Performance Management

by Peter Parkes

Agree targets; measure the journey

Management by objectives works if you first think through your objectives. Ninety per cent of the time you haven’t.

Peter Drucker

Targets need to be ‘stretching but achievable’. Setting targets too high is probably worse than setting them too low, as repeated failure usually leads to resignation in the human psyche.

It is necessary to properly benchmark what is currently achieved, what is achievable, and what we as a team aspire to do over a period of time.

Story

While negotiating a raft of Service Level Agreements and KPIs for a large Public Private Partnership, we faced the problem of the client trying to contractually enforce perfect scores for KPIs on the day of transfer of 20 public-facing services.

The implicit assumption was that their staff would come to work on the Monday after transfer with their underwear on outside their trousers to complete the overnight transformation into supermen.

Eventually, the client accepted that it was neither reasonable nor achievable, especially since they had never benchmarked any of their services, but knew from customer feedback that they were pretty bad. Practical targets were agreed, and a transition plan was agreed – yes, we actually have to do things to improve performance, not just expect it to happen.

Output versus input measures

There is a great temptation to measure outputs, such as sales and profits, for example, to see how we are doing. This, however, is like driving a car with a rear view mirror, in that it only tells us what has already happened, and we have no control over it. We should at least consider adding in some input measures: in other words, measures of the resources we are investing to ensure desirable outcomes. This subtle change in view helps the organisation move from reactive to proactive.

Consider a football club. Their league position tells them less about future performance than investment in players and the quality of manager they have attracted and retained. Think about it. Do you monitor engagement with staff by your investment in training or proportion of Development Plans agreed on time, or just lost days through sickness?

How many indicators do we need?

As with driving a car, we have numerous performance and safety systems, but we get by during normal operation with a dashboard containing a handful of Key Performance Indicators, such as road speed. Other Performance Indicators are checked less often, perhaps at the annual service. Most only come into our awareness when they need attention – for example, failure indicators for lights.

It’s similar with business: we should not overwhelm ourselves with data just because we can measure it. We need to identify the few ‘Key’ Performance Indicators. Should we need to take action, we can usually rely on a greater number of Performance Indicators to give us a richer picture of what is happening, or apply these diagnostically when we know what we are looking for.

Case study

One organisation insisted that all the 200 measures in their Service Level Agreement (SLA) were ‘key’. What they had actually done was codify their procedures into an SLA.

The process tells us ‘how’, whereas the input and output KPIs tell us if we are under control, and we should use as few of these as we can get away with.

SMART targets

Targets should be aligned with our organisation’s strategy and goals. They should also be formulated using the well-known ‘SMART’ criteria for goal setting:

Specific

Targets should be as precise as we can make them and not woolly and poorly defined. ‘Become market leader’ really needs to be broken down into more detail and allocated to areas that can influence parts of this, such as product development, marketing and sales. As part of being specific, it is important to consider the level of impact a team or department can have on the target that is set. Ask yourself ‘Can we affect our target?’ If not, get it either moved to those who can or changed.

Measurable

Is it quantifiable or is it ‘soft’. Many soft targets find their way into performance management, especially around customer satisfaction. Most of them can be made measurable with a little thought: for example, with the use of periodic surveys. Ask yourself ‘Can we measure it?’ If not, it is an aspiration and doesn’t belong with measures.

Achievable

As with personal targets, we need to stretch, but with a realistic expectation that we will achieve. Who would like shares in a business where delivery of the business plan/strategy was dependent on achievement of a number of operational and sales targets which were not likely to be achieved? The benchmarking process will help us to calibrate what is achievable.

Will the business invest the necessary resources/inputs to achieve them? If not, don’t agree them and get them changed.

Realistic

Targets need to be stretching, but they should not be achievable only at the expense of all else. Hopefully, this is probably only a measure of one key part of the job to indicate overall improvement. Let’s not stop the rest of the job getting done by setting targets outside the real world.

Are your targets achievable without sacrificing your home life or sanity?

Timely

When do we need to do this by? We often overestimate what can be achieved in a short time, but underestimate what can be achieved over medium time-frames. Consider staged targets rather than looking for a big bang.

As well as using SMART to test your targets, you can also assess them in relation to these three criteria:

  • Directional – to confirm that you are on track to reach the goals
  • Quantitative – to show what has been achieved and how much more is to be done
  • Worthwhile – adding more value to the business than they cost to achieve.

One final point: a target should be ‘owned’. If I don’t agree with the target, then I am probably not going to emotionally commit to delivering it. Even if I think it is a good target, can I do anything about it, or am I just reporting historical data?

A well-formed target to help us to achieve our strategy of market growth may take the format: ‘Increase sales by x per cent by z date’. In this example, the target is aligned with the strategy and clear, and we can expect to obtain good performance data. But who has control over it (if anyone)? Is it just the sales team? What are the dependencies for delivery?