Measures are the last thing that will drive your company’s performance

Performance measures are a double-edged sword. On the one hand they can give you control, help identify issues, and establish priorities. Yet they can also lead you to take your eye off the thing that really matters – producing great work.

I make this point because I recently spotted a customer notice in my local Volvo dealership. It read “Have we been outstanding? Outstanding is if you would mark us 8/10 for your experience with our dealership. This means we have provided you with a professional and courteous service, and you are happy that the work we have carried out on your vehicle while it has been in with us.”

My reaction was that their definition delivered minimum acceptable standards, not outstanding service. When I asked the Service Manager about the notice he explained that Volvo called customers to ask for their ratings. He therefore wanted customers to understand the Volvo criteria so that the dealership got fair feedback.

Now, I believe in metrics – I am a chartered accountant after all! But this experience reaffirmed to me that measures should be the last step in the process of performance improvement. In particular, there are three vital steps to take if the metrics are to be useful.

  1. Clarity of purpose. Understanding what your business is all about is critical to driving your performance. At Southwest Airlines, CEO Herb Kelleher would tell employees “We are THE low cost airline!” This clarity of purpose meant that employees across the business could easily understand what was required to improve company performance. In-flight meals? No. Sweatshirts instead of uniforms? Yes.
  2. Focus on great work, not great measures. Ex-CEO of US DIY retailer Home Depot was criticised by many stakeholders during his tenure for his zealot-like focus on measuring everything in the business, and his inability to connect with people across the organisation. The result was that staff, directors and investors actively wanted him out of the business. In the end, as Tom Peters commented, “Customer service had gone to hell, even if the metrics were a little bit better.”
  3. Integrity in the use of measures. To be useful, measures need to be used as a basis for finding the truth, not in justifying past actions. In his book Good to Great Jim Collins quotes Pitney Bowes executive Fred Purdue who said, “My job is to turn over rocks and look at squiggly things, even if what you see can scare the hell out of you.” Not all companies are able to operate such an open and honest approach. Perhaps the biggest recent example of a lack of integrity when using metrics is Enron. The systematic manipulation of accounts by the leadership team ultimately led to the collapse of the company.

Unfortunately, the Volvo dealership showed limited progress on any of these three elements. There was no evidence that customer service was really important to the dealership team, the Service Manager seemed more interested in the customer service measure than really ensuring I received great service, and the team seemed to be “playing the game” of ensuring the measures were good enough to keep Volvo head office at bay.

The bottom line

Performance measures are only useful if you have established a clear purpose, created a focus on doing great work, and use the information with integrity.

(By the way, the car was returned in good order and on-time. The service was fine. Not outstanding, but fine. Say, 8 out of 10!)

 

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