The first inaccuracy is the assumption that there are two types of performance measures: lead or lag. I think every performance measure has predictive power. It just depends on what you’re trying to predict. Technically, Average Customer Satisfaction is a lag measure because it’s after the fact. But it can be predictive of Customer Retention Rate, New Customers Via Referrals, and Profit.

The second inaccuracy is that looking in the rear-view mirror only gives you lag information. But in reality, things you see in your rear-view mirror can indeed predict outcomes like being rear-ended. For example, even though profit is considered to be a ‘rear-view mirror’ kind of measure, your historic patterns of average level and variability in profit from month to month can definitely give you some indications of what’s most likely in the future if not much changes.

We need to first focus on the performance result we want to improve, and then look at both lead and lag performance measures that relate to that performance result. Each performance result will have its own unique set of lead and lag measures. And this means that a performance measure that is lead for one result can be lag for another.

If you want to improve employee engagement, lag measures might include Average Employee Job Satisfaction Rating or Gallup’s Employee Engagement Ratio*. Some lead measures might include Days of Unplanned Leave, % Decisions Supported By Employee Consensus, Average Employee Satisfaction With Being Listened To, and % Employees Who Believe Their Job is Important. Here, Employee Engagement Ratio is a lag measure, but if we were focused on reducing loss of knowledge from the organisation, or reducing employment expenses, then it would be a lead measure, with some power to predict employees’ likelihood to leave the organisation.

So I guess I’m suggesting that you need to look in all your mirrors and through all your windows to fully prepare for what’s likely to happen in the future.

* Learn more about Gallup’s Employee Engagement Ratio at http://www.gallup.com/consulting/121535/Employee-Engagement-Overview-Brochure.aspx

TAKE ACTION: Map your performance measures on a page to visually reveal their cause-effect relationships. Only map the strong ones, or you’ll end up with unintelligible and thusly useless tangle of spaghetti. Which performance measures have predictive power for which other performance measures? Are you reporting these measures together, so you can get the most use from them?

IN THIS EPISODE:

Upcoming Events: 2012 Performance Measure Blueprint Workshops, and Online Programs.
Practical Tip: Where Are The Predictive Measures?
Your Questions: Drew asks how to find predictive performance indicators.
Getting More: Lead Indicators, Measure Relationships, 7 KPI Resolutions

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It’s not performance measures, nor dashboards, nor informed decisions. Those are just outputs. The outcome of performance measurement is that the right things are being improved, across the whole organisation or business, and regularly.

How would you measure that outcome? The simplest measure I can think of is the percentage of people in the organisation who are regularly making measurable improvements in the performance results that are strategically important or mission-critical. This measure is called the Performance Excellence Score.

How do you improve that outcome? You need to improve your approach to performance measurement to better engage people in measuring what matters, to give them better skills and tools to do it well, and to make it a more natural a part of doing their job. And to help you plan and monitor your progress, you can use your Performance Excellence Score and benchmark which stage you’re at on the Performance Measurement Excellence journey.

Stage 1 is Appreciation. If your organisation or business is moving through the Appreciate Stage, it’s likely that there are few, if any, good measures of performance. People don’t understand what to measure or why they should do it. Measurable performance improvement is uncommon. Your priority is to give people reasons to appreciate the value of measuring performance.

Stage 2 is Engagement. Here, more and more people are able to describe the mission-critical and strategically important results for the organisation or business and how they contribute to them. A few areas are attempting to measure and improve those results. Your priority is give people quick and easy ways to measure just a few useful things, to nurture their engagement in measuring.

Stage 3 is Commitment. You’ll have some ad hoc areas measuring mission-critical and strategically important performance results, and some of the “quick win” performance improvements are generating interest among other areas. Deepen and broaden the commitment by teaching more people how to have similar successes with performance improvement.

Stage 4 is Focus. The purpose of performance measurement as a driver of continuous improvement is understood more widely, and there are quite a few areas starting to use meaningful performance measures to improve performance. Share case studies of measurement successes to inspire and guide people, and put a lot of emphasis on aligning their measures with the strategic direction.

These first four stages parallel the development of a performance culture that is nurtured through quick wins to raise awareness of what good performance measurement is really all about, and basic guidance in how to develop good measures. A reasonably strong performance culture is an essential foundation to lay before you worry too much about the technical side of measuring.

Stage 5 is Alignment. A cross-section of people throughout the organisation are setting up performance measures that align to strategy, and they are using them to improve performance toward targets. It’s now time to develop a corporate-wide approach to performance measurement, test it, and get it ready to roll out.

Stage 6 is Capability. Most of the organisation is using performance measures that align to strategy, with many areas showing real performance improvements and achieving targets. Here, your priority is to systematically train people in how to use your corporate performance measurement framework.

Stage 7 is Integration. The alignment of performance measures to strategy and to business processes is strong. Improvement in process performance routinely leads to improvement in mission-critical or strategically important areas. Start embedding your performance measurement framework into business planning, strategy execution and performance reporting.

These three stages happen when frameworks for an organisation-wide performance measurement approach are designed, tested and standardised. When you have a unified approach, it’s easier to deploy and to improve.

Stage 8 is Evolution. Performance measurement is a natural part of everyone’s job, and they are consistently reaching or exceeding targets in mission-critical or strategically important areas. Set up the systems and routines to continually monitor how your performance measurement framework is working, treating it like you should any other formal business process.

Stage 9 is Acceleration. At this stage, performance measurement is as natural a part of doing business as financial management. Performance measurement is managed as a formal business process that is, itself, routinely measured and improved to better achieve performance targets. The idea here is that you focus improvements in your performance measurement process on the outcomes of achieving stretch targets, faster and with fewer resources. This is performance excellence.

These last two stages happen when there are well designed and implemented systems for formally managing and continually improving your performance measurement process as a natural part of doing business.

Can you see how these stages logically build on each other, and that you need to be very careful about when and how you plan your journey to performance excellence?

TAKE ACTION: Learn how to find out your current stage of Performance Measurement Excellence, and how to improve it. Then ask yourself this question: What are the best three things I can do in 2012 to move closer to performance excellence?

IN THIS EPISODE:

Upcoming Events: 2012 Performance Measure Blueprint Workshops, and Online Programs.
Practical Tip: Performance Measures – From Awful to Awesome
Your Questions: Jo asks how to focus planning on outcomes, not activities.
Getting More: Getting Started, The Wrong Idea, 8 Steps to Build Buy-in

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These are examples I gathered from various businesses and organisations of so-called measures for a customer service goal. They are all UGLY performance measures:

“Win Customer Service Award”

Winning an award is an event. Good performance measures aren’t events. They are regular, ongoing, actionable feedback about the result you’re trying to improve. Besides, any customer service award worth its salt would ask you how you measure your customer service performance and use those measures as part of the criteria for judging if you deserve the award.

“Implement Customer Relationship Management by June 2011″

Implementing something by a due date is a milestone. Milestone achievement is simply evidence of an action, not a performance result. And like winning an award, they don’t give regular and ongoing feedback that’s actionable. Milestones are useful for project management, but they’re not good measures for performance management.

“Staff Productivity”

How is staff productivity evidence of how good customer service is? Can’t you imagine how staff productivity could improve, but at the expense of customer service? It’s an ugly measure because it’s just not in any way relevant evidence of the result.

“Customer Loyalty”

Customer Loyalty is too ambiguous to be a good measure. There is not a universal standard for how to calculate a measure called Customer Loyalty. Loyalty means different things to different people: retention, lifetime value, referral, % share of pocket, etc… Vague labels that stand alone like this don’t make good performance measures.

“Customer Survey”

A survey is a data collection method, not a measure. A customer survey collects a lot of data, data that could be used for a wide variety of potential performance measures. Perhaps this is why surveys are usually too long and not useful: people don’t define the measures before working out the data they need and the best way to collect it.

TAKE ACTION: Download the “Have you got ugly measures?” Template to find out if any of your current measures are downright ugly.

IN THIS EPISODE:

Upcoming Events: Free Webinar – Where are you on the Performance Measurement Maturity Ladder?, 2012 Performance Measure Blueprint Workshops in Australia, 2012 Performance Measure Blueprint Online Program starting February
Practical Tip: Good, Bad and Downright Ugly Performance Measures
How-to Resources: Get the 4 How-to Kits…Before the prices go up in February 2012
Your Questions: Fernando asks about problems with metrics for Public Relations…
Getting More: Don’t Waste Time With Trivial Measures, Three Ways to Toss Those Time-Wasting Measures, Milestones Do Not Make Meaningful Performance Measures

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Reason 1: Because you’re supposed to.

We’ve been told to have performance measures by our managers. The Strategy Office expects us to come up with some KPIs to go in the KPI column in the business plan. Everyone else seems to be measuring stuff so we probably should too. Let’s just get it done and over with as quickly as we can. What data do we have? Maybe we can throw a few KPIs together real quick…

It’s little wonder then, that to many people performance measurement always feels like another corporate hoop to jump through that takes up time they should be spending on their “real work”.

Reason 2: To CYA (cover your arse/ass).

Show you’re doing lots of work, doing good things, getting heaps of stuff done. Then maybe managers will stop changing things on you all the time, or stop putting pressure on you to work harder, work smarter, streamline this, reengineer that.

All you have to do is to find a few measures that always have positive trends and show how well things are going. Measurement drives behaviour, so where do you think people will prioritise their time and attention when they measure the things that are easy to improve?

Reason 3: To manage staff performance.

Everyone has some KPIs in their performance agreements. And targets. That should make it a lot more objective to work out who’s performing and who isn’t.

And so staff quickly adopt Reason #2 for measuring performance. What happens to overall company/organisational performance then?

Reason 4: To negotiate for more resources.

Demonstrate how worthwhile your outputs are, how capable your team is, how super things could be with more funding. No-one likes having their budget cut. Think of all the cool projects that you won’t get to do if you lose resources.

Funny though, when we give more resources to things that are working, and deny resources to things that need help to be improved.

Reason 5: To monitor strategy execution.

Make sure that the strategic initiatives are being implemented as planned. We have 57 strategies, and they all matter. We need to be sure we get them all done.

Perhaps this is why so many organisations have so many of what I think is a completely useless type of performance measure: “the milestone”. But people will argue until they’re blue in the face that reaching a milestone for a project or initiative means that performance must be better. How so, exactly?

Reason 6: To achieve targets set by the strategy.

Focus on how far current actual performance levels are from targeted performance levels, and using cause analysis and process improvement techniques to find good ways to lift current performance levels until they “hit the targets”.

When most people in a company or organisation have this reason for measuring performance, I’d describe it as a continuous improvement or results-oriented culture. It could be a very energising place to work.

Reason 7: To continually improve capability to achieve the organisation/company vision.

Every performance measure has a line of sight to the results implied by the mission or vision. Targets are set to guide resource allocation, but innovation means the targets are often exceeded. Business experiments quickly identify the best ways to achieve or exceed targets. Organisational learning and systems thinking ensures people are focused on the most elegant ways to improve performance.

Imagine turning up to work each day, knowing that virtually everything you and your colleagues were going to do was verifiably contributing to making the world a better place?

Reason 8: ???

I’m under no illusions that there are only seven reasons people associate with measuring performance. Who knows how many there are? But I am very interested in YOUR personal reason for measuring performance. Let me know by commenting here on the blog post for this practical tip.

TAKE ACTION: It might be a good conversation to have with your colleagues: why do you measure performance? What are your reasons? Why do you bother? What value comes from doing it? What value should come from it? How can your approach to performance measurement improve, so it can better fulfil this purpose?

IN THIS EPISODE:

Upcoming Events: Free Webinar – Is Your Strategy Strong Enough to Measure?
Practical Tip: Why do YOU Measure Performance?
How-to Resources: How to design useful and usable performance reports…
Your Questions: Andy asks – Do you keep measuring after reaching your goal?
Getting More: Reach For The Sky! (Target Setting), KPIs Should Make You Feel Uncomfortable!, Using Targets to Set Your Success Trajectory

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Question 1: What is performance really doing?

This doesn’t mean what is performance doing today, or what did it do last week? It means what is performance mostly likely to keep on doing if it’s left alone? To answer this question, your performance measures need to be displayed in graphs that show the natural variability in performance over time. That’s a new concept to many people, but it’s so very simple to do it.

In your performance reports, XmR charts are the best way to display performance measures. These charts validly and visually flag the signals of true change in performance: a sudden shift, a gradual trend, a change in variation. To learn about XmR charts, get Donald Wheeler’s fabulous book “Understanding Variation: the key to managing chaos”. It’s written for management, it’s easy to understand and you can use this XmR chart for any type of performance measure that you track regularly through time.

Question 2: Why is it doing that?

When you see a signal in your performance measure, like a sudden shift in the wrong direction, it’s tempting to jump straight to solutions. Train staff… hire consultants… invest in technology… educate customers… write policies. But usually these “fixes” fail – you won’t see the performance measure respond very well, if at all.

Fixes fail when they aren’t designed to target the true causes that underly the signals we see in our performance measures. So it should go without saying that before you even think about a solution, you ought to have interrogated your measures and other related data to find out the cause behind the signal. This means analysing the work process that is being measured to identify potential causes, using data to verify which causes are correlated with the signal in your measure, and including a summary of this cause analysis in your performance report.

Question 3: How should we respond?

When you know the cause of the signal in your performance measure, you’re much more likely to look for the right solutions. But there’s more than one way to solve most problems, so performance reports that are most useful are ones that include some options for solutions, along with the pros and cons for each, so the report’s audience can make an informed decision about the best way to respond to the performance measure.

TAKE ACTION: It might be time to take stock of your performance reports and see how well they answer these 3 questions. While you’re at it, find out from users how useful and how useable they feel the reports are. Then design a fresh performance report template based around the 3 questions. For a short cut in the form of instructions and a ready-made report template, take a look at the PuMP How-to Kit for Designing Useful and Usable Performance Reports at www.staceybarr.com/products/reportdesign.html.

IN THIS EPISODE:

Upcoming Events: Interested in a 2012 Performance Measure Blueprint Workshop? Let us know…
Practical Tip: Three questions to design your KPI reports
How-to Resources: How to design useful and usable performance reports…
Your Questions: Chris asks how to present KPIs with minimal effort.
Getting More: Five Steps For a Fast Performance Dashboard, Making Sure Your KPI Graphs Don’t Suck, WOW! What a Cool Performance Report!

Subscribe at iTunes or listen here:

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