Successful performance management is no coincidence
Despite the passion and dedication they put into improving business performance, many managers are frustrated because their efforts often seem to come to nothing.
In this article we reveal four key trends in performance management that will revolutionize your results. Learn how to set clear goals, take the right actions and boost your results in no time.
If you want to improve performance, you need to be aware of this,
that he/she cannot simply throw a few activities into the room that may or may not lead to the desired results. If you want to influence the results in your favor, you first need to know what the control variables are that can be used to improve the performance KPIs.
Classic result variables are:
– Turnover, profitability, productivity, throughput times, reject rates, customer satisfaction, processing times, employee satisfaction, complaint rates, new customer turnover, existing customer development, etc.
Earnings figures versus performance indicators
Almost all variables that are to be optimized in performance management are such result variables. As the name suggests, these results have always been fixed for a long time. I can no longer “tweak” existing customer sales for the past quarter. It is firmly cemented as the past – like a 2:0 in a soccer match after the final whistle. If I want a bigger win in the next game, I can’t simply manipulate the result display in the stadium so that it shows 4:0. I have to do things fundamentally differently on the pitch that allow me to beat my opponent by a higher margin.
The levers I need for this are so-called control variables with which I can influence the result variables.
Both variables are not activities, but measurable values. Applied to the management of existing customer sales, the control variables could be the number of appointments made by the sales force or the number of strategic workshops with customers. I can directly increase the frequency of visits with my decision as a manager. The same applies to the number of strategy workshops we hold. Control variables are characterized by the fact that you can directly influence them with your decisions, which in turn has an effect on the result variables.
Control variables are not activities
It is important to note that our performance indicators always include a KPI in addition to the results. They are also always measurable and not just activities. “Scheduling a strategy workshop” is not a control parameter, but an activity. On the other hand, ten instead of the current six such events are to be scheduled with customers in future, a KPI-based control system.
But be careful: our success naturally depends on whether we identify the right control variables as levers. Which of these variables exist in the company is often well known. However, there is a lack of systematic reference to the KPIs of the results. There is also a lack of transparency as to which measures, projects and activities are working on the performance indicators and with what level of success.
Here they are: the four core principles of performance management
It is not without good reason that experienced managers immediately understand these discussions. After all, these are causal relationships. The reason why controlling results in performance management so often does not work is that the organization is far more complex than in our sales example. In day-to-day practice, this is tricky and requires constant monitoring. To make it simple once again: If 25 percent more customer appointments only increase sales by 10 percent instead of 25 percent, you have to look for other control variables.
By scrutinizing operational performance management systems in a way that is critical to success, four core principles have emerged. We can use them to check an initial draft in two to three iterations and revise it if necessary:
1. no activities
All variables, whether result or control variables, must represent states, not activities. The control variables in the first draft often include things like “conduct CIP dialogue” or “process optimization”. These should either be deleted or the following hack applied:
Ask yourself which status the respective activity affects. For example, the control consideration “Conduct CIP dialog” can become a control variable called “CIP penetration rate”.
2. no relativity
All relative terms must be eliminated. In its structure, the control mechanism does not specify any targets. It presents the status variables on the results and control side and sets them in relation to each other. Whether a value is good or bad, whether it is within or outside the expected range, is determined by assigning corresponding value ranges to each variable. This allows you to indicate whether you are in the “green”, “yellow” or “red” zone. Terms such as “more new customer sales” or “fewer disruptions” are replaced by measurable status variables.
3. no incorrect control variables
The most challenging grindstone is the critical review of each individual performance indicator to determine whether it actually is one.
In order to have more turnover in the quarterly report, it is logical to increase the average turnover per day. However, this cannot be “turned” by magic. It requires upstream activities. In addition, nobody knows exactly what needs to be done. Only if the selected control variable has a direct effect on an earnings figure is it one. Perceived variables are much more important than facts, which most managers consider to be control levers.
For example, the perceived performance of an IT department is far more relevant than the measured system availability or the response time at the service desk.
4. no irrelevant control variables
The final touchstone is to check whether control variables have a significant influence on their results.
On the one hand, we check whether a performance indicator is helpful but not really decisive in influencing a certain performance indicator. For example, it may be the case that the number of customer visits is helpful but not decisive information for the development of sales. Here we need to think boldly and sharply in order to eliminate these variables. Many KPIs unnecessarily inflate the system because they are merely informative, helpful or interesting, but not necessary.
On the other hand, critical variables are often overlooked if they lie outside the usual sphere of experience. These variables are very often “soft” variables, such as the “degree of motivation in sales” or the “perceived degree of support for the field sales force by the internal sales force”.
Progress
