas that will affect your end results. (76) For example, if the number of sales is your results indicator, a leading indicator might be the number of outgoing calls. Or if you are aiming for certain customer ratings, you might measure average delivery times. Leading indicators are things that you have direct control over and that move you towards success in your results indicators.

Results and leading indicators need to be in balance because they are important in different ways. Results indicators clearly show whether you have achieved your goals and they can be used to establish future targets. Success, or lack thereof, in your results indicators reflects the effectiveness of your leading indicators. These leading indicators are important because they provide a gauge of your progress towards your goals and can be adjusted, if necessary, to optimise your outcomes. A combination of indicators will help your team to not only have a clear view of their goals but to understand how their actions drive results—both of which are important in accountability. Research shows that only 50% of employees clearly know what is expected of them and only 44% agree that they can link their goals to those of the organisation, yet these two factors are important predictors for success. (77)

One example of this balance between results and leading indicators is financial and operational metrics. Financial measures have traditionally been the focus of PMSs. These are important because they indicate whether your strategies and processes are effective in improving the bottom line. (78) But operational measures, such as quality, internal processes, and customer satisfaction, are equally important because they indicate and drive future performance.

Strategic performance measures

A performance management system should include as many measures, and only as many, as is necessary to support the key strategic objectives of your organisation and your team. Measurement costs money and time, so it is important to ensure that what you are measuring and the frequency with which you are measuring it is actually improving performance and contributing to profit. (79) Consider the larger objectives of your organisation and the role your team plays in achieving them.

Then, identify what you can quantify to demonstrate whether the desired results are being achieved. This shouldn’t be done by brainstorming, which is a creative process intended to open up many and varied ideas. It will, most likely, leave you with a long list of potential measures that aren’t strongly aligned to your goals. Instead, focus on the evidence that strongly demonstrates progress towards goals and narrow down to the factors which are most crucial and measurable. By focusing on the measures that are most critical for your success, you will avoid unnecessary and costly measurement and you will clearly communicate priorities to your team. (80) You will be able to hold your team accountable for the aspects of their performance that most impact outcomes. Before deciding firmly on any measure, consider the possible consequences of measuring it. Could focusing on it compromise performance in other areas? Could it encourage undesirable behaviour, such as fudging numbers or covering up errors? Is it something your team has control over? (81)

It is also necessary to be flexible and review your performance measures regularly as strategies and priorities change. Getting rid of measures that aren’t serving your team will free you up to focus on those that are.

Employee-driven performance measures

Effective accountability for performance requires agreement about what constitutes acceptable performance. (82) Similarly to when you set goals, involving your team in establishing their performance measures will help your team to take ownership of them and see how their actions affect their outcomes. In other words, it will help make your measures actionable. Studies also show that measurement is most efficient and effective when the people doing something are the people measuring it. (83) Putting measurement into the hands of your team helps them to feel like they are in control of their performance, rather than feeling controlled. When people see themselves as carrying out the instructions of others, they lack a sense of responsibility for their outcomes. On the other hand, when people feel in control of their performance, they are intrinsically motivated to improve it and receptive to outside feedback and advice. (84)

Employee-driven measurement doesn’t mean that there is no external evaluation—in fact, data from a variety of sources (including your own observation, higher-level employees, peers, and customers) is important for gaining an accurate view of performance. (85) But your team will perform best when they are involved in the process. As Ian Robson’s research concludes:

“The most effective forms of organisation… are most likely to occur when the group of people involved in a process are monitoring a small number of measures that are critical to the success of the process.” (86)

That is, measures are most effective when they are strategic and employee-driven. We can add to this that they should also be balanced to enable your team to maximise the accountability and performance of your team.

The process of establishing measures

When setting performance measures, keep in mind the characteristics of effective performance measures discussed above. For measures to be team-driven, you should involve your team in the establishment phase.

Key result areas

The first step is to establish key result areas which will have the biggest impact on your team’s performance. (87) These should be strategic and related to the key objectives of your team and organisation. Understanding your team’s role in carrying out the organisation’s strategic vision will enable you to choose measures related to your team’s true effectiveness and value. Aim for a few key result areas and, for each, define the problem you are trying to solve or the opportunity you are trying to maximise. These will be the basis of your goals, measures, and action plan.

There are many possible frameworks that you can use when establishing your key result areas and the measures you will use to track them. One popular approach is the Balanced Scorecard, in which an organisation’s strategy is translated into a set of objectives based on four different perspectives—financial, customer, innovation and learning, and internal processes. (88) This framework can be applied on a smaller scale to teams. For each area there are specific questions which, together, focus attention onto the most critical measures: (89)

• How do we look to shareholders?
• How do customers see us?
• How can we continue to improve and create value?
• What must we excel at?

The Balanced Scorecard system brings together the various elements of an organisation, demonstrating how they relate to each other and how changes in one area might affect another.

Results and leading indicators

Once you have established your key result areas, set your results indicators. These should be measures that will indicate for success for the key result areas you defined. Start by looking at past performance and set one or two challenging but realistic goals. Then, use the red-yellow-green success criteria (below) to clearly outline what success will (and won’t) look like and determine the value of each measure that would signify unacceptable performance. (90)

Working backwards from your results indicators, consider how you might achieve them and set your leading indicators. Determine what areas of performance have the greatest influence on the desired outcome and how they can be measured. Again, set red-yellow-green criteria for success in these areas.

Action plan

Each result and leading indicator should be expressed as a clear target with a timeframe attached. These goals should be broken down into specific actions which are clearly defined and delegated. It is also necessary to define how accountability will be carried out—how progress will be communicated, the steps that will be taken if performance falls short, the rewards for meeting targets, and how you will provide coaching and feedback. (91) This process is explored below. Including your team in establishing your processes for accountability will help to create a system which they can all buy into.

For each indicator, create an action plan which: (92)

• Defines the goal, its timeframe, and its strategic importance.
• Outlines the tasks that need to be carried out to achieve the goal, breaking down large, complex tasks into smaller ones.
• Establishes milestones.
• Assigns each task to a person or group who will be responsible for it.
• Sets a deadline for each task.
• Determines resources required.
• Establishes measures to evaluate progress.

This plan of action will be the basis of your ongoing accountability, providing your team with clear direction in what actions they need to take and when. This helps employees to prioritise their tasks and more easily track their progress towards goals. They will also have greater understanding what they can expect from you in terms of resources and measurement.

A clear action plan will help your team to feel like their performance measures are in their control—an important factor in accountability, but one that is only true of two in ten employees. (93) If your team members can’t connect what you are measuring with concrete actions they can take, they are unlikely to be receptive to accountability or motivated to improve their performance. (94)

Do you have effective performance measures in place?

If your team already has performance measures in place, consider how effective they are:

• Are they balanced?
• Are they strategic?
• Are they employee-driven?
• Are they driving real performance improvement?

If you don’t have performance measures in place, start collaborating with your team to determine your key result areas, establish results and leading indicators, and create an action plan.

________

The above comes from my eBook 'Accountability for Team Leaders'. You can receive a copy of the eBook by sending me a LinkedIn message requesting the eBook.

__________

References

75 Rhythm Systems, ‘KPI Evaluation: A Comprehensive KPI Guide,’ https://www.rhythmsystems.com/key-performance-indicators-kpis; C Cosper, ‘KPIs That Drive Predictable Results,’ https://www.rhythmsystems.com, p. 2.

76 Rhythm Systems, ‘KPI Evaluation’; Cosper, ‘KPIs That Drive Predictable Results,’ p. 2.

77 M McDonald, ‘Do Your Measures Make Employees Mad? Or Motivate Them?,’ 2018, https://www.gallup.com/workplace/231659/performance-measures-motivate-madden-employees.aspx.

78 R S Kaplan & D P Norton, ‘The Balanced Scorecard—Measures That Drive Performance,’ Harvard Business Review, 1992, https://hbr.org/1992/01/the-balanced-scorecard-measures-that-drive-performance-2.

79 S Tangen, ‘Performance Measurement: From Philosophy to Practice’, International Journal of Productivity and Performance Management, vol. 53, no. 8, 2004, p. 728.

80 Kaplan & Norton, ‘The Balanced Scorecard.’

81 S Barr, ‘How to Measure What Matters,’ https://staceybarr.com/downloads/WhitePaperMeasureWhatMattersPaulFrith.pdf.

82 A Sinclair, ‘The Chameleon of Accountability, Accounting, Organizations and Society, vol. 20, no. 2/3, 1995, p. 222.

83 I Robson, ‘From Process Measurement to Performance Improvement’, Business Process Management Journal, vol. 10, no. 5, 2004, p. 512.

84 I Robson, ‘Implementing a Performance Measurement System Capable of Creating a Culture of High Performance,’ International Journal of Productivity and Performance Management, vol. 54, no. 2, 2005, pp. 141-142.

85 T Dewett, Performance Management: Setting Goals and Managing Performance, LinkedIn Learning, 2019, https://www.dhirubhai.net/learning/performance-management-setting-goals-and-managing-performance/next-steps?u=2126025.

86 Robson, ‘From Process Measurement to Performance Improvement,’ p. 513.

87 S Barr, ‘The 5 Essential Parts of a Dust-Repellent Strategic Plan,’ 2010, https://www.staceybarr.com/measure-up/the-5-essential-parts-of-a-dust-repellent-strategic-plan/.

88 K Khan & A Shah, ‘Understanding Performance Measurement in the Literature,’ African Journal of Business Management, vol. 5, no. 35, 2011, p. 13415.

89 Kaplan & Norton, ‘The Balanced Scorecard.’

90 Robson, ‘From Process Measurement to Performance Improvement,’ p. 515.

91 A Neely et al., ‘The Performance Prism: The Scorecard for Measuring and Managing Business Success,’ Knowledge Interchange Book Summaries.

92 A Athuraliya, ‘The Easy Guide to Developing an Effective Action Plan,’ 2020, https://creately.com/blog/diagrams/how-to-write-an-action-plan/.

93 B Wigert & J Harter, ‘Re-Engineering Performance Management,’ Gallup Inc, 2017, p. 30.

94 M McDonald, ‘Do Your Measures Make Employees Mad? Or Motivate Them?,’ 2018, https://www.gallup.com/workplace/231659/performance-measures-motivate-madden-employees.aspx.