Recent world events have highlighted a simple truth. Accountability needs to be more than just a buzzword.
As we start 2021, and COVID-19 vaccine distribution provides hope for the future, many leaders are now facing a less certain operating environment, and the prospect of temporary measures becoming permanent.
Disruptions may continue to occur, but they are just another risk to be considered and mitigated through planning and business process design. Disruptions are not unique to a pandemic. Uncertainty is not a reasonable justification for poor BAU operational performance.
Measuring what matters
Performance should always matter. Performance Management Frameworks and Key Performance Indicators (KPIs) are widely used to drive organisational behaviours, workforce accountability, and monitor performance. This is nothing new.
Poorly designed performance management systems can hobble organisational performance and individual accountability.
KPIs are usually measured and monitored within regular management reporting, used to gain insights, and track progress towards achieving a pre-decided target performance level for the specific measure.
Ideally, leaders work with their teams to turn their strategic vision and goals into a series of actionable steps and completion dates, with each step tied to a series of measurable outcomes. The measurements of these strategic outcomes are then used to guide the selection of more specific KPIs within the various parts of the organisation, specific projects, and programs of work. Most organisations use their performance management systems primarily to keep track of people, tracking individual and departmental / group / team performance, using selected KPIs.
While it might seem like a mundane set of tasks and systems, which should be routine, large organisations often face major difficulties keeping their performance management programs aligned to tangible and useful outcomes. Conflicting goals and unintended consequences are common occurrences.
This is particularly true for HR related performance management, where measurement systems can easily devolve into little more than a compliance exercise, used to justify workforce remuneration.
Are KPIs and Performance Management useful for more than bonus calculations?
The short answer is yes. Workforce remuneration should not be the main purpose of performance management or KPIs.
KPIs should be tailored to reflect the unique operational circumstances of the organisation. They need to be relevant, and directly useful for people as they decide where to focus their efforts. KPIs should exist at every important level in the organisation – individual, team, project, department, and entire organisation. Measures are not always relevant across all situations or levels, so it is important to consider which measures will contribute most to decision making.
For some organisations, this could mean looking beyond revenue, financial, and operational efficiency measures, to a consideration of measures relating to organisational culture, customer satisfaction, employee wellbeing, or social and environmental impact.
Fundamentally, most KPI based reporting is used retrospectively – as a management rear-view mirror, to help interpret what happened. In some operational areas, there are measures that can easily be monitored on a continuous real-time basis, which can allow real-time dashboards and instrumentation, and the potential to automate predetermined adjustments and responses.
In order to design the right combination of KPIs in a performance management system, leaders first need to understand the questions they really want to answer. Are we measuring an end-to-end outcome, a step in a workflow, or an aspect of the customer journey. Understanding how any specific KPI supports an organisation and helps answer “questions that matter” is vital – and should preferably be discussed and defined during regular strategic planning processes.
From experience, many organisations end up defaulting to KPIs that are based on readily available measures from their core transactional IT systems. While many of these readily available measures may have some value, they are often activity based, not outcomes based. Measuring them may simply indicate “busy-ness”, not effectiveness.
To readily understand the performance that matters, a more customer centric perspective can be valuable, and emphasise an entirely different set of potential KPIs. Determining the elements of the customer journey, and the drivers that lead to customer satisfaction, are critical steps to building customer centric measures. More complex measures may need workflows to be redesigned, to improve measurement points and include additional automated collection of data.
Tips for better accountability and performance management
- Focus on outcome measures, rather than simple activity measures
- Ensure your strategic priorities and action plan milestones have measurable outcomes
- Calculation and evaluation of KPIs should be clear, unambiguous, and documented
- Set short term targets, as well as annual targets
- Transparency, recognition, and mentoring should be the bedrock of performance management
- We can only change future performance, not past. Don’t be afraid to re-calibrate or course correct.
SpencerMaurice is a management consultancy that specialises in business strategy, transformation, performance, and organisational design. For more information visit www.spencermaurice.com .