April 2016

Capability: How do we measure what someone can do?

Over the last three weeks, I’ve written about the measurement of performance. (Read them here: Strategy, Performance Scorecard, Finishing the Performance Scorecard.) This is a common topic, and a Google search for performance management reveals over 27 million search results.

But this is only half of the equation. Defining performance is about the work that an organisation wants to complete. It tells us nothing about the people doing the work. While there are plenty of guidelines for defining KPIs, there is much less objective data about people in the fundamental blocks of HR:

  1. Recruitment and Selection: Are we hiring capable performers?
  2. Training and Development: How do we train and develop them?
  3. Performance Management: How do we ensure their performance is well defined and measured?
  4. Retention and Succession Planning: How do we keep our best people?
What are the fundamental blocks of HR?

What are the fundamental blocks of HR?

When I first worked as a management consultant in the ’90s, it was in the field of process efficiency. A lot of my time was spent examining processes, systems, and the work being done.

Not much time was spent trying to understand more about the person doing the work.

At that time, I didn’t think much about it. It was only a few years later, when I had the good fortune to work for a consultancy that sold the Predictive Index (PI) and related consulting services, that I began to consider this important aspect.

Although I had studied industrial psychology, I hadn’t thought about the possibility that there were simple tools available to line managers to understand more about the behavioural characteristics that drive people – characteristics that make them more or less suitable to different kinds of work.

PI is one such tool. Other similar tools I’ve come to know since then include the PPA and the PDA. Nine years ago, I discovered another excellent tool called Shadowmatch. I’ll write more on these in a later blog. (Obviously I’ve come across many different tools over the years. I’ve simply used the ones above more often, and so I can write a little more about their practical application.)

The genius of these tools is that they enable managers to define a behavioural profile of a job based upon its performance requirements. Managers can then use the tool to compare that profile to the profile of an applicant or an incumbent in the same ‘language’. What makes these tools remarkably useful is that they are easy, quick, and accurate in the hands of well-trained and experienced people. (Training and practice are not to be underestimated. These tools can also be misused by inexperienced people).

One of the dangers of these tools is to apply them without due consideration of other factors such as experience, competency, and track record. For example, there are times when a person with an entirely unsuitable profile can be an excellent performer – and vice versa. While the tools can tell us about the type of behaviour we might expect, they can’t tell us about the quality, maturity and competency of that behaviour.

expert assessmentsFor example, a profile might tell us that an individual is confident, extroverted, impatient, and detail-oriented. But that doesn’t tell us that the individual is confident in a mature sense or knows when to speak up or keep quiet, when to drive for results or be patient, or when to focus on the detail or the big picture. There are many extroverts who can’t communicate or build positive relationships. And there are many introverts who can – and do.

Making better or worse decisions every day as we work is based upon other factors of capability. This topic has interested me a lot over the last decade. So I developed what I called a Capability Scorecard, which consists of five categories. They are:

  1. Education and Knowledge
  2. Experience
  3. Technical Competencies
  4. Behavioural Competencies
  5. Track Record

(A possible extra category for physically challenging roles is Physical Health. The items under this category will depend on the nature of the role. For example: an underwater welder will be measured differently to a  paramedic)

Let’s dive into some detail in each category:

Category 1: Education and Knowledge

What does an individual need to know to do well in a particular job? It includes education and other types of training, but not competencies which feature below in Categories 3 and 4.  For example: it may be required that an incumbent has passed a technical qualification, but that piece of paper does not guarantee that the individual is competent. Examples:

  1. Level of formal education: Degrees, diplomas, certificate – courses of 1 year or more
  2. Shorter examined course certificates of compliance, competency, or qualification
  3. Shorter unexamined company or external courses: normally over 1-5 days
  4. Membership of professional associations, including the maintenance of professional status
  5. Online and correspondence courses

Category 2: Experience

There are (at least) 3 types of experience:

  1. Industry Experience: has the incumbent worked in our industry? Example: Years of Experience – Financial Services
  2. Functional Experience: does the individual have experience of the function in which the job is found? Example: Years of Experience – Auditing in Financial Services
  3. Level of Experience: does the individual have experience at a level that matches the job requirement? Example: Years of Experience: Audit Director

Besides years, we also use ‘number of events’. For example: HR practitioners: How many strikes, lock outs, retrenchments, conciliation and arbitration cases, recruitment projects, training programmes, disciplinaries etc have you managed? A KCITM measuring a number of events may be more useful to understand the competency of a person than a KCITM measuring years of experience. A combination would be ideal.

The first two categories of KCIsTM above give us no comfort that the person will be competent and deliver their KPIs.  However, they are ‘tickets to the game’. The simplest example is Finance: It’s unlikely that a CFO will not have the required qualifications and number of years of experience in a similar environment and function at a similar level.

The next 3 categories of KCIsTM dig deeper into the individual’s capability and differentiate less from more capable people.

Category 3: Functional or Technical Competencies

These are the toughest of KCIsTM to measure because competency is often (and erroneously) inferred from the first 2 KCIsTM: Education/Knowledge and Experience. This is unsurprising because the focus on qualifications and experience starts at the response management stage of recruitment: people who need to scan hundreds of CVs from mostly incredible and a few credible applicants find themselves simplifying their jobs by looking for keywords: the required qualification, the ‘right industry’ background, the ‘right’ job titles and other superficial or biased criteria which include age, gender, race, language group and nationality.

But the key technical competencies required for success remain untested until the individual has joined the company which is too late and often too expensive and tedious to undo.  So, it’s at this critical point of the assessment of capability, that recruiters should be paying the most attention.  Recruiters should satisfy themselves that candidates are competent to function and behave at the right level for the job.  This means creating customised assessments, simulations, scenarios, in baskets or case studies relevant to the organisation’s environment and the job for which the applicant is being interviewed. The example below, in Figure 1, exposed an excellent CV when the highly qualified and internationally exposed senior manager was asked to fulfil the relatively simple requirements. He became tongue tied and stressed during an exercise which, for a senior manager, should have been relatively simple.

Figure 1: Example of a Technical and Behavioural Competency Assessment Scenario provided to shortlisted candidates after Interview 1 for Interview 2.

Figure 1: Example of a Technical and Behavioural Competency Assessment Scenario provided to shortlisted candidates after Interview 1 for Interview 2.

Category 4: Behavioural Competencies

This is relatively easy to measure with the wide range of assessment tools available today, including PI and the others mentioned at the beginning of the article.

Most managers and HR practitioners have their personal preferences for assessment. Personally, I like Shadowmatch (www.shadowmatch.com) and any of the following: PI (www.predictiveindex.com), PPA (www.thomasinternational.net),  or PDA (www.pdainternational.net) but the list is almost endless. I work with clients and whatever assessments they’ve used with one proviso. Can we show value?If we’re going to spend anything from US$25 (R400) to US$1000 (R15,000) per person then we should be able to measure the ROI on that usage. I haven’t seen many companies take a proactive ROI approach to assessment usage.  Given the cost of assessment, it’s surprising. I’ll write more about assessments for a later article, and provide case studies to illustrate different applications.

Behavioural assessment can be contentious, and managers often have strong pro or anti opinions based on positive/negative past experiences respectively.  As with anything in business, subjective opinions and ignorance take us nowhere. We must let the data speak. If an organisation is of the opinion that an assessment tool (technical, behavioural, psychometric, or otherwise) is excellent, there’s only 1 question: what data exists to support that view?

Surprisingly, few organisations apply their collective minds in this respect. Managers enjoy success using a tool to assess a number of people. They seem to think the success they’ve experienced in one unique situation would be repeated in all others. But if the manager moves and he or she no longer has access to that tool, it’ll be replaced with nothing – or a new tool. And the cycle starts again – but without data. With many people changing jobs at alarming rates, it’s often irrelevant to a manager to confirm that his gut feel or considered opinion was right. He/she or the employee moves before the chickens come home to roost. Hence the poor usage and extraordinary expense that organisations will authorise for assessments that are sometimes (often?) looked at once and filed, partially understood … if at all.

Yet, behavioural competency is core to success.

A surgeon should not be impatient and ignorant of detail while executing delicate surgery via a microscope.

A salesman should not be timid, introverted, self-reliant, patient, risk-averse, and uncertain if he intends to meet target.

A nurse should not be aggressive, unfriendly, impatient, and forgetful in ICU.

Behaviour is core to performance. Our newspapers cover the (mostly negative) behaviour of people every day. The organisations in which we work are strongly influenced by the assertive and driven behaviour of some people and the patient, detail-driven, problem-solving focus of others.

Our organisations, made up of so many different types of people, need to be understood and harnessed for best results. It makes sense then to utilise reliable and valid tools to better understand this critical input to performance.

Consider the authoritarian behaviour of a few Presidents: Thatcher, Putin, or Mbeki. Or the extroverted and people-focused behaviour of a Mandela, Blair, or Clinton? What of the behaviour of notorious soccer stars such as Suarez, Maradona, or Vinnie Jones? And the professional style of Federer, Djokovic, and Pete Sampras.  Their behavioural competencies – or incompetencies – were part and parcel of their massive talent for politics, soccer, and tennis respectively in these examples.

If that’s true, then managers of organisations should make it their business to become masters of behavioural competency to support their decision making with regard to people.

And it’s up to HR to be the assessment experts to provide their organisations with the best tools to measure talent, and ensure that the data is built over time, to unequivocally support the use of a particular set of assessments.  It is a core aspect of capability that has a major impact on performance, unrelated to the technical competencies for which they were recruited.

Category 5: Track Record

Track Record: This final category of capability can be the toughest to measure because most organisations track performance subjectively and discuss work in the context of tasks not outputs.  CVs are littered with phrases such as: “Managed operations for outlying areas” or “was part of the team that …”

More unbelievable, people write impossible statements such as “I was responsible for the restructuring of the division, the selection and implementation of a new payroll system, significant changes to the training and development system, a new performance management and a centralised talent management system”.

Firstly, it’s unlikely that one person achieved this alone so the writer’s own role is already questionable. And secondly, if the writer’s tenure is just 9 months, it would have been unlikely that all the work required for this in a large public organisation was actually completed. Thirdly, the effectiveness of the work would have been realised under a new manager, so the real achieved performance is debatable.

Surprisingly, interviewers often gloss over this kind of ‘padding’ without interrogating its credibility. So non-performers are added to the company’s payroll in the rush to get someone appointed.

Back to data.  We should be able to critically assess the achievements that people document for themselves, and provide people with objective and measurable KCIsTM, so that they can wax lyrically about their achievements minus hyperbole.

Three common measures of track record include:

  1. reference checks
  2. documented evidence of past performance, and
  3. awards

This is easiest for sports and entertainment figures whose on-field/stage/film endeavours are documented in detail.

But commercial organisations and people don’t generally write CVs or discuss applicants and potential successors in the language of performance – with the exception of salespeople and CEOs.

Even in these two highly measurable jobs, CVs are littered with waffle in the language of tasks, duties and responsibilities.

Modern people management demands a greater focus on measurement and data, and we are fortunate today to enjoy the benefits of sophisticated software tools that can capture, analyse and score thousands or millions of data points in seconds.

In summary, there is no excuse, in the second decade of the 21st century, for companies and managers not to demand measurable data about the requisite KCIsTM for a role to ensure that companies select, develop, manage, and retain more capable performers.

Next week, we’ll discuss a few examples of capability assessment and the difficulties of defining them. If you feel I’ve missed a crucial category of KCIsTM, get in touch. I’d love to hear from you. Until next time, have a great week!

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Finishing touches to a good performance scorecard

Last week, we described the “Readiness” column as the last in the scorecard. Of course, you can add other columns if these add value to your PM process.

Additional Columns that add some context and practicality to a scorecard

Comments columns: Be specific
The problem with comments columns is that most people don’t use them for their purpose. Comments should add meaning and context to a score. Often, though, managers are not sure what to write. For some, it feels time-consuming and a waste of time – because the performance management process is a tedious admin process that managers dread. Why? Because (ironically) they know it has no bearing on performance management and improvement. Adding comments is just another task.

Alternatively, people overuse the column by writing a short essay full of words like could and should.

For the comments column to deliver value to the individual, the comments need to be action and deadline oriented. “Good” means what? “Good, you’re not as useless as last year?” or “Good, you’ve performed better than last year” … ? More importantly, so what? The comment is only useful if it gives the employee something to think about and preferably do by a certain date.

So, “Good, you delivered your projects on time and within budget” is better if it’s completed with “…I’d like you to mentor Frank this year who is new to our department. I’ve booked a time in your diary to discuss how best we do this”. Now we’re talking specifics. It may sound obvious and many readers might be silently saying “Performance Management 101” with a sigh. If that were true, I wouldn’t raise the topic. Over the years, the overwhelming average is either nothing in the comments column or generalised waffle lacking subsequent action.

Without actions, comments are meaningless – like politicians who say “Government is concerned about corruption …”. What? When? How?

In our businesses and in our national conversations, there are too many meaningless words. But we can’t complain about corporates or governments when our own chance to make a difference is poorly executed. Each one of us responsible for managing people can make a dramatic difference to the future of those people with a little effort and time spent on considering not just the comment, but also the action and its deadline for execution.

Besides the comments column, I’d like to hear from you about the other items you see as important to a comprehensive performance scorecard.

Next steps: what happens at the end of the scorecard process?

When we work with our clients to create KPI scorecards, the first thing we do is to confirm the job has been defined properly by reading it back to the client. If the scorecard tells a story, we’ve done a good job.

We might say to a sales manager: “if this salesperson delivers a target of R4 million, is able to achieve a GP of 17%, reduces the debtors to 7 days, and receives a customer service score of 80% or more, would you say he or she has done a good job?”

Based on the sales manager’s response, we can tell if we’ve defined the core of the job. We carry on until it’s done, but we don’t carry on too far!

Measuring tasks, activities and duties

If we’re not careful, the performance scorecard can become a tedious activity policeman. Warning signs include measuring administration, compliance, paperwork, process adherence and steps that lead to a KPI. It’s sometimes a fine line, but managers need to decide whether or not they want to measure the process of work or the outcome of work.

If the employee has absolutely no control over the method by which their work is done, the process option may be more applicable. For example: a diamond sorter has no choice but to follow a method to sort rough stones. But a PA, salesman or engineer may have many routes from which to choose to deliver an outcome. So their performance scorecard should be outcome focused.

How many KPIs should an individual have?

When we looked at weighting last week, we suggested that having too many KPIs makes it hard for an individual to prioritise their tasks, if of course they pay any attention to the scorecard for this in the first place. In my experience, each job should have between 5 and 10 KPIs. This means we can keep to the KPI weighting guideline that no single KPI should have a weighting of less than 10%.

Having just 5 to 10 KPIs also makes it easy to digest each KPI. Morale is built by the fact that each KPI has a meaningful impact on the total score. This approach also makes conversations about performance more meaningful. Nothing more tedious than discussing KPI number 17, knowing that 7 more remain! It’s no wonder performance management is disliked when the performance scorecard is long, vague and short of objective measures.

What if a member of my team has a high number of KPIs?

The question, then, is how much of the job content is sitting in the scorecard instead of the job description? The job description is the right place for detailing duties, responsibilities, and tasks. Only performance should be measured in a KPI scorecard.

If, for some reason, a particular individual has, say, 24 KPIs, and all 24 KPIs ARE relevant to that ONE person, we might have a job structure problem. No one can focus efficiently on all of those indicators: some will get ignored. We shouldn’t be surprised if we get the sarcastic response, “I have a job to do”, from this overloaded person as he or she attempts to explain why some items on the KPI are left undone.

What if KPIs are hard to define or measure?

Some jobs may well seem difficult to measure. We often hear, “I don’t know how to measure this activity!”

Here’s a simple tip that often deals with this problem. Just ask: “If you didn’t do this activity, what would go wrong?”

If the individual doesn’t know the answer, why are they doing the task? Perhaps the job description needs to be refined.

Usually, though, the answer to this question speaks volumes. For instance, “If we don’t do X, we are in breach of e.g. ISO370011.” In this case, we measure the task by the absence of a compliance problem.

If, for example, certain files must always be filed in a certain way, any time the file is not filed properly, that would be a breach of the KPI.

Another approach could be even simpler: yes or no. Simply ask, “Has there been any instance of non-compliance?” If the answer is no, the individual scores 5 on their scorecard. If the answer is yes, they would score a 1 on their scorecard.

This extremely simplistic route may not provide enough depth for a well-rounded KPI scorecard. We might need to add sophistication, in which case we can break the KPI we’ve described above into two measures: compliance and time.

Let’s use the mining industry to illustrate. Most mining employees have a Zero Harm or similar KPI. But since this is the target, if they achieved it that would score 3/5 on their assessment, not 5/5.

However, the health and safety team would be right to point out that this is not fair, since ops or sales can achieve 5/5 for going over their sales target, while the safety officer can never score higher than 3/5.

The solution is to add a time component. If the safety on the mine results in zero incidence or harm for 12 months, the safety officer scores 3. A 4 could be awarded for achieving zero harm for a period of 18 months and a score of 5 could be achieved for zero harm over 2 years+.

Obviously, this depends heavily on the environment. The possibility of zero incidents of harm for 2 years might be VERY unlikely in a mine, and should be weighted accordingly. On the other hand, this result could be EXTREMELY likely in an office park. Again we would weight this outcome accordingly.

The more difficult a measure of performance is to achieve, the higher it should be weighted.

So when you’re not sure how to measure a KPI:

a) combine two measures:

  • result
  • time

b) ask: what would go wrong if this was not performed.

Performance scorecards simplify the entire process of linking an organisation’s strategy to the work its people perform. This should make it one of the most important tools any business has. If you feel that performance management is largely a bureaucratic headache – or worse, absent – contact me. It’d be good to hear from you.


1 Half chosen for its current relevance in many companies, NGOs and GOs!

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Defining a Performance Scorecard

A company can only achieve its objectives if its people understand their supporting roles and are measured accordingly. Last week we looked at the importance of having a clearly defined corporate strategy and how to link that strategy to the work being done by each member of the team.

This week, we’ll look at the practicalities of structuring a scorecard so that people are measured in a way that delivers value to the organisation based on those strategic objectives.

Start with the end in mind

As we outlined last week, the only way to achieve an objective is to define it. So we need clearly defined objectives for the entire organisation. These objectives can relate to either process or strategy. Most people spend most of their time in process. More senior people and certain specialists will spend more of their time achieving strategic objectives.

Linking strategy to jobs

Armed with a robust strategy and objectives, we define jobs to get the work done. But jobs needs to be defined in the language of outcomes or KPIs first.

A KPI (key performance indicator), is a specific measure of the objectives. KPIs can be used at any level of the organisation: from strategy to processes to jobs.

KPIs describe the end we have in mind. If our sales KPIs are achieved, we will have met our sales objectives. They enable us to remain focused on the outcome so that we are not distracted by activities that will do nothing for the achievement of the KPIs or worse, distract us from achieving the KPIs.

Today we focus on the KPI scorecard for the jobs in our organisations. KPI Scorecards simply (preferably on a single page) provide an at-a-glance assessment of the performance requirement per job. They are a tool we use to monitor and improve performance over time.

Today, we’ll take a look at the main sections of a KPI scorecard and next week discuss common difficulties and frustrations with the development and usage of scorecards. This is not an exhaustive discussion and I’d be pleased to hear about your suggestions for key elements of a performance scorecard (click here). The key is not to over complicate performance scorecards so they become time killing bureaucracies of their own.

How to Structure an Effective KPI Scorecard

The primary objective of performance management should be to maintain a link between an organisation’s strategic objectives and each team member’s scorecard. It should be clear to both the individual and to management the role this person plays towards meeting the organisation’s objectives. And a scorecard should make it simple to determine whether or not they have delivered.

Step 1: Which Objective?

Each scorecard should include the relevant strategic or process objectives.

The objectives are coded to make it easy to cross reference the scorecard to the strat map. This is important from a software solution perspective because managers require the capability to zoom from a high level business objective to the detail through processes and departments down to jobs and ultimately people.

Step 2: Define the KPI

Keeping this simple, let’s use an easy example: most commercial organisations have a sales objective.

The sales objective could be measured by a number of KPIs:

  • % Targeted Revenue – Did we achieve 100% or more of our targeted revenue for the year? This measures our effectiveness.
  • % GP – Did we achieve the sales target profitably? This measures our efficiency. It’s one thing to sell, it’s another to do so profitably.
  • % Average Revenue per Sales Person vs Benchmark- This measures people efficiency. It asks more probing questions of the sales director:
    • What’s the benchmark for sales per sales person in our industry? How well do we do against the benchmark?
    • If not, do we have enough of the right people in the right jobs? Are our recruitment, selection, development, management and retention strategies effective?
  • % Debtors on Time: Once we have sold and invoiced our clients, are we effective at collecting the money?
  • % Customer Service Satisfaction: After dealing with us, are our customers satisfied with their experience of our services?

I’m sure you’ve developed some interesting measures. Please send me a few examples. We learn continuously.

Step 3: Define five levels of success

Now that we have defined the KPIs, we need to define five (or less or more as per your preference) levels of achievement for each one. Nothing new in this but a weakness we’ve found is that people know something about target and bonus targets but less about super bonus and under achievement. The five are defined as:

  • 1: Poor. The target has been missed to the point that performance management must be undertaken to avoid dismissal.
  • 2: Below target: Some good things have been achieved, but overall the target was missed. What’s our improvement plan?
  • 3: On par or On target: This might surprise some people. It’s often the case that 4 or even 5 is the target but that thinking leaves no space for over achievement. 3 means the job was done. We targeted a budget of x and we achieved it.
  • 4: Over target: We hit the target and surpassed it. Now we’re into top performer territory. Bonuses and incentives apply.
  • 5: Far over target: Bonuses and incentives apply but the individuals achieving at level 5 must be recognised and rewarded, developed and retained like no other. Some companies (not enough) have special memberships, additional conferences, additional training or exposure to the best practises / top executives and meetings. Unfortunately, 5s are seen as walking on water and managers will often set a target so high that 5 is unachievable. But people aren’t stupid so they forget about 5 and targets are adjusted to a 4 point scale by default. This is a waste of time. If it’s a 5 point scale, people must be able to score 5 for each and every KPI. An average of 5 would be highly unusual but it should be achievable and so aspirational.

But 3 is the target. Performers earn accordingly at 3, 4 or 5. 1s and 2s are on performance management to rise or fall.

The other key is that the 5 standards above must be clearly measurable to avoid subjective manager assessments such as Good. Did Johnny the Sales Person display commitment to the company’s values? Manager Assessment: Good. Tosh. This kind of lazy thinking leads people to become cynical and managers to become frustrated by scoring something they know they can’t. One person’s good is another person’s average and leaves people open to personal biases and the boss’s level of liking for the individual. Performance management is difficult enough already. Let’s not make it worse. If you can’t measure it, scrap it.

Step 4: Weighting KPIs

The subject of weighting also begs the question, “How many KPIs should one person have?” We discuss this next week. For now, the key to note is that KPIs are not created equal. In any job, some things are more important to do than others. They need to be weighted accordingly so that each member of the team can prioritise appropriately. If each indicator has the same impact on a person’s overall performance review, it would be easy for the person to get bogged down in non-essentials, while losing focus on the more critical components of their work.

Let’s go back to our earlier example. A salesperson might need to achieve a certain level of revenue. This KPI could be assigned a weighting of 25%. Another KPI might be for customer service but it only counts for 10% because the sales person is only responsible for customer service up to the point of sales completion. As a rule of thumb, no KPI should have a weighting of less than 10%.

Obviously, for a salesperson, sales are more important than debtors. If anything, a salesperson may not be particularly interested in or skilled at collections as they tend to have a ‘hunter’ work profile and less of a ‘farmer’ profile (I recognise these are gross assumptions today as the sales job has become a lot more sophisticated than it was 20 years ago and the ‘hard sell’ method is being replaced by needs and service selling approaches more in tune with modern sales and customer retention practices). However, the point remains: If these KPIs are equally weighted, the salesperson might get lost in the admin of collections, lose focus on prospecting and begin to miss targets.

This is why we use weightings: to focus and prioritise each KPI.

You can contrast the salesperson discussed above with an accountant. The accountant’s KPIs would look totally different to those of the salesperson. Typically, an accountant should be more focused on rules, quality and accuracy. Unlike the sales person, their work is heavily weighted towards compliance with company rules and regulations, statutory laws, deadlines and prescribed accounting practices.

When we define and weight KPIs accurately, the individual and the manager are both clear on the job’s priorities.

Step 5: What is your data source?

Where does the data come from to score the KPI in support of the objective?

Typically, there are three options:

  1. manual data entry
  2. semi-automated entry
  3. automated data extraction.

As the words suggest, the first option requires someone to manually find data or execute calculations and physically enter them into the scorecard. A manual approach can work in the short term but the more people you need to manage and monitor performance, the more onerous the performance management process becomes. Risks for mistakes are high and reports aren’t always as accurate as they should be. This leads to dissatisfaction from all stakeholders.

A better approach is to semi-automate or automate the data collection process. This means, as per our example, a sales data extraction process would be built to feed data into the system with limited human involvement. The extracted data would automatically update the scorecard and the scorecard itself updates and re-calculates the individual KPI scores and the total weighted average. This makes the life of (sales) managers much simpler and the data more accurate.

An added benefit of an automated system is that a manager can request a report at any time to review an individual or team’s progress. The manager knows the data is correct up to the last data collection date which is typically daily, weekly, monthly, semi-annually or annually.

Step 6 – Are we ready to use the data?

The last question on a KPI scorecard is vital to the success of the scorecard as a measurement tool. It simply asks, are we ready to use the data?

I prefer one of three possible answers to this question:

  1. Ready: The data to measure the KPI is available and can be extracted immediately
  2. Needs some Work: Alternatively, the data may be harder to define or extract for any number of reasons. Examples include: do we measure and assess GP from all the branches in the same way? Not sure, needs some work. Have we accounted for differences in the agreed % mark up across different branches which affects GP, commissions and targets? Not sure, needs some work.
  3. Needs extensive work: A KPI might not be measurable yet. It needs extensive work. For example: to measure customer service, we first need a customer service measurement tool and there isn’t one. It needs extensive work. We can’t use the KPI until we have a useful and objective tool to measure the KPI.

Next week, we’ll talk about common difficulties and issues with using performance scorecards. In the meantime, if you have any questions or suggestions, I’d love to hear from you.

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Your Strategy: How Does it Translate into Actual Work?

What is a business strategy?

Author: Steve Rogers
A business strategy describes both what a business aims to achieve and its unique approach to achieving it. . The strategy details the key objectives of the organisation. It will be clear who is accountable for each objective and how each objective will be measured over time.

Kaplan and Norton developed the Balanced Scorecard which has become a popular methodology for over 50% of US and European firms1.

Business Strategy Made Practical

My purpose here is not to lecture anyone about strategy. Rather, I want to ask what I’ve found to be an important question: How does your strategy translate into work? i.e. how does each person understand their contribution to the firm’s ability to achieve its strategy?

The simple answer is that the strategy should be cascaded to each person’s job. In other words: their role in the firm’s success should be reflected in their KPIs. They should be measured on their impact on the strategy.

But this is often easier said than done.

First, the direct link between the work done by most of your staff and the strategy of the company may not be clear to them.

Second, the way we define and measure an objective at a strategic level will not always be the same at job level.

For example, an organisation might have an objective in their strategy to improve customer service. That objective could be measured through client surveys. For the score to improve, there may be a number of ways for the staff to make an impact. A packer in a warehouse can make sure that the parcels he has to pack are packed properly. A service agent will see that he returns customers’ calls – fast. Another service agent may take care that the clients’ experience of the ‘faulty goods return’ process is pain-free.

All of these people play a part in the improvement of the company’s customer service score.

What if each of those staff has no idea how much they matter? Their work needs to build up – and not damage – the business’ reputation for service. But if the warehouse packers and service agents are not aware, not competent, or not motivated to work in such a way, the firm can never reach its objective.

Clear Communication is Key

It is key for a company’s growth to build a strategy. But it’s not enough to just tell the staff what the objectives are. They need to be able to translate those strategic objectives into their day-to-day work. To do so, they each need to have the awareness, skills, and / or motivation.

Members of a team need to know – specifically – how what they do each day impacts that strategy. If they don’t, they can’t be expected to play a role in achieving the organisation’s strategic goals.

The goals defined in the firm’s strategy must be easy to trace to the KPIs (Key Performance Indicators) of all staff … Whether or not the staff operate at a strategic or process level of work.

It should be clear by now that, for the whole team to do their part to achieve the firm’s goals, there will need to be ongoing training, on-the-job coaching, and team building.

Start with Service

Let’s continue with the theme of service.

I never cease to be amazed by the volume of bad service in everyday customer transactions. For example, not long ago I was in Windhoek. I popped out for lunch at a cafe. The manager was berating the staff for wasting food. But she was doing it where we could all hear her. It was unpleasant, to say the least. She did not consider that her customers don’t want to hear this kind of heated conversation happening between staff and the boss in a service business.

It was made worse by the fact that it was clear the staff were walking around on tenterhooks. Their heads were down in fear, afraid of being the next to be berated, instead of smiling as they served their customers. This is Café Management 101.

If the café owner then asks me to rate their service, he might be surprised by a negative score. It’s simply that he hasn’t connected the dots: happy staff = happy customers.

Has this ever happened to you? In retail stores, you ask a staff member about one of their products. The response? A casual, “It’s over there somewhere”; – with a glib wave of the hand. What’s worse, the staff member is completely unaware that she is providing poor customer service.

That makes it obvious that she has never been trained, motivated, coached, or checked on customer service. Yet the company’s website claims:  “Our customers are number one” – or words to that effect.

There is no link between the activity of the store clerk, and what the store says it stands for.

The other day I went to a bank to change my PIN. As I walked in, I was less than thrilled to find a queue of seven at the enquiries counter. It was soon clear that both people being served were going to take a long time. After about five minutes I proposed to the two people serving them that they ask someone else to join them at the third service desk.

Amazingly, they completely ignored me! My voice rose with my temper. Eventually this led them to shout to someone in the back. At last, a third person arrived. When I told her that the behaviour of the two assistants was unacceptable, she apologised. But the other two said nothing.

Sadly this is typical of the service one can expect in the retail banking sector.  At least in my experience. Why should this be the case?

And yet the websites of all the banks will proclaim that the customer is first, second and third! The missing word in my opinion is ‘last’ at the end of the previous sentence.

Organisational development starts at the work level. It starts with the person doing the work. It doesn’t start with a campaign launched by HR or management and rubber stamped by exco.

True growth starts when we link the strategy to each and every job in the company. This ensures that the strategy is alive in each and every job in the business. Without this link, a firm can publish its strategy on any document or website it wishes to. It won’t change things. In fact, for the most part, doing so will be a waste of time and cash.

Companies that give their people the tools to understand the strategy, provide them with the skills to play their roles, and show how their rewards (financial or other) will improve, will always be the ones that outshine the rest.

Managing Performance Strategically

Performance Management generally has a poor reputation. Most managers and staff find the process of scoring work output tedious. They see it as a waste of time.

The reason is plain. Most of what is measured in the average performance scorecard is subjective. This leads to a biased response by the manager and the staff member. Further, the individual cannot see how his job adds value to the strategy of the organisation. So each year he simply carries on as he did the year before. Why should he change?

Some companies even outsource the development of job descriptions, role profiles and performance scorecards to consultants. The consultants might deliver a great job on paper. But many of the profiles created by these consultants will gather dust on PCs and in filing cabinets. This is because these profiles don’t match the reality of how the company works. And they don’t link the roles to the firm’s strategy.

Making the Connections

Without a strategy, a business can’t grow. You can’t get to where you’re headed if you don’t know where that is. With a strategy in place, you can plot a course to your business goals. And you can measure your success each step of the way.

But – and it’s a big but – if your team has no idea what that strategy is, or (worse), what role they play in it, you will never get there. Each member of your staff needs to see the big picture. And each one needs to know how they impact those goals directly.

When you develop job roles and KPIs, make sure that you communicate these clearly. Need help getting it right? Give me a call. It would be good to hear from you.

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