Measuring Your Success Keys to a Smart Performance Management System

‘You can’t manage what you don’t measure.’

You may have heard this adage before. Yet many of managers and employees come to work daily faced with only a subjective opinion of what they are expected to accomplish that day and how to get it done.

When asked ‘Do you have a performance management system?’ most organizations respond ‘Absolutely. We conduct performance appraisals once a year.’ I often ask, ‘What types of metrics are used when evaluating employee performance?’

The response often is, ‘We have a scale of 1 through 5. Then we rate each person on a variety of performance factors using that scale.’

‘How do you know who gets a 5 versus who gets a 3?’ I ask. ‘Well, that’s somewhat subjective,’ is a common response.

Therein lies the age-old question that has been plaguing health care managers for generations: ‘How do I apply metrics to performance that is tough to measure? And how do I change unproductive employee behaviors to productive ones?’

First, it’s important to establish a new mindset regarding the definition of performance management. PM is more than an appraisal system. It’s an ongoing process that has three major components:

  1. Measurement of critical success factors from the strategic level, linked all the way down to the line employee goals and standards. This could include individual or team metrics in daily productivity, customer service, attendance, efficiency, or customer delivery, to name a few;
  2. Regular and immediate feedback on performance data to all managers and employees, including graphs with team performance; and
  3. Incentives and recognition systems such as praise, E-mails, certificates of achievement, bonuses, profit sharing, and merit increases.

Let’s assume for a moment that you have all of the above. Congratulations. You may still be struggling only with the performance that is tough to measure. This category might include customer interactions, phone technique, work ethic, attitude teamwork or initiative.

There are two major ways to measure these subjective aspects of performance.

  1. Counting. This method applies to any behavior or result which is observable. For example, you can count how many times a customer service representative says ‘we can’t do that’ to a customer as opposed to ‘here is what we can do.” Often, just giving feedback to the rep doesn’t help. You may hear managers say. ‘I’ve told him a hundred times to cut that out.’ The better strategy is to set up a behavior chart where the employee keeps track of the daily calls during which he offers to help a customer solve a problem.
  2. Judging. When judging performance, you do need to start with a frame of reference. However, most supervisors use their subjective opinion in assessing how well employees perform. The major mistake most supervisors make is that they fail to translate their opinion into some objective standard that an employee can understand.

For example, you may hear a supervisor say to an employee ‘Your work area is sloppy. Be neater next time.’ The employee still does not know the specific expectations of the supervisor. Sometimes, a supervisor will devise a “neatness scale,” where 0 represents the sloppiest work and 5 represents the neatest work.

At first glance, this approach may seem useful, but the supervisor is still judging performance based on subjective opinion. The supervisor may never have answered these important questions: What is meant by sloppy? Are tools housed in the wrong place? How many tools?

An opinion-based measure can be made more objective by defining distinct pre-established criteria for each rating. In other words, both the supervisor and employee could agree that in order to receive a ‘5,’ the employee must maintain a work area where 100 {06cf2b9696b159f874511d23dbc893eb1ac83014175ed30550cfff22781411e5} of tools are properly housed in their designated area and the floor is clear of debris at all times. In this case, a ‘3’ might represent that 80{06cf2b9696b159f874511d23dbc893eb1ac83014175ed30550cfff22781411e5} of the tools are properly housed and the floor is clear of debris by the end of the day. Once these pre-established criteria are set, judgments can be made on the basis of observation. This type of measure is called a Behaviorally Anchored Rating Scale or ‘BARS.’ Each number represents a specific set of observable behaviors. This approach creates a system in which both the supervisor and employee will be “on the same page” regarding performance ratings.

The Pucino Group has assisted several local area businesses on implementing performance management in initiatives funded by the Workforce Training Fund Grants. RiverBend Medical Group has successfully experienced substantial performance improvement and cost savings throughout the organization. In its primary care operations, the turnaround time for processing claims was improved. The business and clinical supervisors successfully reduced the number of days it takes to submit a claim after a patient visit from 10 days to 4 days.

This also cut down on rework because claims were more frequently processed correctly the first time. In addition, the medical records department reduced their backlog for filing patient records from 30 days to less than five days.

Another example of substantial performance improvement was demonstrated by Granite City Electric Company whose customers include Fenway Park. Prior to performance management training, the company’s retail sales representatives were averaging 2.8 lines per ticket, which indicates how many items were sold per sales transaction. Within one year of the training, the average performance increased to 3.8 lines per ticket, (which represents in excess of $400,000 in increased sales margin). In addition, the company-wide dead stock inventory was reduced 32{06cf2b9696b159f874511d23dbc893eb1ac83014175ed30550cfff22781411e5} within five months, resulting in $465,000 in cash for new inventory, and the accounts payable team reduced monthly account discrepancies from 10.4{06cf2b9696b159f874511d23dbc893eb1ac83014175ed30550cfff22781411e5} to .5{06cf2b9696b159f874511d23dbc893eb1ac83014175ed30550cfff22781411e5}, which saved the company an estimated $65,000 in wasted time researching items which now process accurately and on time and another $100,000 in missed discounts on invoices not paid on time.

By using the Workforce Training Funds to implement performance management, an organization can immediately realize two major sources of return-on-investment: the first is the grant funding itself, and the second is the increased revenue from improved organizational performance.

With such a high pay-back potential, the Workforce Training Fund is one of the best resources available to Massachusetts businesses.

Helmi Pucino is president of The Pucino Group, a management consulting firm in Amherst; (413) 253-4154; pucino@comcast.net.