In article #3 of our Effective Strategic Planning series, we discussed Annual Business Planning and the development of performance measures that help an organization shift from activity-based to results-based conversations. Most companies we work with have numerous high-level lagging indicators that are meaningful at a board of directors or senior executive level.
Many individuals are required weekly or monthly to develop these lagging indicator reports that move up the hierarchy. Although these metrics are discussed at senior levels of the organization, and are important for strategic decision making, they do not provide a lot of value for the employees collecting the numbers.
This is due to the fact that in most large organizations, individuals and teams do not control or influence these lagging indicators in a meaningful way.
Selecting the right performance measures is critical to shifting conversations from activity-based to results-based. All too often we participate in meetings where numerous individuals list all of the great work they have been doing; yet the organization is not delivering results.
HOW DO ORGANIZATIONS CREATE MEANINGFUL PERFORMANCE MEASURES THAT IMPACT THE BOTTOM LINE?
- Create performance measures that are directly controlled or influenced by the individual or team
- Build performance measures with individuals or teams to create ownership and accountability
Demonstrate a clear link between performance measures and organizational results
Review performance measures with a regular cadence to create focus and demonstrate they are important to organizational success
In order to build performance measures that are meaningful, the individuals and teams must be able to control the outcome; or at a minimum have influence over the result. Therefore, selecting the right metrics should be a discussion with individuals, teams, bosses and peers so that there is alignment related to ‘what good looks like’. As performance measures cascade down the organization there should be a shift from lagging to leading indicators. Ultimately, the frontline should be measuring the behaviours or actions that will deliver on the business strategy. These leading indicators are far more meaningful, and are easy to track and measure.
PERFORMANCE MEASUREMENT & SCORECARDING IN ACTION
A clear example of how the right performance measures can create impressive results occurred at a Power Generation company that Lead 2 Perform worked with, where the overarching corporate goal was to improve safety. In fact, our firm was asked to help develop safety excellence after a rash of safety incidents. The Sr. VP of Operations in our initial meeting simply stated, “I think we are going to kill somebody”. At the senior executive level Safety Excellence meant a dramatic reduction in their Total Recordable Incident Rate, Lost Time Incidents, and an increase in Safety Observations.
The power plant employees decided to focus on the following leading indicators that they believed would have the biggest impact on the corporate lagging indicators. After a careful study of the safety data and survey of the prioritized personal opinions of the plant employees, everyone agreed that the biggest impact on safety performance would come from the following metrics:
- # quality safety observations per week
- Redesigned Work Permits
- # work permits audited
- % people in the plant trained on Lock out/ Tag out procedures
- % Improvement in air quality in the plant
Four performance improvement teams were created from the plant frontline employees that were accountable to train and educate all of the plant staff on how to perform each of the 4 initiatives and understand the leading indicators. These teams were created by the plant employees themselves in a shared leadership effort. The Air Quality team engaged in a well thought out plan to first understand, and then develop and implement initiatives to improve the air quality issues in the plant.
The performance measures and resulting scorecards that were developed for each of the initiatives were posted in the lunchroom and reviewed weekly at team meetings. Over time, with L2P coaching support, there was a shift in the conversations at the team meetings; rather than discussing all of the tactical work that had been completed that day, the team spoke about how they could ‘move the needle’ against each of the identified initiatives in the coming week.
The results were astounding. In 6 months the plant met the annual corporate safety observation target for the entire Power division that spanned the country. They also completed the year without a single safety incident and are continuing to add new initiatives once they have developed safety excellence in each area.
Our client’s results were a direct impact of engaging employees in developing performance measures that:
- Are meaningful and relevant
- Are selected and agreed on with the team to create alignment
- The individuals and team have control or influence over the result
- Are reviewed at a regular cadence to build accountability