It's a fundamental question: How can we get people and organizations to consistently perform at high levels? The answer is more complicated than simply implementing some sort of incentive program. Instead, companies need to have a well thought-out performance management program that establishes not just what the metrics are but also how they should be used.
Metrics come with responsibilities
Elevating performance is closely related to the subject of metrics. When an organization chooses to focus on a few mission-critical metrics, its management has a couple of subsequent responsibilities.
The first is to report performance results often, visibly, simply, and on a timely basis. It's not enough to report current status or even to relate that status to a baseline. People need a target, something to shoot for. It's human nature to want to strive—to meet expectations, to reach the goal, to excel. People from all over the world respond positively to clearly communicated expectations.
The best way to motivate them is to begin by setting equitable, achievable targets. Not "stretch" goals that can only be met when the sun is out and the planets are aligned. Not generous allowances that can be achieved all day every day without breaking a sweat.
The specific standards on which your targets are based can be engineered, derived from historical data or reasonable expectancies, or the product of MTM (methods time measurement) or MOST (Maynard Operations Sequence Technique)-like programs. Which type of standards you choose is not material. Just stay away from guesses and management estimates.
The second responsibility is to have a plan for what to do when targets are reached—and then do it. Highlighting metrics creates an expectation that something will happen when targets have been reached. Failure to take visible action when a goal has been met, therefore, will cause people to lose interest in doing what it takes to continue meeting the targets you have set for them.
It's not a matter of having to bribe people to perform. It is very much a matter of demonstrating a positive link between cause and effect—in other words, between employees' actions and the results they produce. That demonstration reinforces employees' interest in and commitment to contributing to sustained, high-level performance. In fact, the details of the associated reward and recognition—such as whether the measures and targets are quantitative (more production, say, or perfect orders) or qualitative (zero defects or on-time deliveries)—are less important than their consistent implementation.
Similarly, the payoff itself can vary from company to company; it might be a group pizza party, a quarterly bonus, a field trip, or desirable parking spots. The key is to make the rewards as visible as the accomplishments. Remember, too, that even as you recognize individuals' performance, the emphasis should remain on group rewards for meeting group objectives.
Finally, don't use day-to-day quantitative performance for disciplinary purposes. If you do, the program will immediately be discredited, and good performers' achievements will drop like a stone.
Not just what but why
The reporting process is not just about highlighting success and failure; it also gives management a chance to understand why that success or failure happened. Supervisors should interview high-performing associates to determine what factors account for their success. The answer might be a process, a short cut, an absence of obstacles, or the mix of tasks and transactions.
Failure presents an even greater opportunity. Failure provides supervisors with an excuse to interview the less successful employees to try to determine what went wrong. If the supervisor is able to identify the root causes for failure, two good things can happen. First, it will demonstrate to the worker that the company's intentions in setting up the measurement program were pure—that it's not a thinly disguised disciplinary tool. The effects of this realization on morale and employee commitment can be enormous.
Second, it will provide a forum for workers to inform their supervisors about those things that hamper their performance: barriers, obstacles, problems, events, bad processes, upstream failures, downstream disconnects, insufficient tools, lack of information, and poor communication. Supervisors then have the opportunity to analyze, prioritize, and remedy those problems.
In addition, continuous reporting of performance relative to targets provides a way for both working and supervising employees to track the effectiveness of their problemsolving and repair efforts. This approach, which is powerful indeed, is a far cry from the old system of punishment, rewards, and incentive pay.
When you boil it all down to the essentials, the way to get people to meet or exceed targets, goals, standards, or objectives is not to push them to strive for excellence. Instead, it's simply to remove the obstacles that get in the way of stellar performance. Once the barriers have been dismantled, they'll strive on their own to do what is expected and needed.
Editor's Note: This column was adapted from Fundamentals of Supply Chain Management: An Essential Guide for 21st Century Managers, published by DC Velocity Books (2007). Reprinted by permission.
As we discuss metrics and performance management it's important to be clear that there is a big difference between performance metrics and performance standards.
In the world of metrics, we generally are after outcomes, ideally outcomes that bear directly on customers and profitability. In the realm of standards, we are working with details that, in the aggregate, contribute to the outcome metrics. Standards also help us devise better processes, understand and improve costs, and plan the labor component of supply chain management.
By way of illustration, in a logistics environment, we might want to have standards that are related to the number of stops, miles driven, parcels handled, or number of orders delivered. The performance metric, by contrast, would likely be on-time delivery percentage. In a distribution center, we might have standards for picks per hour, putaway productivity, fill rate, and the like. An appropriate performance metric might be cost per order.