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Get the results you want: Change what you measure to shape employee behavior

If your employees are not giving you the results that you want and need, take a look at what you aremeasure assessing. “Change your measure, and you change employee behavior,” said Harold S. Resnick, PhD, CEO of Work Systems Associates, Inc., a Ponte Vedra Beach, Fla.-based consulting firm.

“People will respond to whatever it is you are measuring,” Resnick told a group of business leaders at a recent meeting of Executive Advantage (www.theexecadvantage.com), a professional- and business-development group for Jacksonville-area CEOs. “Measurement is your most powerful feedback and control tool,” he stressed.

But, measurement cannot be done haphazardly. He told the group about an organization whose accounting department provided monthly reports on 35 different measures. “Unfortunately,” he said, “they had no projective sales measurement, no operational performance measures of any substance, no human-factor measures, no customer-satisfaction measures at all.”

What that organization needed—and all organizations need, he said—were measures to assess the organization, individuals, and departments. These types of measurement are essential to entrepreneurial companies because:

• It’s not possible to understand something until you can measure it;

• You have to understand something before you can improve it; and

• You cannot respond to threats and opportunities unless you know where you stand.

“People respect what you inspect,” he summarized, “and what gets measured gets better.”

Organizational measurement

“Folks don’t realize how much their success in the company is driven by measurement,” said Resnick. “Most companies unfortunately drive behavior only from financial results. The problem with financial results is that they tell you nothing. Financial information does not tell you why your performance was great or poor. So financial measures by themselves don’t give you any guidance about what actions to take — or prevent — in the future. It’s like driving a car with no windshield and only a rear view mirror.

So, if financial measures by themselves are not the answer, what is? Resnick said businesses should first identify and assess their critical success factors. “To figure out what these factors are, ask yourself what you would want to know first about your company if you had had no contact with it for three months. What would be your first questions?” Those questions identify your critical success factors.

For each critical success factor, ask yourself:

• What will this measure tell me about my business?

• How can I use this information to impact the future?

• What behaviors will the act of measurement likely create?

• What are intended consequences of this measurement?

• What are the likely unintended consequences of this measurement?

“The act of measuring changes behavior,” he explained. “So for every measurement you take, consider, ‘How are the people in my organization going to start to behave? What are the intended consequences of what I want? What are the unintended consequences?”

Some of the most common key measurement categories include:

• Financial progress and results,

• Sales and/or revenue and/or margins,

• Market share,

• Customer base and customer satisfaction,

• Cost of manufacturing,

• Operational performance (cost and process),

• Human resource measures,

• External benchmarking, and

• Other special categories peculiar to your business.

Resnick said that measures should be objective, obtainable without great difficulty, generated automatically output from existing systems whenever possible, and able to be tracked over time so that trends become apparent.

Individual performance

The second type of measurement every organization should make is individual performance. “If you could shift the performance of your organization one standard deviation to the right,” said Resnick, “you would get a 34% improvement in productivity!”

And it is possible to get that gain, he emphasized, stating that on average, employees spend about 1.5 hours each day not working. Instead, they are shopping online, updating their Facebook page, or answering personal e-mails. “Are they doing these things and falling behind in their work? Or, are they doing these things because they do not have enough productive work to do?”

Only a small percentage of people get fired because they are not performing to the standards set for them, said Resnick. The problem is that the standards are set at a baseline level—the minimum employees have to do to keep their jobs. “The assumption is that a worker’s performance should improve over time,” he said. “Your job is to raise the bar with every employee every year, because you are paying more for that employee every year.”

Peer measurement

Individual measurement is further strengthened by adding peer assessments to the process. “If you have a number of employees who do the same or very similar work, it is statistically impossible for their performance not to resemble a bell-shaped curve,” said Resnick. What this means is that some people will be low performers, some high performers, and most will be “average” performers. The implication of the bell-shaped curve is this: First, you should either get dramatic short term improvement or remove the lowest performers. Second, you should focus on the high performers; that is, leverage your best people to give you really great performance. Then work on consistently raising the bar and performance levels for the middle third.

Honest peer assessment depends on understanding and factoring in three variables: talent (skills and attributes an employee inherently brings to the job), competence (the ability to perform), and performance (what is actually done).

A relatively new employee may have low competence (because she has a lot to learn), but high performance, judged relative to her competence. On the other hand, a 10-year veteran is probably highly competent, but if he is delivering the same amount and quality of work as the one-year person, his performance should be considered low in comparison to his peer group.

When you look at employee performance in this light, said Resnick, you are then able to compare experienced employees with less experienced ones. And, if you have a number of employees who do the same type of job, you can create a forced bell curve—something that is critical if you want to reward people for their actual performance.

resnicksmallHarold S. Resnick, PhD, is CEO of Work Systems Associates, Inc., www.worksystems.com, located in Ponte Vedra Beach. He can be reached at 904-273-2558.

Executive Advantage is a business development and networking group. For more information on joining a group, call 904-704-5058.

 

SIDEBAR 1

Align your mission and measurements

Although having a vision for your company and a stated mission are important to success, making sure that you are measuring the right things is crucial, says Resnick. “If your measurement system is different from what you are intending to accomplish, then your measuring system is going to control behavior more than your vision statement. That’s a pretty compelling message that people don’t really think about.”

A story illustrates: A company boasted that it focused on quality, but its employees were incentivized by the number of completed shipments they made.  Employees knew their pay depended on sending out complete orders, so they made sure each order had the necessary number of boxes. Unfortunately, some of the boxes were empty or partially filled or filled with defective parts. Customer complaints pointed out that quality was not driving employee behavior, despite the company’s mission verbiage. The company’s measurement (and reward) system was in conflict with its mission.

 

SIDEBAR 2

Common measurement errors

Many companies make a number of common mistakes in their measurements, said Resnick. Their measurements:

• Focus on the financial and do not look at other criteria;

• Are historical, but the past data provides no future-focused help;

• Count transactions, but do not show trends over time;

• Are easy to capture, but are not necessarily important to the business’ success;

• Look only at hard data and ignore soft data;

• Focus on final results, but do not explore process for improvement.


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