Wednesday, January 14, 2009

Performance Management: Both 'What' & 'How'

I was asked to comment on performance management by a friend who is trying to help her boss understand that performance is not just the number of units sold at the end of the quarter. My friend is absolutely right, it is not just what you do, it is also how you do it that counts.

In fact, my friend's company has a perfect example. They hired a new salesperson in October 2007. This person was extremely quick to pick up on all of the technical attributes of their product and was very tenacious on the phone. He was held out as an example by the middle of the year because he was setting goals for number of calls per day and meeting or exceeding those goals every day. This initially translated into a lot of new business with previously untapped customers. Late last year they asked this salesperson to help them earn repeat business from those new customers, but the salesperson could not deliver. He explained that he is a "hunter not a farmer". So the company paired him up with a terrific relationship-building "farmer" that had been with them for years. After a couple of months the company still did not have a single repeat sale to any of the top gun salesperson's original customers - not a single one. On top of that, the "farmer" had asked to be reassigned back to his old position three times over a two month period. What was going on?

To quickly summarize what had happened:
  • The salesperson had a very solid understanding of features and benefits and could quickly and effectively overcome objections related to those factors
  • The salesperson set goals specific to individual clients and followed up with them tenaciously
  • Many customers eventually were worn down into submission and made an initial purchase
  • Those clients were not completely satisfied and did not want to deal with the salesperson's personality any longer (the value of the product was not worth the perceived abuse they were subjected to during the sales process)
  • The company had a quick spike in sales, but had lost any hope of doing repeat business with those customers in the future
Sales management held this "hunter" out as an example to all of what they wanted and expected from their salesforce. That pride in his accomplishments was based solely on the fact that new doors were opened and sales jumped. When they looked at their metrics the "hunter" was a fabulous performer! Unfortunately, they only had metrics that focused on what was done. They had completely ignored how the work was done to their long term detriment. If this was a B2C company that was selling a product that would last a lifetime (hence, only one sale per life is expected) then they might expect long-term success following this role model. However, even then, the company's reputation would eventually be tarnished and sales would slump. Customers simply have too much access to comments on a company's performance for any company to allow a singular focus on what in their performance management system.

So why do companies rely so heavily, if not completely, on what gets done? Because it is objective and easy. Technology allows us to measure and manage tangible results without having to think. The numbers are there on a spreadsheet and those numbers are accurate. Employees either did or did not reach the minimum acceptable standard. They either did or did not hit the top 5% when everyone's results were compared. Management understands that what results in a clear impact on the bottom line. The relationship is almost always easy to prove.

However, don't results suffer over time when how is ignored? In my friend's company the impact was noticed much faster than in most companies. Often, reputation takes a while to disintegrate to the point where new customers cannot be found and harvested. A classic example is car sales. Many dealerships only expected to sell one car every five or more years to a customer and they hoped that memories would fade. Therefore, they went for the kill on every single sale. As consumers started to buy more than one car per family and more often than every 5+ years, car dealerships had to make a significant change in their sales processes. However, simply changing the process did not fix the problem. That is because how you sell is just as much a factor of what type of person you are as it is the process that you are supposed to follow.

How people perform is perceived as very difficult to measure. I have often heard managers say, "It is too ambiguous to measure. I don't want to get sued for using subjective data." On the other hand, I have also seen managers embrace subjective evaluations and get themselves and their company into a lot of trouble. So, how can it be done?

First, a company must understand that the process of managing how begins with the strategies that they employ for sourcing, attracting, and selecting talent. A large number of performance problems can be avoided by making sure that only the right people get hired. And, it is not enough to simply put a nice behavioral interview guide together and expect to hire the best fit for the job. You must know where the best fit people are. You must market to them and create interest and demand for the jobs in your company. Then you must have an effective screening process that evaluates the competencies that make up how. Those attributes typically include attitudes and beliefs, aptitude, and interpersonal skills. The best methodologies for measuring these seemingly subjective traits focus on the behaviors that are manifested as a result of having the trait.

As an example, when measuring 'listening skills', create and validate a rubric for what it looks like if someone is not listening (e.g. they interrupt the customer), what it looks like if they are an average listener (e.g. they use the customer's name), and what it looks like if they are an active listener (e.g. they repeat back what they understood the customer was saying). Create a simulation based on a very typical customer scenario and have a trained rater listen to or observe the candidates going through the exact same scenario (always use the same script and employees as both the customer and the rater in these scenarios to avoid variance in results). The rater will check off the actual behaviors exhibited by the candidates and the results can be compared to narrow the field of applicants. Multiple attributes can be rated during the same simulation to give a more robust view of the candidates. There are also vendors who have created validated instruments that measure aptitude and other how factors.

Once the rubrics have been created for selection purposes, they can also be used for measuring the performance of current employees. However, this is where most managers give the greatest push-back. They must observe their direct reports' performance. The typically objection is, "I don't have time. I have too many direct reports and I am already too busy." If their job is to manage a team, what are they doing that takes precedent over this primary responsibility? I am going to guess that they are either doing the work for their direct reports or they are fighting fires (which may have been created by their direct reports). Again, prevention is the key to freeing up time for the process that most effectively measures how. The process is as follows:
  1. Observe performance (e.g. a complete interaction with a customer from start to finish)
  2. Rate the how attributes using the validated rubrics
  3. If the performance that was rated was recorded, have the employee watch and rate their own performance using the same rubrics
  4. Have the employee share his/her self-rating first
  5. Compare and contrast any differences between employee and boss rating results
  6. Identify why behaviors and actions were taken by the employee (the manager may identify a systemic problem that would prevent future problems if it was successfully addressed)
  7. Document a final rating (some scores may change based on what was discussed) and enter it into the company's performance management system
  8. Repeat no less than once per month
  9. Aggregate the annual results (minimum of 12 observations) and apply to the annual review
Of course, if there are any actions or behaviors on the job that are in direct conflict with company policies or external regulations or laws then the incident must be immediately documented and action taken. What I am focusing on in this article in a long-term, sustainable, and effective process by which companies can manage how work gets done. If my friend can convince her company to allow her to analyze performance, create the tools, and validate them, then she will be able to prevent the slow, corrosive impact that the previous 'top performer' had on their long-term repeat sales. She can start softly by using them in the selection process, but once the new hires are identified as top performers, she should be asked to build performance management tools out of the same content. Only then will her company truly optimize performance by focusing on both halves of the equation: what gets done and how it gets done.


Improvedliving said...

There has to be something icredible. I love it.

Business Process Management

clevelenterprises said...

Your topic was great! Thanks for taking a moment to draft such an interesting piece…
Strategic Planning