When setting up internal measures to track our performance, there are many things that we should pay attention to. Are they meaningful? Are they valid and reliable? How about attainable? The list goes on. In fact, that’s probably a subject for an entire week’s worth of posts.

Those notwithstanding, I think the biggest pitfall by far in the selection of measures and indicators is that they lack “actionability” (i.e.- the ability to of worker to the influence the outcome of the metrics we assign and delegate to them), and “connect-ability” to the overall business outcome desired. Simple enough, right? Not so fast.

I’m willing to bet that many of you are held accountable for things that you have little or no influence on. Like holding a sales director accountable for share price. .. holding a production worker accountable for plant outage performance….or holding a secretary accountable for budget performance. Things that are way too far “out there” for the individual to have any meaningful connection with. Sound familiar? Read on…

The better approach would be to look at measuring the “drivers” of performance rather than only the hi level outcomes of specific goals (ROI, Share Price, Budget). A DRIVER is something that has a significant ability to influence the performance of a top level goal, but can be managed and tracked at the “workface”. When done right, what you’ll end up with is a tapestry of sorts, where each indicator is well connected to the overall goal or outcome above it in the chain. Perhaps a better metaphor would be the “ukrainian egg” concept, where each egg fits snugly into the one above it in the overall chain.

For example, rather than holding a Marketing Director accountable for overall company or divisional performance or budget, why not consider some metrics that get at things they can really control (# new relationships developed, response rate on certain campaigns, % leads qualified, etc.) Those would then roll up into sales revenue, and ultimately profit and ROI, for example.

OK- now you’re probably wondering whether you’ve got the right indicators. One way that I typically test indicators for their “connect-ability” is to take a look at trend performance on that particular measure (say marketing campaign response rate), and do a simple regression against a macro measure like gross sales. (If you’re not familiar with how this works, there are many free linear regression tools and sites on the internet that have simplified and automated the math, making regressions a simple matter of copy, paste, and click. See- http://www.numericalmathematics.com/ as an example) Use the driver (e.g.- response rate) as the independant variable (x), and the macro indicator (gross sales) as the dependent variable (y). Load the datapoints for the trend, and run the regression. It’ll never be a perfect 1:1 correlation since every indicator is affected at least in part by other factors…But if your correlation is less than .6 or .7 when correlated against the next higher macro indicator in your measure chain, then an “alarm bell” should ring, alerting you that you’re measures are probably not as ‘connected’ as they could be. If that’s the case, look for measures that might be missing between you and the next higher level indicator (e.g.- sales close ratios), and try those using the same method. If there are none that give you at least a .6 or higher, you may be tracking the wrong indicator altogether.

One of the single biggest frustrations of operational management is doing a great job, but not being rewarded because the division or company failed. Clearly, there are times where shared metrics are useful, particularly where processes are concerned, and performance is a multidepartmental thing. Don’t get me wrong, I’m not against shared measures, but I am saying that you should also have a healthy set of measures that each employee can both relate to, and control the outcome of. It’s up to you, the performance manager, to link these measures in a way that produces optimal process and enterprise results.

You can have the best balanced scorecard in the world, but if you dont have the right drivers being managed at the workface, you’re really just shooting in the dark.

Give yourself a challenge for the next week or so, and check your measurement framework against these principles. You’ll be amazed at how much value comes from simply being ‘more connected’.

An old adage that has become my guiding principle as I work with organizations on performance management in the workplace. It’s only logical, then, that we start this discussion from the standpoint of performance MEASUREMENT…which I believe is the foundation of good Performance MANAGEMENT. To me the measurement challenge occurs in two separate, but related spaces:

1. THE INTERNAL: How am I doing vis a vis internal goals and targets. To me, that involves first establishing a baseline and taking an inventory of where you stand vis a vis that baseline. Then, armed with that information, begin the process of time oriented goals and milestones, which can be trend-tracked over time

2. THE EXTERNAL: How am I doing vis a vis external indicators (aka- benchmarking). Assessing yourself against peers and competitors (desireably against best in breed, if that is your goal), and using that information to set goals and guage progress.

As I stated earlier, these are separate but related disciplines. In fact, I’d go as far as saying that without the external benchmark, the internal targets would only be a shot in the dark. Yet most every organization I’ve worked with has some degree of internal targets that guide their strategic plan, but many do this absent credible external benchmarks. That’s not to say you develop and govern your whole plan based on the performance level of some other competitor. Rather, companies should use the competitive benchmark to INFORM and CHALLENGE the goal setting process. For example, is the goal that I’ve been setting reasonable and attainable? If I implemented xyz, how far ahead of the competition would it propell me?

To me, this is where most organizations fail to see the real value in external benchmarking. They use it to see if their performance is “in line”, rather than using the information to challenge their strategic planning process.

We’ll have lots more to share on both of these topics in coming weeks. But if there’s one thing I want you to take away from this post, it is that both internal and external dimensions of performance measurement are essential in building an effective performance management platform…Separate, but highly dependent on each other in effecting performance excellence.

Welcome to “Performance Management Daily”- a blog dedicated to the measurement and management of performance in the workplace and beyond. In this blog, I will share my current thinking on PM topics obtained from my past (20+years) and recent experiences working with organizations on performance optimization and business turnaround. Feel free to email me with any questions you’d like me to respond to, or simply join in and append to the dialog. I hope you enjoy the forthcoming posts, and I look forward to seeing you online in the weeks ahead! -b