Have you ever managed someone and just couldn't understand why you weren't getting what you needed from them?
These situations can arise when there are poorly developed performance metrics. Performance metrics need to be developed thoughtfully in order to encourage and measure the desired behavior of employees. The encourage and behavior aspects are often left out of the metrics development process. A recent and relevant example: some lending agents were rated on the volume of loans processed and the speed with which they processed those loans. They were not rated on the quality or the risk associated with those loans. Because they had performed in accordance with how they were measured, they were rewarded and the behavior continued. The banks for a time were doing well based on this performance; however, the default rates on these loans have been tremendous and have had a debilitating effect throughout and beyond the finance industry. By not measuring performance based on the quality and risk analysis associated with loans the long term goals of the companies, their customers, and the individual performers were not met. The key to developing behavior performance metrics is to analyze the different intended and unintended ways an individual could meet the metrics as defined. With each metric ask yourself, how could someone meet this goal by circumventing the intention?
Performance metrics should also cascade: organizational goals and their performance metrics should translate into more specific department and team goals which then translate into very specific goals for individuals. Managers at all levels within the organization need to be able to clearly articulate how the individual goals and supporting metrics at the lower levels directly and indirectly assist in meeting the overall organizational goals and supporting metrics. Using the SMART (Specific, Measurable, Accountable, Realistic and Timely) methodology for developing goals is a simple tool that can assist you as you look at the goals and supporting metrics in a top-down and bottoms-up fashion. A simple example is:
Organizational Goal: Sales of Widget A $2MM for Q1
Department Goal: Sales of Widget A $500K for March
Salesperson Individual Goal: Sales of Widget A component $125K for March Week 1
IT Support Individual Goal: Sales system downtime <1% during="" peak="" selling="">1%>
Inventory Individual Goal: Widget A components out of stock <5% at="" key="" distribution="" centers="" for="">5%>
Each of these goals and metrics, while simple, rolls up to the department and organizational goals. These would be solid starting points, but would need to be thoroughly vetted to ensure the desired manner in which these goals could be achieved are supported by the existing processes and that any loop holes in the process would be identified and corrected.