Which Types of Goals Are Worth Measuring, And Which Aren't?

Goals ain't goals. There's not really a single and definitive application of this word. And one messy consequence of this is that when we go to measure our goals, we can end up with very trivial and useless measures.

Here are four basic types of goals: actions, milestones, targets and results. I've seen all four used in strategic and business plans. And the amount of frustration people have with the meaningfulness of their performance measures is directly related to which type of goal they are setting.

Leading Performance Without a Title

Modern-day wisdom says that nothing changes without leadership from the top. And that's the excuse many give for not pursuing the changes they know are desperately needed. Performance measurement is one of these changes that is desperately needed, but rarely driven from the top.

Despite this modern-day wisdom, there is overwhelming evidence in support of the idea that anyone can be a leader, no matter their title or position or education or connections.

Let's hold this to be true. Let's explore what it might take to lead a performance measurement culture from deep within the bowels of your organisation, where right now you might be suffocating and stumbling around in the dark, waiting for the senior leadership team to open the doors and switch on the lights.

How to Help People Measure Results, Not Activity

Measure Up reader, Kenneth, works in a hospital and has this measurement challenge: "Different people want to follow up on different things. The nurses, for example, think it is crucial to follow up on how many phone calls they answer. I reckon it is because they want evidence to show management how they spend their time at work. But I do not think this is a critical KPI or success factor for our hospital. How do I draw the line? Do I need to draw the line? How can you get all people to accept this? The bigger question here might be: Who should have access to KPIs?"

Let's start with an answer to Kenneth's last question: Everyone should have access to KPIs. Everyone needs feedback on how well their efforts and collaborations are getting the intended results, and contributing to the hospital's strategic direction.

Why You Should Start Small With a New KPI Methodology

One mistake organisations make in performance measurement is to not have a real methodology. They treat measuring performance as an ad hoc activity or event. But when you do adopt a performance measurement methodology, another mistake is to do too much too soon. Starting small is important for a few reasons...

Rushing into a full implementation of your new performance measurement methodology, without a strong enough performance culture (and how many of us can claim to have that?), is a recipe for failure:

You'll overwhelm people and burn them out.

You'll make mistakes without noticing, and leave them uncorrected.

You'll feel out of your depth and lack confidence when you need it most.

You'll fail to get a measurable return on investment for your measurement approach.

Starting small, just like a pilot test, has some very worthwhile advantages:

Life would be perfect were it not for the customers!

Many years ago I formed the opinion that, once an organisation reaches a certain size, it develops the ability to remain busy, no matter what the level of sales. By that stage, responding to customers’ requirements almost becomes a disruption; customers, in fact, only provide the cash to keep the mechanism turning!

Be careful what you ask for

How efficient is your organisation? Do you have efficiency measures for everything that is going on? You do? Then stop it, right now, and read on.

Maximising the efficiency of every aspect of a business will probably have a negative impact on overall performance. That is not to say that measuring efficiency is a bad thing, it is just not useful if the measuring is not effective. Just to make it clear;

Efficient is doing things right

Effective is doing the right things.

High performance professional

Working with sports for a long number of years, I could see the emergence of many champion athletes. I observed that they all achieved their success using the same components. I call them the Champions' key-factors. They are:

1. Planning: The beginning of everything; success in sport doesn't exist without good planning. Medals won at the Olympic Games were planned at least four years before.

2. Methodology: High performance sport doesn't happen without a methodology. There is method to everything: training, eating, competing, living.

3. Results measurement: Each training session,movement and performance is measurable. An athlete has to frequently measure their performance; it is the attest evolution of the athlete.

4. Focus: An athlete in preparation for the Olympic Games doesn't compete in all of the competitions. They choose those that help them achieve the most success.

5. Fail correction: Fails and weak points of the athletes are corrected during the preparation, and even during the competition. If they don’t do that, their opponent can gain a big advantage.

6. Commitment between athlete and coach: Total confidence in each other; complicity. Give it your all and believe that the other is doing the same.

7. Limits overcoming: An athlete has to really want to achieve success. This inside feeling is the one that will push them to overcome all the challenges and obstacles on their way towards great success.

You can’t change history

Another tax year has come to an end and, for many, it is time to take stock of the last year’s results. What will they tell you and what will you do with them?

Results are about history; we can’t go back and change what happened. What they tell us is about how well the business performed last year, and those results impact all kinds of decisions by all kinds of stakeholders The real value of results is not what they tell us about the past, what we learn from them to make a better future.

There is a simple cycle that enables organisations to become ever more successful; it is called PCDA, or plan-do-check-act. It is a principle that quality practitioners know well; it is most effective when used organisation-wide, an approach known as TQM (Total Quality Management).

Rules for Assuring Poor Performance

Imagine I took over the management of a poorly performing organization and wanted to keep it that way. For example, I might not want it to grow so quickly that it would leave me less time to pursue my hobbies and golf. What steps would I take?

First, I would ensure that all of the managers and employees are totally ignorant of the executive team's strategy. That way no one will understand how the work they do each week or each month contributes to successfully achieving the strategy. Next, I would figure out ways to insure that managers and employees don't trust one another. I would discourage dissent and debate. It would be tricky to preserve some level of harmony by not allowing healthy conflict among managers that are already distrustful of each other, but I think I could do it.

I have recently heard about this new trend of “business analytics.” I will stop any employee trying to use software for analysis. My IT department should have some sort of software to detect it.

Next, I would avoid holding anyone accountable. That would be fairly easy because I would disallow reporting of performance measures. Anyone mentioning the phrase “the balanced scorecard” would be summarily fired. I would try to disallow setting of targets, but some managers have a nasty habit of liking them. I think those managers believe that if they could make it appear that they are better performers than others, that I would then reward them with a “pay for performance” bonus system. If I allow people to be motivated this way, performance might improve. I'm not going to fall for that trick.

I would freeze our managerial accounting system to remain in its archaic state. It was probably designed in the 1950s, but our external financial auditors would always be giving us an OK grade. I'd allow managers to hire more support overhead to manage the resulting complexity, but I'd preserve the primitive overhead cost allocations to processes, products and customers using those distorting and misleading broad averages, like product sales volume or number of units produced. Using activity-based costing (ABC) would be forbidden. Most employees would already know that these cost allocations cause big cost errors, but I would want to keep them guessing about which products and customers make or lose money and what it actually costs to perform our key business processes. I don't think my financial controller will correct this, but I need to keep a watchful eye because my accountants are getting much smarter about how to improve operations and serve as strategic advisors to me.

We would need to be careful about how much information we collect and report about our customers. Obviously we'd report their sales volume data, but I would not segment our customers into any groupings. I'd keep sales reporting at a lump sum level. I don't want anyone asking questions like, “Which types of customers should we retain, grow, acquire or win back from competitors?” To keep our company from tanking, I would encourage sales growth by putting big signs in the marketing department saying, “More sales at any cost!” I'd prevent the CFO from any thoughts of measuring customer profitability. But that would be easy because our arcane cost accounting system wouldn't be capable of calculating that information. The marketing people typically spend their budget with a “spray and pray” approach, anyway. Targeting specific types of customers and getting a high-yield payback from our marketing spend would be outside their level of thinking. I'd maintain our advertising spending as the “black hole” that no one understands.

I would, of course, implement an enterprise resource planning (ERP) system. I wouldn't want to be at a cocktail party with other executives and admit I don't have one. That would be too embarrassing, like a teenager without an iPod. Luckily, ERP systems alone won't improve performance; they produce mountains of transactional data for daily control but not meaningful information from which anyone could make wise judgments or good decisions.

Our budgeting system would be another way to assure our poor performance. Since the budget numbers are obsolete a couple of months after we begin the fiscal year, assembling the budget for six months during the prior year would provide a great distraction and prevent anyone from working on more important things. Plus I love sending the budget back down a few times to be redone to lower the budgeted costs. Everyone moans – more assurance for poor performance.

We'd squeeze our suppliers. We could talk about partnering and collaboration, but any attempt to actually do so would be squashed immediately. Never trust a supplier. If you drive one out of business, you can always find another.

I don't think I could stop employees from using spreadsheets. They are contagious. But since every department would have their own spreadsheets, it would be like a Tower of Babel. Employees would waste a lot of time trying to make their numbers match. Those employees with secret spreadsheets might want to use them for forecasting and planning. I'd put a stop to that by calling it gambling and promote our company as being conservative. Gambling is for fools, so I'd set a policy forbidding risk taking.

I know that operating a poorly performing business is an extremely difficult job, but I think I'd be up to the task. Suppressing the efforts of all those employees and managers who want to think, analyze, contribute and make the business successful requires constant vigilance. The business world is full of subversive ideas that could hamstring my efforts to keep the business floundering aimlessly.

I am particularly concerned about this new concept called “enterprise performance management.” Whatever it is, I will stop it from happening. I believe that with hard work and dedication, I could keep any company from reaching its profit-making potential.

Gary Cokins, CPIM (gcokins@garycokins.com; phone 919 720 2718) http://www.garycokins.com

Gary Cokins (Cornell University BS IE/OR, 1971; Northwestern University Kellogg MBA 1974) is an internationally recognized expert, speaker, and book author in business analytics and enterprise performance management systems. He is the founder of Analytics-Based Performance Management LLC, an advisory firm located www.garycokins.com . He began his career in industry with a Fortune 100 company in CFO and operations roles. He then worked 15 years in consulting with Deloitte, KPMG, EDS, and SAS.

Using KPI’s to Coach for Performance Improvement

Several years ago, I led a culture change in a manufacturing organisation. We removed a top down, high dominance structure and replaced it with customer focussed cells. During the reorganisation, we moved relatively inexperienced people into new leadership roles. Why did we do this? Because the company had realised that a top down, “tell them what to do” culture wouldn’t provide the speed of change needed to complete successfully. They needed empowered, autonomous teams with the potential to deliver results. 

So how do you manage empowered, autonomous teams, given that they must be autonomous and not managed? 

 How do you ensure that they understand the company goals and all their actions are geared to achieving them? The answer is to use the overall company goals and objectives to define team goals and objectives. 

A system of performance measurement (KPI’s) and regular review meetings can then be used to deliver the goals, but allow the leaders autonomy with their teams. 

If managers hold regular KPI review meetings, they clearly define what they expect from their teams and action plans can be developed to meet the company goals. Thus, the company has systems to manage the delivery of company goals. 

The impact on individual employees is that their goals and objectives are very clearly defined. They and their peers can clearly see who is delivering against expectations and who is not. 

For managers, performance coaching then becomes more objective. High performers are easily distinguished and can be rewarded accordingly and poor performers can be identified and then managed objectively, with performance reviews focussing on results and how to achieve them. This avoids personal criticism, which makes the review easier for the employee. They become more receptive and less threatened by the discussion. Focussing on achieving objectives and the steps they must take enables the poorer performers to achieve more than they would without this focussed coaching. If the poor performer is repeatedly unable to meet goals, then the management of their exit from the organisation is easier for both the manager and the employee. 

Using KPI’s with regular, action based reviews, gives teams and their leaders a clear view of what is expected from them and gives the responsibility and autonomy for the delivery of results to the team. With clear direction, the teams are then empowered to deliver high performance against company goals.

Written by Jane Burns - Manufacturing Coach

WHAT MAKES A CLIENT LOYAL: A COMPETENT TEST!

It is called the Z test - but its name's origin can only be explained in an informal conversation...

I do not know of a more effective way for making a group of people understand the basic principles of customer's satisfaction.

Ask people to fill in boxes 1 to 4 successively, answering the questions shown in the image below.

Click in the image to view amplified.

Do this exercise with colleagues or friends. You are sure confirm what we have discovered after repeating it with hundreds of people:

- the causes for loyalty are mainly customer service and quality of products and services;

- the causes for rejection are bad customer service and low quality of products and services;

- price is hardly mentioned in this exercise.

Conclusion: What makes a client loyal are quality and service, not price. Once disappointed they don't tell you, they just go away!

Written by Claus Jorge Süffert

PERFORMANCE INDICATORS: THE FEW VITAL ONES

As soon as we learned the importance of measuring results in the early nineties, we fell into a trap from which few were able to escape: we started to measure in excess.

Information technology, which allowed us to have increasingly detailed and up-to-date data, contributed a lot to this tendency.

In a hospital, in an IT area, in a restaurant chain and in many other organizations we'd find books with monthly updated figures, and we learnt to challenge people to present that which made a difference on a single A4 page.

The trick is to consistently measure that which is important and is (or may become) a problem.

In a factory, only single indicator: machine yield, caused an almost unbelievable revolution. In a dispatching area, the focus was on counting the number of cargo units alone that wouldn’t be dispatched within 48 hours. In a steel mill, it went for the number of batches that went back to oven during one month.

It is necessary to know the process and its local characteristics to find such precious measures.

At times we need to have a mirror-indicator to avoid an adverse side-effect a KPI could generate. Recently, concerning a technical service provider, they have been better controlled while measuring their schedule fulfillment when they arrive at a client's house (window), re-occurrence of calls (problem not solved) and, finally, productivity: number of weekly calls.

People are free to measure what they want, but if we focus on fewer vital indicators - well, there is no easier and more effective way of getting into a quality journey...

Written by Claus Jorge Süffert