Rule 9: Measurement

The Measurement Rule:  Measure and Report Performance Results

Once people have goals and targets, to keep them quickly adaptable to Plan changes and evolution over time, and to clearly communicate actual performance results, you need a comprehensive automated performance measurement system.

The Truth that “What Gets Measured Gets Done” is evident because measurement systems are explicit and overt statements from the enterprise to the workforce on how Success is happening, or not.

In addition to being easily and universally accessible, measurement systems first should be accurate, second they should be timely.  While the ideal is to have fully accurate performance reporting as soon as possible, it is better to be late and right, than on-time and wrong.

Why?  Because inaccurate performance reporting breeds Uncertainty; workforce members don’t know if they can trust the numbers, so they become unsure of their capability to know how well they’re succeeding, or not.

Experience in implementing over 3,000 incentive plans at thousands of organizations has taught that measurement system accuracy (and, frankly, timeliness) has much to do with the reliability, consistency, accuracy, and completeness of the underlying source data from which performance reporting is derived.

If incentive/bonus/merit payments are based on reported results, source data accuracy becomes essential.  Expectations tell the workforce “What” to do, measurement reporting tells them “How” well they’re doing.

Because no two enterprises have the same priorities, resources, and infrastructures—even across lines of business within a single enterprise—an optimum performance measurement system should be highly flexible, quickly adaptable, granular to individuals and days, and multi-dimensional: meaning that it reports performance across a virtually unlimited range of leading and lagging indicator factors.

These should include revenues and costs, sales activities and results, customer portfolio revenue and/or profitability value, service quality and customer satisfaction, service problem resolution, process quality and accuracy, referral activities and results, efficiency, productivity, project achievement, performance ratings, and others.

Finally, a great measurement system should provide highly customizable set-up and administration of performance recognition and incentive/bonus/merit compensation and recognition programs, enabling in virtually any reasonable combination:

  • individual, workgroup, and unit rewards, based on individual and/or team performance,
  • variable pay-out timeframes (day, week, month, quarter, through annual and multi-year),
  • pay-out qualifiers, pay-out multipliers/divisors,
  • various pay-out bases (% of revenue, % of salary, % of pool, et. al.),
  • management overrides, point-in-time and period-of-time,
  • cash, non-cash, and equity,
  • retrospective and prospective results,
  • flexible periodic re-assignment of goals and incentives based on job changes, and
  • integration with external accounting, payroll and human resource systems.

Optimally, measurement systems evolve beyond simply reporting past results to become full-scale, mission-critical Enterprise Performance Management systems: universally automating performance planning, goal-setting, data collection, assessment, coaching, best practices, and performance recognition and rewards (as opposed to the time-lagging, passive performance assessment documentation archiving systems often call ‘talent’ or ‘performance’ management systems).

And, bluntly speaking, Performance Management will not work without effective feedback, reporting and information.

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 >>> Rule 10