Rule 8: Expectations

The Expectations Rule:  Establish Individual and Team Performance Expectations

When a workforce member knows What to do (Priorities), and How to do it (Processes, Technologies, and Expertise), they’re ready to know, and respond positively, to the organization’s specific performance expectations of them.

Typically, these are portrayed as goals, quotas, targets, budgets, and the like.  Employees who aren’t ready, or who resist these expectations, either don’t know What and/or How (90%), or for a range of reasons are already emotionally or psychologically beyond the point of caring (10%).

Realistic written performance expectations, ideally as an element of a Personal Performance Plan, are an explicit and overt statement from the enterprise of what it takes to Succeed.  They are of extreme importance, should not be underestimated, and should be provided to every individual, and team of individuals with common objectives, throughout the enterprise.

These expectations should manifest the Plans of the organization such that the sum of the parts equal the desired enterprise-wide results, and they need to evolve and change at the same pace as those of the enterprise.  That means if the company’s Plan and budget evolves monthly, individual performance goals and targets need to change monthly as well: no timing incongruities when it comes to performance against goals.

A word of caution.  When it comes to setting goals, be careful what you ask the workforce to do.  Because they will give you exactly what they think you’re asking for, based on what they interpret from what they know.

There are scores of examples of this across markets and decades.  In the 1980’s and early 1990’s, when the “Sales Culture” was running rampant in financial services worldwide, bankers wanted more revenue generation from their sales forces.  Remarkably, they incorrectly deduced that a greater quantity of sales would derive more revenue (true in the men’s clothing business, but not in financial services, where sustained revenue increases correlate with relationship longevity and depth).

Based on this they set goals based on higher Sales Ratios: the number of products sold per customer, or per day.  So, the workforce gave them what they asked for: higher Sales Ratios.  Instead of opening a single $100,000 one-year certificate of deposit as requested by the customer, employees began “selling” four $25,000 three-month certificates, and then “re-sold” them four times per year (every three months when they would renew their accounts).

So, instead of being measured for producing a single sale of $100,000, they got credit for producing sixteen sales for $400,000 total… even though the bank generated the same revenue for both over the entire year (actually less, due to higher set-up and administrative costs of sixteen accounts instead of one).

Quantities of sales skyrocketed, goals were far surpassed, employees were paid spectacular incentives, all much to the thrill of the resident sales management consultants.  Until senior managers began to realize (once the strategy guys showed them the numbers) to their great dismay that employees were re-selling the same dollars over and over and over again (a.k.a. “account churning”), with no material growth or revenue added to the income statement.  Bank CEO: “…you mean we sold over 500,000 accounts this year, and paid millions in incentives for them, but have only 6,000 net new accounts (this year-end vs. last year-end) to show for it?”  Ouch.

Employees gave management exactly what they asked for in the goals that were set: higher quantities per customer seen (even if it ended up being the same customer and the same dollars).  If the bank had wanted higher revenue and more profitable customer relationships, then expectations and goals should have been based on sustained actual revenue and customer portfolio value.

The key here is: Some Performance Management initiatives can be too successful, but may still not achieve enterprise goals.  Organization leadership should be certain that it rationally translates enterprise goals and objectives down through and across business units, workforce groups, and individual groups members, so that the actual results that roll up are the ones they want.

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>>> Rule 9