Volume No. 2

RU Connected?

When setting up internal measures to track our performance, there are many things that we should pay attention to. Are they meaningful? Are they valid and reliable? How about attainable? The list goes on. In fact, that's probably a subject for an entire week's worth of posts.

Those notwithstanding, I think the biggest pitfall by far in the selection of measures and indicators is that they lack "action-ability" (i.e. the ability to of worker to the influence the outcome of the metrics we assign and delegate to them), and "connect-ability" to the overall business outcome desired. Simple enough, right? Not so fast.

I'm willing to bet that many of you are held accountable for things that you have little or no influence on. Like holding a sales director accountable for share price. . .holding a production worker accountable for plant outage performance. . .or holding a secretary accountable for budget performance. Things that are way too far "out there" for the individual to have any meaningful connection with. Sound familiar? Read on. . .

The better approach would be to look at measuring the "drivers" of performance rather than only the high-level outcomes of specific goals (ROI, Share Price, Budget). A DRIVER is something that has a significant ability to influence the performance of a top level goal, but can be managed and tracked at the "workface." When done right, what you'll end up with is a tapestry of sorts, where each indicator is well connected to the overall goal or outcome above it in the chain. Perhaps a better metaphor would be the "Ukrainian egg" concept, where each egg fits snugly into the one above it in the overall chain.

For example, rather than holding a Marketing Director accountable for overall company or divisional performance or budget, why not consider some metrics that get at things they can really control (# new relationships developed, response rate on certain campaigns, % leads qualified, etc.) Those would then roll up into sales revenue, and ultimately profit and ROI, for example.

OK – now you're probably wondering whether you've got the right indicators. One way that I typically test indicators for their "connect-ability" is to take a look at trend performance on that particular measure (say marketing campaign response rate), and do a simple regression against a macro measure like gross sales. (If you're not familiar with how this works, there are many free linear regression tools and sites on the internet that have simplified and automated the math, making regressions a simple matter of copy, paste, and click. See http://www.numericalmathematics.com/ as an example.) Use the driver (e.g. response rate) as the independent variable (x), and the macro indicator (gross sales) as the dependent variable (y). Load the data points for the trend, and run the regression. It'll never be a perfect 1:1 correlation since every indicator is affected at least in part by other factors. . .But if your correlation is less than .6 or .7 when correlated against the next higher macro indicator in your measure chain, then an "alarm bell" should ring, alerting you that you're measures are probably not as 'connected' as they could be. If that's the case, look for measures that might be missing between you and the next higher level indicator (e.g. sales close ratios), and try those using the same method. If there are none that give you at least a .6 or higher, you may be tracking the wrong indicator altogether.

One of the single biggest frustrations of operational management is doing a great job, but not being rewarded because the division or company failed. Clearly, there are times where shared metrics are useful, particularly where processes are concerned, and performance is a multi-departmental thing. Don't get me wrong, I'm not against shared measures, but I am saying that you should also have a healthy set of measures that each employee can both relate to, and control the outcome of. It's up to you, the performance manager, to link these measures in a way that produces optimal process and enterprise results.

You can have the best balanced scorecard in the world, but if you don’t have the right drivers being managed at the workface, you're really just shooting in the dark.

Give yourself a challenge for the next week or so, and check your measurement framework against these principles. You'll be amazed at how much value comes from simply being 'more connected'.

Author: Bob Champagne is a Vice President of Performance Management Solutions with UMS Group, Inc., a privately held international management consulting organization specializing in Performance Management tools, systems, and solutions. Included in UMS Group's product portfolio are a wide variety of performance tracking, reporting, and benchmarking solutions, as well as customized performance assessments and diagnostic services. UMS Group has consulted with hundreds of companies across numerous industries and geographies. Visit UMS Group at http://www.umsgroup.com or contact us directly at 973-335-3555.