Jerry's Blog

A post by Guy Kawasaki reminded me of another unintended consequence of using the wrong measures (see the Unintended Consequences post from 5/15). Actually, Guy was commenting on a video of Malcolm Gladwell (The Tipping Point) discussing the pits falls of today's hiring practices.   Using the wrong criteria in your selection process could lead to disastrous results.  With today's technology, we are in data overload. For many, many things, we can have so much data available to us that we cannot possibly digest it all. What's more, much of the data conflicts with other data, which then leads to analysis paralysis. 

So what is the solution? There is no one solution, but taking careful time to think through all the different roads that a certain type of data could lead you to, before you start collecting the data, could head off potential problems down the road.

Setting SMART Goals and Clear Expectations are an essential part of the process of achieving higher levels of accountability with your peers and employees. Goals must be determined before expectations can be set and Expectations have to be set before someone can be held accountable for meeting them. Often we use the terms Goals and Expectations interchangeably. This happens most often when expectations are implied during the goal setting process. For example, when setting the goal to reduce errors in a process by 25% there is an implied expectation: you make 25% less mistakes. However, there are significant differences between goals and expectations. A Goal is something to strive for; a target to reach but it is not an obligation other than the obligation to try. An Expectation on the other hand
is an obligation considered reasonable, due and necessary. In performance management terms, the expectation is the minimum acceptable performance level and a goal is some point beyond the expectation that the manager and employee have agreed to target. Going forward from here, I will talk setting goals and expectation and the process for both are nearly the same as long as you keep in mind the differences: Targets vs. Obligations.

The goal and expectation setting process is not a complicated one. It can be difficult to pick the absolute right point to place as a goal or expectation, but in most cases it is less critical to be absolutely correct than it is to get a goal set and get commitments to striving to those goals. If you follow the guidelines for setting SMART goals, you should be fine. Many books, papers and websites give great detail to setting SMART goals but I'll run through the basics. First the acronym:

S - Specific

M - Measurable

A - Attainable

R - Relevant

T - Time Bound

 

Specific:

Both Goals and Expectations should be very clear, unambiguous and specific. There is no place for vagrancies when setting goals because a specific objective has a much greater chance of being accomplished. Specificity also facilitates measuring progress towards achievement. In the context of developing goals, Specific means that an observable and quantifiable action, behavior or result is described which is also linked to a measure of some type such as a rate, number, or percentage. Using the previous error rate goal as an example it is not enough to say our goal is to reduce errors. The goal should be quantified more specifically. To do so, you and the employee(s) need to answer and agree to six "W" questions:

Who: Who is involved?

What: What do we want to accomplish?

Where: Identify a location.

When: Establish a time frame.

Which: Identify requirements and constraints.

Why: Specific reasons, purpose or benefits of accomplishing the goal.

 

Measurable:

The old adage is that if you don't measure it, you can't control it. What good is a goal that you cannot tell if any progress is being made on it? So to be effective you must create a tracking system to measure progress on reaching the goal that provides feedback in a timely basis. Let's use a real life example that nearly all companies want to improve upon – Customer Satisfaction. Everyone wants to improve on customer satisfaction. But how do you measure customer satisfaction in a way that is measurable in real time so that feedback can be given to the people that are trying to improve? Typical measurements are surveys that can take weeks to get back therefore delaying feedback for periods much too long to effect any real change. When facing this challenge, break the overall goal down into more manageable buckets. What are the controllable components of customer satisfaction that your employees directly control that can be measured? If you in a call center environment it could be things like:

• Time to call resolution


• Number of call escalations


• Number customer calls per issue

One note of caution goes back to a previous post: select the right measurement or you may get the wrong result.

 

Attainable:

Both Goals and Expectations should be achievable. Since expectations are obligatory, they have to be doable. That does not mean that they have to be easy but you must put people in a position to be successful or you are dooming them, and you, to failure. Goals, on the other, should stretch people more than expectations. They still should be achievable, even if it takes what for the individual is a herculean effort. Beyond this, the goal becomes ridiculous and it actually becomes a demotivator and a source of dissension in your organization.

 

Relevant:

Goals and expectations should be relevant to both the individual and the organization. A goal for which an employee has no influence upon is again worse than irrelevant, it is a distraction and a demotivator. Setting a goal or expectation to increase sales on a production line worker is not only irrelevant it is not attainable.

 

Time Bound:

Both goals and expectations need to have distinct starting and ending points. If the goal has a significant duration (this will vary by what the goal is) then a series of milestones should be defined. This increases the sense of urgency for accomplishing the objectives. Human nature being what it is, most people wait until the last moment to get things done. By setting a series of short interval milestones, then you can help the employee be successful by ensuring that they are taking incremental steps in achieving the overall goal or expectation.

 

When Goals are not needed:

There are also many times when goals are not needed in order to set expectations. Would you really go through a goal setting exercise in order to set the expectation that someone is to come to work on time? No. Nor should you. Some things in the workplace are not or nor should they be negotiable. Honesty, integrity, reliability, loyalty are all attributes that should be simple expectations in any organization that are framed in goals. These are pure obligations that come with employment or membership in the organization. A job description is another example of expectations that are not necessarily tied to goals. A job description states the minimum expectation of someone filling a certain role.

As everyone in business knows – if you don’t measure it, you can’t manage it. But what happens if you are measuring the wrong thing? Well obviously it can drive the wrong result. Worse still is that it may drive exactly the result you hoped it would, but it drives it way too far or drives other undesirable results along with it that are not seen until something hits the fan. In nearly every one of our consulting engagements we work with our clients to set up a set of metrics that can be measured directly on the floor in very short intervals, typically 1 to 2 hours. We do this to enable front line managers to drive barriers to performance to the surface so that they can be resolved on the fly instead of building up to unrecoverable levels. Often, probably more times than not, we discover after a few days that the measure that the client told us was the one to watch turns out to be the wrong metric. Either its focus is too narrow and other important metrics suffered (the old production vs. quality dilemma for example) or the focus of the metric is way too broad and we never achieve the intended result. I see the same thing on the verge of happening on a grand scale with a trend that is developing in the talent and performance management fields.

As global competition heats up corporate profits will get squeezed tighter and tighter. Furthermore we all know that the competition for top performers is becoming intense. Both of these trends are forcing companies to look for ways to both improve productivity and retain talent. This is driving industry of all types to adopt more and more aggressive pay-for-performance plans. I urge caution here. These plans must be thoroughly thought out from every angle to avoid unintended consequences from choosing the wrong metrics to drive the incentive program. Take for example Arthur Andersen and Enron. As Barbara Toffler points out in her book Final Accounting: Ambition, Greed and the Fall of Arthur Andersen no one in AA ever intentionally set out to take the company in that direction. In the beginning Andersen himself was as diametrically opposed to where AA ended up as possible. He was the great crusader for fiscal responsibility. However, over time the reward system that developed drove both the right and wrong behaviors.

Another example of how a system can go wrong with unintended consequences lies in the very heart of government oversight agencies - the SEC. In September an arbitrator ruled that the pay-for-performance system adopted by the SEC in 2003 was illegal because it discriminated against African-Americans and employees over the age of 40.

We also see these types of consequences with executive pay on a regular basis. Tie compensation strictly to some short term metric like share price and what do you get? Short term results, long term heart ache. How many companies can you name?

One could also make the case that the whole housing market collapse is due to the way loan officers and others in the loan approval process are compensated. If you are paid by the number (or dollars) of originations, then you are incentivized to take more risks.

So as we go about trying to improve our companies’ performance, let’s make sure we are picking the right metrics for the right reasons.