Measurement is a powerful communication device.
What you count counts. What you measure tells people what’s important. It drives actions people take and the results they create.
When you try to measure too many things, it may tell the people you lack priorities because “everything’s important.”
Recently, we worked with a leadership team that had 15 performance measures. In focus groups employees told us they were confused about priorities. “One minute everyone’s running after improved safety,” one employee told me. “Then it’s quality. Then it’s something else. They need to make up their minds what’s important.”
We were able to whittle the list down to four core measures. Then everything that was said and done focused on those four measures.
One of the most difficult measures to decide on is a people measure—a measure that lets us know how well we’re leading our people.
Here are two schools of thought.
One school says that measuring relevant operating and financial performance such as safety, quality, delivery and cost or productivity is the best measure of how people are performing. Open book management supporters believe financial statements are stories about people and what they do. All their employees understand the financial statement and manage pieces of it every day.
The other school acknowledges that there are specific people-related measures that can be adopted. That’s fine in theory, but you need to make sure you know what outcomes you want before you adopt one of those measures.
Take engagement, for example. Measuring engagement through the use of surveys is useful, but engagement isn’t an outcome. It’s a condition that can lead to the right outcomes if focused well.
Or take retention. Measuring retention can be helpful if you’re measuring turnover of key people. But simply measuring retention may encourage managers to keep poor performers.
Productivity is another measure, with revenue per employee being the most widely used. But measuring revenue per employee might invite some leaders to downsize over the short term in order to hit the numbers, or play the numbers games by outsourcing people.
A better measure might be output produced to total employee compensation. This measures return on compensation (investment) rather than return on employees.
A few years ago, I worked with a client who measured the number of people attending training during a year. That’s fine if that’s all you want to know. But if you want to increase the competencies of your workforce so they generate better business results, you should measure that, not training hours.
Measurement is a powerful communication force. But if you don’t use it right it will send energy in all the wrong directions.