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5: Implement a Value-Centered Metrics System

Some managers are surprised, and a bit incredulous, and survey results that suggest that compensation is a less important factor in job satisfaction than working in a place where people care about their customers and one another. That is, people want to work in a "high-spirit" organization, and will even help you create it. Another fact that meets with doubt is that employees who are highly satisfied are also highly productive. And so it follows that if you can foster a high-spirit culture, you will have happier and more effective employees.

With that in mind, a key component of the values blueprint is a system of metrics that enable the company to gauge the progress of its culture, and incentives that are designed to motivate employees and managers to foster a positive culture. The goal is for every employee to understand the kind of culture you wish to create and specific ways in which they can lend their support.

An example: a restaurant wanted to stress to the employees the importance of being careful in clearing tables, and lectured employees about the exact cost of each item (silverware, plates, etc.) - the lesson was driven home when a table was set up beside the time clock with a stack of dishes that had been picked out of the trash, with a note indicating their cost. The astonishing thing is that the manager did not do this - it was done by some of the employees.

For companies with profit-sharing plans, connecting expenses with rewards can be an effective way to encourage the right behaviors. Another example from Southwest Airlines involved explaining to pilots the effect of rising fuel costs and suggesting ways in which they could conserve fuel (fundamentally, taking off, flying, and landing a little more slowly) - once the pilots understood this connection, they modified their behavior accordingly and the airline saved "millions of dollars over the years" without impacting schedules.

(EN: The author doesn't mention this, but I strongly suspect pilots were at some point given incentive by management to meet or beat the clock and arrive on time or ahead of schedule and were going faster to shave minutes off their scores. When aberrant behavior s widespread, it is generally not something that arose accidentally, but was directly or indirectly encouraged.)

While both of these examples seem to deal with efficiency, the desire to be efficient can be traced to values: when employees have the ability to take a personal stake in the values and success of their firm, they will rise to the occasion.

In order to take hold with employees, performance metrics must be tied to the success of the firm, and a clear and specific connection must be drawn between behavior in a given role and the outcomes it will achieve. Employees need to know the reason, and when they do they will recognize the value of the metric and will earnestly adopt it rather than merely paying lip service.

In spite of examples such as this, executives and managers are often skeptical that a culture change will have a direct impact on performance. But they, too, need a reason to embrace the change. The manager who refuses to explain metrics to employees and demands that they comply with orders they do not understand is, himself, guilty of undermining culture and giving poor leadership to his people.

Sharing information, explaining metrics, and being open about your intent is critical to establishing and maintaining a highly productive culture based on conscious values.

Use Metrics To Make Values Real

Managers have a love of numbers, and especially in the present age of computerization, they have access to mountains of data. But beyond a certain point, that love becomes an obsession with irrelevant data.

A common misconception is that employees lack the ability to understand numbers and are fearful of them - but the reality is that numbers have been used so poorly that the employees' knee-jerk reaction is that the numbers do not represent anything relevant to them - that they are going to be lectured on something completely useless and boring.

Simply stated, the problem is that managers deluge employees in numbers that are not relevant. Employees (or anyone for that matter) are intently curious about things that are relevant to themselves. If the numbers you present are relevant, they will pay attention - and if they don't understand, they will ask questions.

However, people have a limited capacity to pay attention even to things that are relevant to them, and a long lecture that plumbs the depths of a relevant issue gets into details that are too granular, or too oblique, to retain their attention.

With that in mind, consider the use of dashboard metrics - a few key metrics that represent high-level and high-relevance analyses, with the ability to drill down to more granular information for those who so desire.

In addition to representing actual phenomena, key metrics should be responsive to employees' actions - they should be able to recognize that their efforts cause the numbers to change. Any number that the employee cannot impact is trivia, and again becomes boring and irrelevant.

Ultimately, the purpose of numbers is to focus employees on their own performance rather than the numbers themselves. A well-chosen metric will do exactly that.

Conversely, poorly selected metrics will do the opposite - even those that are relevant to the organization as a whole may not be meaningful to a specific employee. Not only will the numbers be boring and irrelevant, employees will be inured by managements' demands that the numbers be improved, without any indication of that might be done to improve them. At best, they will be indifferent. Worse, they are frustrated. Worse still, they may engage in dysfunctional behavior to try to influence (or forge) the numbers that managers desire.

Backing up a bit, the author provides four qualities that make a metric suitable to employees. It must ...

• Be directly relevant to the work being performed
• Be simple enough to understand at a glance
• Include a goal or benchmark for performance
• Change regularly based on the actions of employees

For example, a "customer satisfaction" metric for an entire hospital may meet the second and third criteria, but fails the first and last. A better metric for the nursing staff would be "call button response times" for each ward.

Step 1: Create an Organization Dashboard

As a first step, you must have a dashboard for the entire organization that the operational dashboards for various business support. The key performance metrics should still be correlated to employee performance, and any employee or team to comprehend the way their individual behavior will influence these metrics, but because it is an aggregate, it is unlikely that a change in behavior by a small number of people will cause the numbers to move much.

The organizational dashboard will include five to seven key metrics where changes in employee behavior will have the most impact. There are hundreds of strategic drivers you can choose, but these are the ones you want employees to give the greatest attention.

Most of these goals should be in the areas of quality, efficiency, and effectiveness. Financial goals may be important to investors - but for employees, the financial results derive from their behaviors and the connection may be tenuous.

The goals should also be as objectively quantifiable as possible: if employees do not understand how the numbers are calculated or do not feel that there is anything they can do to affect them, then the numbers become irrelevant. Or worse, if they feel the method of calculation is subjective or can easily be fudged, they will recognize that their actions are irrelevant and it's just someone else's opinion - though some subjective measurements such as customer satisfaction are inherently subjective, they can be based on a fair and understandable process of evaluation (show the actual survey and the scoring system).

The organization's dashboard reflects the organization's strategy, but it need not be comprehensive. An executive dashboard may measure things such as financial performance, but the dashboard show to employees may not (stress: it is not kept hidden from them, but no special effort is made to make them pay attention to it).

Recall: it's five to seven numbers. A wall of numbers is overwhelming and unintelligible, so focus is given to a few specific things, and presented in a way that it can be understood at a glance ... a single PowerPoint slide that represents them graphically.

The author uses the phrase "clear line of sight" to suggest that any employee, not just those with specialized knowledge or access to restricted information, can quickly understand the numbers and translate them into what they mean in their role.

A quick word on goals: they need to be achievable with effort. A low hurdle doesn't challenge anyone, but too high a hurdle discourages employees. Ideally, the dashboard would indicate current performance, compared to minimum threshold, target goal, and a stretch goal ... and no impossible dreams.

(EN: An important perspective for leaders is that they are responsible as well - the dashboard isn't just about what employees must do, but what they must be managed and lead to do by their leadership. Hence a question for leaders to consider is whether they are capable of enabling their people to achieve the goals. Where they don't have a plan, they should not expect an outcome.)

Step 2: Create Team Metrics and Scorecards

Employees feel disenfranchised and disempowered when they are assessed by metrics that are beyond their control. Consider a metric such as employee tenure: other than "don't quit your job," how is an individual employee supposed to impact that metric? Unless there is a clear sense of the behavior they need to do to impact the metric, it does not motivate them to do anything at all.

Conversely, when employees understand the meaning of the metrics and see how their performance can have an immediate impact those outcomes, they are able to become motivated to do so. The metrics encourage them to take action, and provide feedback on how well they are doing.

Specific qualities of team metrics are:

• They are directly related to the work
• They are simple to understand
• They are limited to concrete and objective measures
• They will change as a result of individual and team effort
• They reflect changes in a timely manner

The author provides an example of a scorecard/dashboard of team metrics, which includes separate columns for the organization's performance and the performance of a specific department or team.

In terms of team metrics, the author uses the word "acceptance" to stress that you cannot force people to care about them - metrics imposed by the organization are important to management, but are not important, and may be perceived as conflicting with, the work of an individual or team. Ideally, employees should have a voice in determining what the metrics are - or at the very least, should be involved in a discussion that encourages them to understand and support them.

With that in mind, the author suggests organizing a group of employees who will decide how the organizational goals can be supported by the work of a team. It should not be something the manager alone decides upon and hands down to the team. The team should also be encouraged to think independently - do not come up with goals that management will favor, but those that they feel are worthwhile.

Even an oddball metrics like "how many times have you volunteered to fill in when someone else has called in sick" can be a meaningful metric. Management may need to be involved in an advisory capacity to make sure the metrics are in line with the organizational goals, but this need not be heavy handed: left to their own devices, people will stay on track, and to behave as if you assume otherwise is offensive and demoralizing.

As with organizational metrics, each team metric should include (1) an explanation of its relevance and importance, (2) specific details on how individuals must behave in order to impact the metric, and (3) the minimum, target, and stretch goals for that metric. Then, the metric should be converted to a scorecard and an information graphic that can be updated, at least once a week, to provide feedback.

Step 3: Track Errors Honestly

A common problem with metrics is that there is pressure to make the numbers come out right, regardless of actual performance, even if this means cheating, fudging, or covering up mistakes. This is highly dysfunctional, in that people in such a situation continue doing the wrong things, or doing the right things the wrong way, and the feedback they receive fails to encourage them to change their behavior.

Management should be critical of the metrics before they are critical of the people. They should be watchful as to whether the numbers are measuring the right things.

Also, be cautious about creating a competitive mindset. While there is the sense that people enjoy competition and the desire to do better than others motivates them to excel, it also encourages cheating and sabotage in order to get ahead.

It's also suggested that rewards should not focus entirely on the numbers, but instead focus on the behaviors that drive the numbers. The numbers can be scrubbed or tweaked, but he performance cannot.

The author suggests a four-point procedure developed by one of her colleagues for tracking errors:

1. Awareness: There must be awareness of the performance gap, not merely the goal, that focuses on behaviors rather than metrics.
2. Accountability: The metrics must be tied to behavior, and it should be clear who is responsible and what they must do
3. Ability: The staff must have the authority, resources, and skills necessary to meet performance objectives
4. Action: Managers should encourage employees to take specific actions related to the objectives

It's generally believed that any deficiencies in performance versus goals can be tied to one of these four points and that considering them gives leaders more options than merely whipping the team to make the numbers.

Step 4: Use Games to Reinforce Behaviors

People are motivated to compete and win, and companies seldom provide the opportunity to do so as part of their working day. The author stresses that this is not competition between departments are teams - as mentioned in the previous section, "that is always counterproductive." Healthy competition challenges people to work collaboratively toward a goal, and provides incremental feedback and rewards.

As to incentives, the author suggests that competition should not be rewarded with money - it is not memorable and has no trophy value, and can be counterproductive: people begin to assess whether the money is worth the effort required to win it, and the money becomes considered as part of compensation (a bonus expected in perpetuity).

Ideally, the achievement itself is the incentive and no external or additional incentive will be necessary. The satisfaction of a job well done is the reason most people choose to do a job well. Self-esteem and recognition from others is a great motivator. This is a good motivator for everyday performance, but it's likely a special competition requires an special prize.

The author doesn't give much guidance for how to design a "game" for the office, but instead gives of random bits of advice:

• Games should be short, no longer than ninety days
• The goals for success must be achievable given the time and resources allowed
• The goals and rules should be fixed and known at the beginning, never changed in mid-game
• Games should be limited to a single, natural team
• Games should be visible
• Scoreboards should be prominent and frequently updated
• Teams should play only one game at a time
• A celebration at the end is mandatory

The author mentions an example that isn't really a competitive game, but seems like a good idea: to decrease workers' compensation claims, employees who have no injuries receive a ticket each week they had no injuries, and a raffle was held weekly, monthly, quarterly, and annually for prizes: a monthly prize might be an extra day off, a day spa or movie tickets. Too grand a prize might keep people from reporting legitimate injuries - but even a small token can provide a reward for not aggrandizing or faking, potentially saving millions in lost work.

Step 5: Set up Systems to Give Authority

The best way to completely demotivate and disenfranchise employees is to give responsibility without authority. This is particularly true of metrics: employees who are held accountable for things they haven't the ability or resources to control is guaranteed to go over poorly.

Many firms find that when the consider their metrics, it becomes clear that they have not given front-line employees sufficient authority to be effective in their roles. For example, a waiter who servers customers should be able to apologize and provide some sort of compensation to a disappointed customer without having to seek management approval.

An example was the author's work with Doubletree hotels, where front-desk personnel were given authority to comp any customer who complained about their visit with a free stay. Prior to that, the desk clerk had to call a manager to discuss an issue with a customer (and given someone checking out of a hotel is trying to catch a flight or otherwise get on with their business, it was very frustrating).

The concern of management is that employees will be too free-handed in giving away freebies and the company would suffer unnecessary losses. But at Doubletree, they tracked the program and discovered that the $7 million in free stays that were given away gained the business an additional $27 million in revenue from customers who had received them.

Onboarding The Values

New hires typically go through an orientation process that gives them a strong dose of the culture of their new organization - they get it once, and never again. As such, the first thing to consider about onboarding is that it should not be the only time a culture is explicitly discussed - but even so, it is a very important time to discuss it: orientation is the best time to capture the attention of new people before they have a chance to turn sour and cynical.

Top leadership should be involved in the onboarding. The author speaks of a CEO (Dave Barger) who personally attends every orientation session for new hires. If culture really is important, executives will make the time.

Another bit of advice is to drop the canned presentations about corporate history and structure, and replace them instead with stories about leaders an employees who are "living the values." Concrete and relevant examples are far more effective than pedantic speeches and over-produced videos.

Just as when presenting to an internal audience, start with the values, but then drill down through the metrics, explaining why these goals are important to the health of the organization - and making it clear how success is dependent on the performance of individuals.

After the initial orientation, each new employee should be assigned to a peer mentor who continues to communicate with them as they settle into their new role - this is essential to reinforcing the notion that the information presented in orientation was not mere corporate puffery, but relevant to their actual role. Peers have greater credibility, and greater ability to observe and influence new hires over a longer period of time.

Base Decisions On The Evidence, Not Your Gut

Of critical importance: stop relying on gut feelings to make decisions. This goes beyond hiring decisions, to any business decision - gut-feel decisions are not defensible. Where the outcome is bad and all you have to back the decision is your own arrogant opinions, there can be no defense. When it's plain to see your decision was made on evidence, there can be criticism of the decision itself.

The old-school manager depended largely on his personal charisma (or power) to get other people to accept his decisions and comply with his will; but in the present day, that's not enough: he must convince and influence even his subordinates.

The author asserts that organizations with the most satisfied customers have this quality, as do some of the best-regarded leaders within organizations.

(EN: This continues on for a while as the chapter concludes - it's fluffy, general, and off-topic.)