Behavioural performance metrics
Well-designed performance management systems ensure that organisations – across all levels – work towards the same strategic objectives. However, moving from a few strategic must-win battles – often concocted in a management board room by executives and management consultants – to actual behavioural change in the operational units is notoriously difficult. However, following a sequential four-step process can help an organisation in making sure that the performance management framework supports the corporate strategy.
Definition: Must-win battles are the three to five challenges an organisation must conquer to achieve its key objectives.
The starting point of any proper performance management system should always be the organisation’s strategy and desired future state. How to define a corporate strategy is an entire topic of its own, but a good starting point is to define the organisation’s must-win battles.
Must-win battles are the three to five challenges your organisation must conquer to achieve its key objectives. Arriving at this short list of strategic corner flags requires focus and prioritisation and clearly shows that strategy is about making choices – selecting certain options in lieu of others. Consequently, as stated by A.G. Lafley and Roger Martin, strategy is choice.
For inspiration on how to create a proper strategy, refer to these dogmas for making strategy work.
Definition: Key performance questions are open questions that highlight what an organisation needs to know in terms of executing its strategic objectives.
As first stated by Voltaire, you should “judge a man by his questions rather than his answers”. This goes for strategy as well. Thus, having defined the organisation’s strategic objectives as a few must-win battles, the second step entails a translation of each must-win battle into approximately three key performance questions.
"We run the company by questions, not by answers. So in the strategy process we've so far formulated 30 quesions that we have to answer (...) You ask it as a question, rather than a pithy answer, and that stimulates conversation. Out of the conversation comes innovation." Google CEO Eric Schmidt on the importance on asking questions
Key performance questions must be precise, forward-looking and open questions highlighting what the organisation needs to know in terms of achieving each must-win battle, enabling a focused discussion on how the organisation is delivering on its strategic objectives. The aim is to design key performance questions that can be regularly revisited to better manage the organisation.
When defining key performance questions related to the organisation’s must-win battles, remember that key performance questions should …
Definition: Desired performance behaviours are the actions that are believed to support our ability to assess each of the key performance questions.
Key performance questions enable leaders to identify the management information needed to guide the organisational effort of succeeding with its must-win battles. However, a strategy is nothing if it isn’t operationalised. That is, must-win battles will never materialise without behavioural change – someone needs to do something different tomorrow compared to what they did today.
Outlining the desired performance behaviour humanises the abstract vision outlined in the strategy. A classic must-win battle, customer centricity, is rather ambiguous on its own but defines a behaviour: all employees speak politely to the customer in any situation, making it operational and action oriented.
Consequently, to ensure the behavioural element, step 3 entails the definition of desired performance behaviours associated with each key performance question. Ask yourself what kind of behaviour would have to be observed to answer the key performance questions.
Desired performance behaviours should …
Definition: Key performance indicators are quantifiable metrics that reflect how well an organisation is achieving its strategic goals and objectives.
The fourth and final step includes the definition of key performance indicators related to each desired performance behaviour. This involves the definition of quantifiable and measurable performance metrics that illustrate the extent to which each desired performance behaviour is occurring in the organisation. In doing so, strive to design leading indicators (metrics that indicate future performance) rather than lagging indicators (metrics that confirm patterns already in progress).
If the desired performance behaviour is “all employees speak politely to the customer in any situation”, then a proper leading key performance indicator could be “number of employees who received customer dialogue training”, and a leading key performance indicator could be “number of customer complaints mentioning impolite talk”. Changes to these performance metrics will indicate whether the desired performance behaviour is adequately sustained throughout the organisation.
Thus, key performance indicators should …
Here’s what the final result might look like for a single must-win battle decomposed into key performance questions, desired performance behaviours and finally key performance indicators.
Using this process should help you define behavioural performance metrics that tie to your organisation’s strategic objectives. However, to ensure a holistic performance management setup, it is advisable to support these behavioural performance indicators with performance metrics linked directly to the key performance questions, i.e. circumventing step 3. This ensures that you not only track and visualise performance metrics that incentivise the desired behaviour but also track the associated effects of adequate behaviour. That is, you want to track that employees are doing the right thing but also illustrate how this impacts operational performance, customer satisfaction and financial results.
Want to learn more about this topic? Here's an article on the common performance management pitfalls, which will provide an introduction to a stakeholder perspective to performance management.
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