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Getting Performance Management Programs to Perform

In the mid 1990’s, two guys named Kaplan and Norton wrote a book that had nearly every CEO talking about one thing: balanced scorecards. By the early 2000’s it seemed that every company had some variation of a scorecard in place and some companies had several different varieties going at the same time. It became trendy to have a scorecard and most of these were displayed on office walls like artwork. Today, the biggest problem with balanced scorecards is that almost everyone has them but few organizations are actually benefiting from them.

Organizational programs that don’t live up to expectations are certainly nothing new. We all remember the challenges of data warehousing and customer relationship management programs from the 90’s. But do scorecard programs have to fail?

Perhaps the problem organizations have with implementing a scorecard program has more to do with the approach than it does the content. Usually, a performance management program begins with picking some readily available and seemingly useful metrics and putting them into a scorecard. As usual, the data needed to compile these metrics resides in a multitude of locations, within non-integrated systems, has missing values, and requires a large amount of time to collect accurately. Add all of this to the fact that the data is not easily summarized and doesn’t present a picture of performance “at a glance”. To get these issues ironed out takes a great deal of time and usually the program is scrapped before it ever yields positive results.

Many consultants recommend rolling out a performance management program by starting with the organizational objectives first. From the mission and vision statements are derived the departmental objectives followed by individual goals. This is known as the “top down” approach and helps give the perception that the President or CEO is leading the charge. Unfortunately, this tends to cause its own set of problems. Just the amount of time it takes to get consensus on the goals and objectives at the executive level can significantly delay the amount of time it takes to get a program in place.
Even organizations that already have their goals and objectives clearly defined can founder while rolling out a program. This is typically due to the large number of objectives that are simultaneously being rolled out as well as the large number of stakeholders interested in the outcomes.

Since rolling out a performance management program that is large, time-consuming and doesn’t show results for a long period of time almost assuredly results in failure, organizations should consider making their programs more manageable. Instead of deploying across the entire organization, they should pick an area at a functional or divisional level where measurement can be achieved in a relatively short period of time. Once this area is identified, there should be clear communication across the organization detailing what the objective is, why it is important and how
the measurement will be accomplished. When the communication has been done and all participants are clear on what their role in the process is, then performance can begin to be measured.

As work begins on this first objective, the team learns what works and what doesn’t work. From these lessons come the best practices for future deployments. Once performance is measured, perform the analysis and move into the improvement phase. While that is underway the organization can start rolling out additional performance measurements. These subsequent deployments should continue in the same department first, then expand later into other sections of the organization. Following the best practices of previous deployments will shorten the time to realization of
performance improvement.

This simple 5-Step approach will help ensure that you are not only able to acquire measurements but also that the performance improves as well:

Step 1 – Choose Your Target Area
While there is no simple formula for picking the right things to measure, the most logical approach would be to start with those areas that are directly customer facing. This makes sense because the value in improvement is either making your customers happier, increasing your revenue, or both. Not to mention the fact that customer facing operations are typically not the focal point for performance improvement programs. Programs usually start in HR or financial groups and take a long time to have a positive effect on customers. As a result, there are plenty of “low hanging fruit” to provide almost immediate positive impact.

Step 2 – Identify Meaningful Metrics
No matter what area is chosen to measure and improve, Norton and Kaplan had it right when they suggested defining success from multiple points of view. Their standard perspectives are financial, customer, process and people but you should choose perspectives that are relevant to your organization. Others may include supplier, competitor, shareholder or regulatory just to name a few. Regardless of what is chosen, make sure they mean something to the organization.

Step 3 – Gather The Data
Once you have identified metrics that make sense for the area you want to measure, begin gathering that data on a routine basis. Depending on your metric, the data gathering frequency will be different. Some metrics may require data gathering daily (i.e., call center call volume), while others might make more sense to be gathered weekly or monthly (i.e., number of product returns). While gathering the data, be careful not to form conclusions
early on. One or two data points do not necessarily identify a trend.

Step 4 – Identify Improvements
After you have gathered sufficient data to start analysis, carefully analyze the data to determine where you have a gap between actual performance and expected performance. Make sure to look at the area being measured from all of the angles to get a more complete picture of the problems areas. This will help you to determine what areas need improvement first. Identify your “low hanging fruit” and put corrective actions in place to alter the performance. Keep an eye on the metrics to ensure any corrective actions change the performance for the better.

Step 5 – Expand The Program
Once you’ve demonstrated success in your initial target area, it will be much easier to roll the program out to other areas of your organization. Nothing gets buy-in better than demonstrated results. You also have a much better idea of what will and will not work for your organization. These best practices will save you time and make it easier to be successful in future deployments.

Far too often these programs are never allowed to reach maturity because the wrong approach is used for implementation. Organizations can help ensure success by taking a more controlled approach to implementing a performance management program.