People who boast of their efficiency terrify me when I do not know to what ends they are applying it.

Thomas Gilbert

Do you struggle to control the delivery of measurable results by the people that you lead? Wouldn't it be great if they stopped micromanaging each other, and were more empowered and engaged, and less apathetic? What do they want? Why haven't we totally solved this problem yet?

Every person in an organization is employed to deliver results (outputs) that contribute to the organization. Effectiveness should be judged by the extent to which internal and external customer demands for outputs are met. An effective performance management system is an engine that drives performance and productivity improvement.  It determines not just how fast and how far an organization or team will travel, but how enjoyable the ride will be.

Buckle up while I show you how to travel faster and further on the road to productivity improvement and enjoy the ride!

The components of an effective performance management system

To fine-tune any system, we need to break it down by individual components, then ensure each component is working effectively individually, and as a part of the total system.

The individual components of an effective performance management system are:

• Stakeholder identification
• Outputs and measures
• Targets
• Feedback

Sacher Associates have developed detailed checklists of quality standards that ensure each component works. For this article, I will give a brief description of the components and some common breakdowns and pitfalls.

Stakeholder identification 

Many individuals and teams do not achieve optimal results because they do not know who they are really working for, or what outputs are expected by their stakeholders.

It is vital to first identify these stakeholders. Next, the organization should clarify what each stakeholder expects, in the clearest of terms, so these expectations can be met.

The most common pitfall when identifying stakeholders is certain stakeholder groups are not identified or are neglected, for example, suppliers or employees.

Outputs and performance measures

Outputs are the value-added end result of a process and define the permanent areas the organization expects to deliver results.  Performance measures make those output achievements measurable. Outputs are produced by an individual or a team for its stakeholders, most commonly its internal or external customers or users.

Implementing outputs requires effort and focus. Many organizations think in terms of management activities rather than results. Managers need to understand their outputs before they can successfully achieve and measure them. Correctly defining a hierarchy of outputs is a critical step in the quest for performance improvement.

The most common pitfall is incorrectly defining outputs which can lead to trivial, even harmful accomplishments.

With effective performance measurement, everyone is measured against whether their customer and/or stakeholders’ many and varied expectations for outputs have been satisfied. Specifically, performance measures measure the quantity, quality, timeliness, and cost of outputs delivered to stakeholders.

The most common pitfalls with performance measures are all four dimensions required by the stakeholder are not comprehensively covered. For example, we measure quantity but not quality.

Targets

Targets flow from outputs and their measures but are developed to ensure strategic goal achievement. Thus, they are short-term and change according to what is required.  Targets are evaluated and re-set regularly, typically every 3 or 4 months, or even every 6 months.

The most common pitfalls in setting targets are not having them at all, having too few, or too many.

Feedback

Systematic communication on how people are performing against their targets is critical, and this is the role performance feedback plays. We define performance feedback as official information from the organization that tells people how they are performing against targets. Performance feedback is the foundation for what we call the performance-linked communication system.

Effective management teams recognize the importance of feeding back performance information to all levels of the organization, particularly to the workforce level.

Failure to do this can be one of the costliest errors in organizational management. While resources are invested to ensure the financial director has all the information, he needs to make decisions and perform in his role, little is invested in providing the sort of information workers need to perform their role – yet these are the people that are immediately adding value to the products or services delivered by the organization.

What can you expect from an effective performance management system?

Productivity improvement and quality of work-life are two sides of the same coin.

Below are some results achieved by our clients during and after Sacher Associates productivity improvement projects. They are from published case studies we can provide on request.

• • Man-hours per unit down by 23.5%Unified sense of direction amongst team leaders up 14.4%
  • Time customers off supply 241% improvement
  • 30% improvement in sick leave
  • Time lost due to accidents 322 to 33 days.
  • Time lost due to industrial disputes down from 250 to 15 days.
  • Dividends paid to owners increased by $130 million over a 5-year period.
  • Operating expenditure reduces by 23% over a 5-year period.
  • 97% of stakeholder responses indicated a high level of stakeholder satisfaction. 

Summary

In the long run, everyone should be measured against whether the customers' demands, and their many and varied expectations for outputs are satisfied. The concept of the customer is broadened to include all the stakeholders of an organization or team. Organizational performance is judged by the extent to which stakeholder demands for outputs are met.

Go back to the basics. Establish for each individual and team exactly who their stakeholders are, and what outputs are expected of them. Implement a comprehensive performance measurement system that covers  quantity, quality, timeliness, and cost and set targets. Regularly review and update your targets.

The result will be a clear focus on results, and continuously improving performance.

If you would like to discuss how to fine-tune and improve your performance management system, book a clarity call here.