Thursday, September 4, 2008

Rating Performance Factors

Once you have identified performance metrics and you have made them SMART (specific, measurable, ambitious, realistic, and time-referenced), you can rate the performance of an organization, department, team, or individual employee. I recommend that you develop a weighted measurement system so that the most important performance objectives earn the greatest focus from your employees. This can be done in a simple manner when you review the objectives with your team.

First, make it very clear how important each objective is. I suggest that you use the following scale:
  1. Mission Critical – employees in this position must succeed in this area.
  2. Very Important – this factor is one of the most important for this position.
  3. Useful – this factor can help employees in this position be seen as successful.
When you then sit down to review results with team members you can put their results in a matrix. Each column represents how important the objectives are. The most important objectives are in the first column. The rows represent how well that employee has executed against each objective. If someone has emphasized an objective to the detriment of others they will be doing very well, but perhaps too well. Therefore, the very top row is actually not a positive thing, it is "excessive focus". That is just as problematic as having a performance metric in a lower row (e.g. underperforming). The rows I recommend are:
  1. Excessive Focus – the employee ignored other important factors because he/she was so focused on doing this well.
  2. Exceeded Requirements/Expectations – the employee did more than I had hoped or expected in this area.
  3. Met Requirements/Expectations – the employee was as successful in this area as I wanted or needed him/her to be.
  4. Missed Requirements/Expectations – the employee did not live up to my expectations or did not fully realize my requirements in this area.
  5. No Focus – the employee seemed to ignore this factor.

This 15-cell matrix (5 rows x 3 columns) drives home a very clear, visual message. Of course, you must discuss each individual result as measured during the performance period that you are discussing with the employee, but the visual representation of their performance is what will stick in their mind. Their goal will be to have all objectives in the second row across every column.

Individual Performance Factors Based on Kaplan and Norton’s Balanced Scorecard

For those readers who want a more detailed list of actual performance metrics that may be used to measure individual performance, this list has been successfully used in several settings, including a multinational's contact center. Each of the four cells in the balanced scorecard matrix are represented. However, instead of the corporate-level goals, this outline breaks the metrics down into those that should be used to measure individual performance. For companies that want to roll performance up (as opposed to cascading objectives downward), aggregate results of individual team members should be used as the performance objectives of that team's leader. All direct reports roll up to their boss at all levels of the organization.

Productivity & Process
  • Quantity of work completed
  1. Number and scope of activities completed
  2. Percent of work completed on current projects/assignments
  • Efficiency & timely delivery
  1. Speed of work relative to expectations and peers
  2. % of deadlines met
  3. Efficient use of down time
  4. Efficient use of people involved
  5. Efficient use of tools and resources
  6. Efficient use of money
  • Quality of work
  1. Valid
  2. Precise/concise
  3. Verified as accurate
  4. Met requirements and scope
  5. Consistent look and feel
  6. Clear and coherent
  7. Justifiable content (not too much, not too little)
  8. Solid craftsmanship
  9. Organized and planned (and plan executed)
  10. Thorough
  11. Applied best practice(s)

Impact on Bottom Line
  • Impact on other employees, leaders, customers, company, industry
  1. How actions or results affected direct reports
  2. How actions or results affected peers
  3. How actions or results affected self
  4. How actions or results affected the boss
  5. How actions or results affected internal customers
  6. How actions or results affected external customers (Travel Partners or guests)
  7. How actions or results affected the company
  8. How actions or results affected the industry (cruise, travel, hospitality, or function)
  • Increase revenue
  1. Dollar amount that the company made as a result of the employee’s actions
  2. Projected impact that actions will have on company revenue
  3. Unintended consequences (positive or negative) measured or observed
  • Increase customer loyalty
  1. Quantified increase in customer loyalty as a result of the employee’s actions
  2. Projected impact that actions will have on customer satisfaction
  3. Unintended consequences (positive or negative) measured or observed
  • Increase in productivity
  1. Quantified increase in company, team, and/or customer productivity as a result of the employee’s actions
  2. Projected impact that actions will have on productivity
  3. Unintended consequences (positive or negative) measured or observed
  • Increase in quality
  1. Quantified increase in company, team, and/or customer accuracy and/or precision as a result of the employee’s actions
  2. Projected impact that actions will have on quality
  3. Unintended consequences (positive or negative) measured or observed
  • Reduce costs
  1. Quantified reduction in company, team, or customer spending or expenses as a result of the employee’s actions
  2. Projected impact that actions will have on costs
  3. Unintended consequences (positive or negative) measured or observed
  • Reduce cycle time/process time
  1. Quantified reduction in the time it takes to complete company, team, and/or customer processes and/or activities as a result of the employee’s actions
  2. Projected impact that actions will have on activities, processes, and systems
  3. Unintended consequences (positive or negative) measured or observed

Customer Satisfaction and Loyalty
  • Compliment/Complaint ratio
  1. Positive vs. negative customer and employee reactions
  2. Unsolicited compliments vs. complaints
  • Identified and met or exceeded expectations
  1. Number of projects where stakeholders mapped (identified and their position documented)
  2. % of stakeholders who confirm their expectations and requirements were met
  • Customer satisfaction survey results
  1. Results of regularly-scheduled surveys
  2. Results of solicited customer surveys
  • Impact on team credibility
  1. Number of times that personal actions brought the team into question
  2. Number of times that personal actions helped the entire team gain respect or recognition
  • Continuously improving
  1. Results improved for same solutions or activities
  2. Streamlining processes, procedures, policies, or methods

Learning & Growth
  • Organization’s core competencies assessment
  1. Self vs. boss ratings
  2. 360 ratings
  • Position competencies assessment
  1. Self vs. boss ratings
  2. 360 ratings
  • Error reduction/repeat ratio
  1. Number of errors vs. last time on like activities
  2. Number of mistakes by level of impact
  • Increased autonomy
  1. Amount of time spent getting specific direction (whether sought or given)
  2. Self-regulated efforts
  3. Proactively seeking solutions
  4. Focusing on the right objectives/results
  • Creative or new solutions applied
  1. Number of new ideas sought out
  2. Number of ways existing ideas used in new ways
  3. Number of existing ideas adapted to new situations
  4. Number of completely innovative solutions generated
You can clearly see the connections between this post and my earlier posts on performance management topics. I hope that this, more inclusive and thorough, review of individual performance helps you build a scorecard for the members of your team.

Individual Performance

All employees should:

Contribute to Team Success – establish and maintain team credibility by sustaining the positive perceptions of others, share best practices and help others, and help complete team member’s work when they are out of the office.
Produce Results Relative to Company Investment – ensure value of productivity meets or exceeds rate of pay and contribute to team results relative to percentage of team investment represented.
Meet Customer Requirements and Expectations – establish or identify and met or exceed internal and external customer performance requirements and expectations, including quality and other standards.
Produce Timely Results – delivery results on time, including work, reports, and/or products; be on time, stay engaged throughout the workday, and make up lost time.
Optimize Resources – optimize use of all resources, including tools, equipment, budget/money, and people; minimize waste.
Work Autonomously – achieve results with minimal supervision; identify, source, and invest in solutions where skills do not match requirements.
Constantly Improve – identify opportunities to increase efficiency and efficacy all of the time; surpass previous personal bests; continuously produce more year over year.
Develop and Maintain Effective Work Habits – focus on improving how results are achieved, increase interpersonal competence, eliminate ineffective behaviors, and increase effective behaviors.
Champion the Company – represent the company through professional dress, speech, and behavior in the office, with customers, and in the community; promote achievement of company goals and realization of the company mission; maintain alignment with the company vision and model the core competencies at all times.

Whether you are an executive, middle manager, front-line supervisor, or individual contributor, these are objectives that everyone should be focused on at all times.

Team Performance

Below the organization or department level, performance can be viewed at the team level. Basically, this is a view of the team leader's individual performance. If the leader is effective then the team should excel in each of these areas. The questions around team performance are the same as those for project management. How effective is this group at getting their work done?

Integration - are all team resources such as hardware, software, chemicals, etc., coordinated properly?
Quality - is the team meeting the agreed-upon quality requirements? Metrics include quality planning, quality assurance, and quality control.
Schedule - is work completed in a timely manner? Metrics include activity sequencing, resource planning, activity duration estimating, and work schedule development and control.
Cost - are approved budgets being met? Metrics include resource estimating, cost estimating, and cost monitoring and control.
Risk - have issues that may or do inhibit performance been identified and proactively tackled? The team should identify, assess, and mitigate risks associated with factors such as new technology, very tight time constraints, lack of availability of skilled resources, and customer readiness for the team’s work.
Communication/Information - does the team generate appropriate information and disseminate it in a timely manner to team members, management, and other stakeholders to ensure that their expectations are consistent with the realities of the team’s progress or results?
Organizational Impact - how effectively does the team identify and plan for organizational changes that may or should occur?
People - is the team effectively led? Does the team's boss provide effective leadership and management of the team, including organizational planning, staff acquisition, conflict management, and team development?
Procurement - how effectively does the team manage the processes required to acquire goods and services from outside and inside the company? Metrics include procurement planning, RFP preparation, source selection, and contract negotiation and administration.

Organizational objectives can be cascaded down to a team in similar language, but if you are only measuring a team's performance these generic categories can be very useful. Exact metrics depend on what the function of the team is and how they operate. Hopefully, these nine categories provide some structure for setting up team objectives.

The Big Seven

Recently, I have received a number of requests for help with identifying performance management metrics. Therefore, I wanted to post a few ways to look at performance. Let's start with the company-wide metrics that are often taught in B-school and are affectionately known as "The Big Seven" by students who have suffered through an MBA program.

1. Increase revenue
2. Increase productivity
3. Improve quality
4. Increase customer satisfaction
5. Increase bench strength
6. Reduce costs and waste
7. Reduce cycle and delivery time

In response to a recent LinkedIn Answers question I pointed out that even though these objectives are meant to drive overall organizational performance, they can be applied at all levels. For that particular question I pointed out how six of the seven can be used to measure the value added by a company's purchasing department.

Regardless of location or size, procurement has several significant impacts on the overall organization. If you look at the 'big seven' performance objectives that they teach in US business schools then you can define the impact that supply chain/purchasing/procurement has across a fairly powerful spectrum.
1. Increase Revenue - the Sales team must have the proper resources or they will not succeed. It does not matter if they are both willing and able if they do not have the products to sell or the tools that enable them to make the sale (software, phone system, etc).
2. Increase Productivity - personal productivity relies very heavily on having the right tools at the right time working the right way.
3. Increase Quality - you can imagine the impact that purchasing had on our guests when I worked for Royal Caribbean Cruises. If the strawberries were rotten the entire ship was slammed on the guest comment cards. However, the extremely comfortable mattresses and sheets resulted in praise from everyone.
4. Increase Customer Satisfaction - this is all about procuring the right tools for the job. If the purchasing agent takes the time to understand how the tools are used and what makes one better for the business than another (value) then s/he can have a significant impact by buying a tool that allows employees to delight the customer (e.g. the right content management system will enable the call center to quickly find accurate information when answering customer questions).
5. Improve Bench Strength - internal to your own team you should make sure that you have planned for near-term workforce needs and have developed talent as needed. Your actions as purchasers can only tangentially affect this objective.
6. Reduce Cost - there is more to this that meets the eye. Sure, things can be procured for a low cost, but a very savvy purchasing team can train the entire company on how to negotiate (or not) with vendors. If people who are clueless or corrupt get involved then your vendors can get the upper hand during negotiations and rob your company blind. I have seen several IT people who favored a product erode the company's negotiating position by giving insider information during negotiations. They were not evil, they just really wanted to help the vendor that they felt was clearly best and deserved the most possible money from the company. (As one IT person said, "We have a ton of money so it doesn't really matter.")
7. Reduce Cycle Time - excellent negotiators can get faster computers and more bandwidth for the same price that competitors are paying for inferior products and services. That extra power and speed is a distinct competitive advantage because it cuts down on the overall time to deliver answers. Clearly, just-in-time delivery of raw materials for construction can also improve cycle time by eliminating wait.

Bonus thought: there is an eight performance metric.

8. Increase Market Capitalization - this is effectively the net result of the first seven objectives being met. If you do the first six things right then your company's tangible and intangible value should increase and be justly rewarded by investors.