Linking Strategy with Results

By Joseph P. Truncale, Ph.D.,CAE, Founder & Principal, Alexander Joseph & Associates

Few subjects are more widely discussed and more misunderstood than performance management. Today, with the demand for qualified people higher than ever before, the impact of performance management has never been greater. In this article, we’ll take a close look at a step-by-step approach to performance management we’ve developed that changes the dynamic of organizational and individual performance.

John O. Whitney, business professor at Columbia University and author of “The Economics of Trust,” served as a turnaround consultant for many years. In his experience, he insisted that he could go into any organization and eliminate up to 50% of the activities being performed by employees with little or no impact on the overall performance of the enterprise (at least, the customers would never notice).

While you may wonder about this, ask yourself these questions: Are our employees working in the same direction, creating unique value for the customer? Do they understand the purpose, mission, vision and values of our organization? Do they know and appreciate how their actions and activities, day in and day out, contribute to the success of the enterprise? Put it this way: If they did, what could you accomplish?

Linking organizational and individual performance is not a new idea.

Linking organizational and individual performance is not a new idea. While few will argue against it, so much has been written and presented on the subject that a relatively simple idea has become a complex, cumbersome and widely disliked exercise. Our aim was to develop a simple, effective method to link the two in way that will accelerate job satisfaction and organizational results.

Reflect the Strategy

To begin with, we view organizational performance around four key questions:

1. What do we want to accomplish? (Goals/Targets)
2. Why is it important? (Mission)
3. How do we want to go about it? (Values)
4. What will happen if we are successful? What will it mean to our stakeholders-employees, customers, ownership, vendors and the community? (Vision)

It’s important that the specific targets you choose for measuring organizational performance reflect the strategic intent of the business. Ideally, these will come directly from your strategic plan and will address three distinct, yet interrelated areas:

1. Financial Targets
2. Sales & Service Targets
3. Strategic Targets

Financial targets are just that. Revenue, profitability, efficiency, and cost control are examples. You may also use value added, EBITDA, and gross profit percentage. It is important to keep these simple, measurable and easy to understand.

Sales and service targets are next. What do we want to sell and to whom? New products/services to existing customers? Existing products/services to new customers? Customer service goals such as on-time delivery, accounts receivable days, spoilage/unforced errors (especially those identified by the customer), client satisfaction ratings, customer lifetime value are a few. What matters most is that they are measurable and meaningful.

It’s important that the specific targets you choose for measuring organizational performance reflect the strategic intent of the business.

Strategic targets are a bit different. These are goals that are important to accomplish even though they may not yield a tangible outcome in the current planning year. These are so important to our future development that it would not make sense to ignore them when measuring organizational performance.

Examples of strategic targets may include installation and training on a new software system, launching a new marketing effort, testing new product offerings or staff training and development. Since these targets are more qualitative than quantitative, whether and to what extent they are accomplished is a bit subjective. Nevertheless, strategic targets should be included to round out this balanced approach to organizational performance management.

To a New Level

Individual performance management also consists of three parts:

1. Responsibilities (What are the major functions of my job?)
2. Goals (What is it that I need to accomplish this year?)
3. Work-related behaviors (How will I go about it?)

Responsibilities for major job functions takes the traditional “job description” to a new level. Since we begin with a blank form, a dialogue between the supervisor and the direct report enables us to get clear, concise agreement on what we need from the team member in order to accomplish our broader objectives. There may only be four or five of these items, or as many as 10. You may want to have the job description on hand but only as a reference point. The company’s strategic plan and the department plan and budget are more useful tools for this exercise.

Once the responsibilities are written out, each is ranked in order of importance/impact with the total reaching 100 (this for the scoring part of the document). For example, you may have 9 items listed; three are ranked at 20 points each, two at 10 and four at 5 points.

The next step is to determine goals. Here again, we refer to the operating plan for guidance. If the organization is to be successful, what must that individual accomplish in a way that provides a meaningful, measurable contribution? Each goal should be discussed openly and agreed upon by the employee and his/her supervisor. It must be specific and measurable. For instance, “develop a better understanding of…….” is not a measurable goal. There may be as many as ten goals and each is assigned a point value based upon its impact/importance. No matter how many goals are assigned and weighted, the total for this section will amount to 100.

The third and final step focuses on work-related behaviors. This is an important but often overlooked part of individual performance management that is rarely included as a performance metric. Yet, it is easy to see how it brings balance to the process. In short, we are measuring performance by three criteria: responsibilities and job functions; goals and accomplishments; and work-related behaviors.

The first of these, responsibilities, is why most people are hired. That is, their background and experience match the responsibilities of the job. The second, goals, are what get people promoted; they get things done. The third, work-related behaviors, are most often what lead to employees being terminated.

What are work-related behaviors? Ideally, these are derived from the values of the organization. Examples may include:

• Honesty/integrity
• Respect for everyone
• Courage to speak your mind
• Servant’s heart
• Commitment to personal and professional growth

Capture Examples

As a step toward linking work-related behaviors with organizational values, consider bringing together an ad-hoc volunteer group of employees in a facilitated discussion to capture specific examples of behaviors that support and violate the stated values (expect the second list to be a bit longer than the first!). Share these with the full staff for discussion and for ready reference. Oh, and there is no need to prioritize or rank-order the list of values that form work-related behaviors. Most likely they will all be assigned the same value and again, total 100 points.

Once the document is completed, it is signed by the employee and the supervisor. This is more than just an HR requirement. Once signed, the document takes the form of a “performance pledge,” a working agreement between the employee and the supervisor.

Ideally, this document is reviewed quarterly to be sure the employee is on target, the goals are still valid and the responsibilities have not changed. If modifications are needed because there has been a shift in direction or goals are no longer valid, the document may be adjusted accordingly.

Scoring at the end of the performance period consists of two steps: dialogue and calculation. This important conversation about performance/contribution (supported by an agreed-upon document which outlines in specific and prioritized terms the most significant job responsibilities, the most important goals and the required behaviors which support our values) brings needed clarity and objectivity to the review process.

Coaching Skills

Since much of the value of this system lies in the opportunity for frequent dialogue between the supervisor and the employee, supervisory training in specific coaching skills such as active listening, empathetic questioning and understanding the difference between discussion(taking a position and arguing for a particular point of view) and dialogue (taking no position) are key.

Employees want to be recognized sincerely for doing meaningful work that contributes in a specific, measurable way to an organization whose mission and purpose they can believe in.

Finally, although there are any number of changes impacting the work environment, one thing has not changed. Employees want to be recognized sincerely for doing meaningful work that contributes in a specific, measurable way to an organization whose mission and purpose they can believe in. Tying the mission, vision, values and goals of the organization back to each individual team member’s responsibilities, goals and behaviors can be a positive step in that direction.

About the Author

Joseph P. Truncale, Ph.D., CAE, is the Founder and Principal of Alexander Joseph Associates, a privately held consultancy specializing in executive business advisory services with clients throughout the graphic communications industry.