one nail at a time

Editor's Note: No two successful performance management programs are the same, but all successful performance management programs share common principles. To shed some light on what separates a good company from a great company with regard to performance management, DC VELOCITY has published a series of columns on the 12 Commandments of Successful Performance Management. This month we wind up the series with the 12th commandment: Be Patient.

The 12th Commandment
Be patient: You build a house one nail at a time

A good carpenter will tell you that a house is no stronger than its foundation and frame—and that building a strong foundation and frame takes skill and patience. The same can be said of a successful performance management program. You have to start the building process from the ground up, basing the program on a sound framework and taking care not to rush the process.

But what should that framework look like? The accompanying diagram, which shows the framework for what we call the "House of Performance Management," may help you visualize the underpinnings of a successful performance management program. As the illustration shows, the foundation is a set of metrics that are aligned with the company's strategic goals and objectives. [For more on alignment, see Commandments #1 (Focus: Know your goals), #7 (Integrate: Make sure everybody's working toward the same goals), and #8 (Listen: Find out what your customer wants—not what you think it wants).] The companies that report the greatest success with performance management programs are the ones that track their progress toward what senior management identifies as strategic targets. (Of course, strategies can and do change, so make it a point to review your metrics programs at the start of each business cycle and revise them if necessary.)

Once a company has settled on a strategy and laid the foundation for a performance measurement program, it can focus on the program's major components—the three major pillars, if you will:

• Process metrics. To ensure that the company measures strategic outcomes, its metrics must be process oriented, not function oriented. That's because strategic vision focuses on outcomes of the total process irrespective of individual functional contributions to the process. [See Commandment #5 (Beware: Know the point of your metrics and be careful not to get sidetracked).]
• Balanced metrics that include both financial and non-financial measurements. Study after study has shown that companies that use a balanced set of financial and non-financial strategic measures outperform their less-disciplined rivals in both performance and management. [See Commandment #2 (Balance: Use a balanced approach to selecting your measures).]
• A metrics-oriented culture. You can't motivate employees to improve performance simply by putting well-defined performance measures in place. You must integrate measurement into the corporate culture itself. That means taking the measurements out of the realm of the abstract and translating them into something that's meaningful to the people on the shop floor. It also means measuring performance against goals. And it means using what you learn to drive improvement. [See Commandments #3 (Involve: Engage your employees) and #4 (Apply: Put the metrics data you're collecting to good use).]

Adding the nice-to-haves
Anyone who has built a house knows that part of the process is choosing from a wide array of options that make the house more livable and increase its value, but also drive up the cost. In the performance management house, there are also options and nice-to-have elements that can enhance the value to the company once the culture is established and the program is well under way.

Successfully integrating these enhancements into the protocol without undermining the entire program requires a certain amount of experience and sophistication; thus, it's often best to wait until you've achieved some success before attempting to build on your program. But when the time is right, carefully considered additions can pay off handsomely.

One option, for example, is to establish a program that links employee incentives to the key metrics. Such incentives will, of course, vary depending upon the employee's level and influence on the organization's processes. A good incentive program will motivate the employee to achieve the desired result and will use the appropriate type and level of compensation as a reward.

As for other "nice-to-have" features, once your company has established a solid internal metrics program, it may want to consider extending the measurement program to include trading partners. [See Commandment #11 (Lead: Practice what you preach).] Your customers don't distinguish between your company's performance and your suppliers' performance, which means your company's success depends heavily on the effective management of your extended supply network. True, these processes are outside of your direct control, which makes implementation difficult, but the potential rewards make the effort worthwhile.

Finally, technology and automation can do much to enhance a well-designed and -executed performance improvement program. The key is remembering that the program should dictate the type of technology used, not the other way around. Rare is the company that builds a successful metrics program by purchasing technology first. But that shouldn't be taken as a vote against technology. Once they have a successful program in place, companies can gain tremendous efficiency through automation.

Built to last
Choosing which metrics to use is just the beginning of the journey to world-class performance. The next phase is to implement a performance management program that converts those metrics from an abstract concept to an active management tool for boosting performance. Like any tool, metrics must be properly applied. Anybody can go to the hardware store and pick up the tools. It takes a master craftsman (or woman)—someone with vision, technical skills and patience—to take those tools and build a house that will last.