Des Kelly connects systems thinking and emotion in business.

Measurement of performance within organisations is possibly the most misunderstood and misused technique available to senior leaders. Some organisations can even destroy the bond between leader and employee by measuring the wrong things or by measuring the right things but in the wrong way.

There is a maxim that emerged from social science that suggests that ‘Not everything that can be counted counts & not everything that counts can be counted.’ We may be able to count how many customer complaints we’ve had but will we ever be able to count the cost of unhappy customers telling other potential customers of their bad experience?

This is a view that was articulated by W.E. Deming when he said, ‘he that would run his company on visible figures alone will in time have neither company nor figures…the most important figures that one needs for management are unknown or unknowable, but successful management must nevertheless take account of them’.

So, how should leaders approach the subject of measurement? And how do they implement these so that the employees can positively respond and influence them?

The first thing is to do is something that is more related to beliefs and assumptions than any statistical endeavour. We should start with the customer, their needs and wants because they determine what the business will be. Senior leaders define the system that can deliver this ‘want’ and then lead its deployment.

We will only know if the system is working if we measure

This may seem obvious but it’s often where things start to go wrong.  All measures should be a sensible balance of effectiveness – how well we are satisfying the customer, and efficiency – how much resource it takes to satisfy the customer. All too frequently organisations have a disproportionate bias towards efficiency with the very real risk that they become extremely efficient at delivering the wrong thing.

We should start with the customer, their needs and wants because they determine what the business will be. Senior leaders define the system that can deliver this ‘want’ and then lead its deployment.

After measurements come understanding targets and their related cause and effects. It is at this point we run the risk of creating measures that fashion a rift between the leaders and the employees.

One of the errors leaders can make when setting targets is that while they seem to be derived from understanding the needs and wants of the customer, they have no science or method as to how they can be achieved.

The deployment of these types of target is a certain way to destroy the bond between leader and worker. When targets are set with no science of method of delivery, it means leaders don’t understand what to do. Setting a goal in this circumstance is just a misplaced appeal to the employees to work harder or to be better.

The consequence of driving that target will only generate concern or worse, fear, in the people assigned to the task of delivery. The achievement of targets or goals needs rational logic for how they can be achieved.

Back in 1986, in his book Out of the Crisis, Deming suggested that management should, ‘Eliminate slogans, exhortations, and targets for the work force asking for zero defects and new levels of productivity. Such exhortations only create adversarial relationships, as the bulk of the causes of low quality and low productivity belong to the system and thus lie beyond the power of the work force’.

For every target, there must be a rational understanding of the effect, which is the desired target, and its cause, the upstream activity that predicates the result. These, in process language, are referred to as Results Measures (related to the target) and Process Measures (related to the cause).

The Results Measure tells us how well we satisfy the target or customer requirement, the Process Measure tells us how probable it is that we will hit the target.

When we establish process measures and allow those working in the process to control these and improve the very method that delivers them, we build on the intrinsic desire of all humans to do well. The outcome is a powerful one, its gives the employee pride in what they do and better yet, control over the outcome.

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It’s also true that we cannot know if we are being successful if we do not define and track these important goals or targets.

Karl Pearson, a well-known statistician, has been credited for suggesting, “When performance is measured, performance improves. When performance is measured and reported back, the rate of improvement accelerates.”

Whether this a statement based on empirical evidence or pure logic I’m not certain, but it doesn’t need a huge degree of imagination to see a reasonable rationale for correlation between the two.

Establishing rational targets with a means and science behind their delivery, which are tracked and reported, the business will benefit, our employees will be engaged and the bond between leaders and employees can be fostered.

If we take the converse of this and have arbitrary targets that we track and report we accelerate not improvement but distrust between leaders and employees and, in doing so, break the emotional bond crucial for the businesses well-being.

Measures are far more than something that generates data for leaders, measures are for learning. The measure allows insight and the growth of knowledge and when established in the right way builds a psychological bond between worker and co-worker and between worker and leader. When established poorly they do the exact opposite.

About the author

Des Kelly is director consultant at PMI (Process Management International)