Overcoming Skepticism In Performance Measurement Hci April 14, 2011 Final

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Performance measurement can be powerful and dangerous. This presentation discusses the problems and presents the opportunity, especially for HR professionals.

Performance measurement can be powerful and dangerous. This presentation discusses the problems and presents the opportunity, especially for HR professionals.

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  • Here is a little bit about me. I have never been afraid to speak the truth…and, as a result, in 12 years at IBM, I have never been promoted once. I am just not a good yes-man! You can talk to a lot of people in SO sales about me and they will speak very highly of my contributions. My latest book (TPM) is about the ‘measurement mess’ in organizations like IBM and how to create a measurement system that will work.
  • We spend a lot of time measuring things, but aren’t even aware of it.
  • Most people don’t like performance measurement, or trust it very much.
  • One of the biggest problems is the confusion between “measurement” and “evaluation.”
  • One of the biggest problems is the confusion between “measurement” and “evaluation.”
  • I think you will have to agree that most people experience more of the first brand of performance measurement than the second one.
  • One of the biggest problems is the confusion between “measurement” and “evaluation.”
  • Most of what I have talked about cannot happen without strong measurement leadership.
  • Happy measuring! Please feel free to contact me if you want to discuss this subject further. I will also be in the book store immediately after this session to inscribe copies of my new book “Transforming Performance Measurement.” Are there any questions?

Transcript

  • 1. Overcoming Skepticism in Performance Measurement Dean Spitzer, Ph.D. President Dean R. Spitzer & Associates Inc. Human Capital Institute Webinar April 14, 2011
  • 2. Let me introduce myself…
    • I an organizational psychologist, business transformation consultant, and learning innovator with 40 years of experience in consulting, teaching, and research;
    • I am internationally recognized as an expert in many areas of organizational improvement, including organizational change, service design, service quality, performance measurement/management, human resource development, knowledge management, leadership, motivation, service quality, and other areas;
    • I am certified as a Performance Technologist and a Business Transformation Consultant;
    • I have been a professor at 5 universities; worked at several other Fortune 100 companies, including more than 12 years with IBM Corporation; I consulted with more than 50 other companies;
    • I have published 8 books and more than 200 articles;
    • I have managed and successfully completed over 200 successful performance improvement and organizational change projects with public and private organizations throughout the world;
    • I have presented more than 100 keynotes, featured presentations, and workshops at professional conferences and meetings on five continents; I am passionate about, and committed to, knowledge sharing and collaboration
    Hi! My name is Dean Spitzer. I am currently President of Dean R. Spitzer & Associates, Inc.
  • 3. Two Primary HR Challenges
    • “ HR executives must meet two primary challenges if they wish to get and keep ‘a seat at the table’ when business decisions are made. The first is to support the organization’s business strategy more effectively…The second is to provide HR services more efficiently.”
    • [“How HR Leaders are Getting and Keeping a Seat at the Table,” Sibson Perspectives , January 2005]
    An incredible HR opportunity: There are so many vital organizational issues that ‘fall between the cracks’
  • 4. Major HR Challenges
    • Organizational Effectiveness
    • Change Management
    • Compensation and Rewards
    • HR Effectiveness Measurement
    • Leadership Development
    • Staffing
        • Recruitment
        • Retention
        • Succession planning
    Survey of Global HR Challenges: Yesterday, Today & Tomorrow, PriceWaterhouseCoopers, 2005
  • 5. You get what you measure , because what you measure is what you manage and reward No matter what is said, measurement and rewards tell people what the organization thinks is really important!
  • 6. Performance Management Model Expectations
    • Employee
    • Capacity
    • Knowledge & Skills
    • Attitudes & Motivation
    • Consequences
    • Positive
    • Negative
    Work Process Feedback Performance Measurement Resources Constraints
  • 7. Strategy-Aligned Performance Management Derive Value Drivers from Strategy Identify Strategic Measures Identify strategy- aligned Operational Measures Continually test for strategic and operational alignment Identify Performance Targets Develop Incentive Plans Revise (as needed) Business Strategy Ongoing Performance Management Operational Plans
  • 8. Management is based on measurement, and all other organizational systems are dependent on the measurement system No organization can be any better than its measurement system
  • 9. Effective measurement serves many vital functions, including:
    • Drives performance
    • Clarifies expectations
    • Focuses attention on what is most important
    • Promotes accountability
    • Is the basis of rewards (and punishment)
    • Increases the visibility of performance
    • Forges increased strategic agreement and alignment
    • Increases the holistic perspective at all levels
    • Provides timely early-warning signals and facilitates prompt and appropriate corrective actions
    • Increases the frequency and accuracy of feedback
    • Motivates improvement
    • Increases objectivity and the perception of fairness
  • 10. Performance measurement is powerful!
    • "Measurement always improves performance." [Buckingham & Coffman, First, Break All the Rules , p. 236]
    • "...everything that is measured improves." [Scheuring, Handbook of Performance Measurement , p. 2-6.13]
    • "Good data, properly distributed, transform organizations. " [Whitely, The Customer-Driven Company , p. 175]
    • "Measures have great power, almost like genetic code, to shape action and performance...Change the measures, and you change the organism." [ Epstein & Birchard, Counting What Counts , p. 145]
    • "Most often when we see illogical behavior, the fault is in the measurement system, not in the employees." [Brian Joiner, Fourth Generation Management , p. 242]
    • "Changing the way we measure changes everything." [Meador, The Dance of Change , p. 299]
    • "An organization's measurement system strongly affects the behavior of people both inside and outside the organization." [Kaplan & Norton, The Balanced Scorecard , p. 21]
    • "The essence of a corporate culture is the firm's measurement system." [Strassman, The Business Value of Computers , p. 73]
    • "The mere action of defining measures of success will change behavior positively or otherwise." [Thorp, The Information Paradox , p. 164]
    • " Metrics are to a business what the five senses are to humans - systems of feedback that improve our capacity to adapt and excel over the long run. " [Kiuchi, "What We Learned in the Rainforest," Barrett-Koehler, 2002, pp. 152-153]
  • 11. Measurement is ubiquitous and intuitive
  • 12. Unfortunately, most performance measurement systems are in poor shape
    • "Only 35 percent of respondents rated their performance measurement systems as effective or very effective." [American Institute of Certified Public Accountants, Performance Measurement Survey ]
    • "…a recent study found that only 29 percent of the interviewed executives said they would bet their job on the measures of customer satisfaction they had available to them; only 16 percent said they would bet their job on the measures they had of employee performance." [Resolving the Measurement Paradox]
    • "…most executives today are making do with inherited and outdated measurement systems that warp and distort their business strategies." [Frederick Reichheld, The Metaphysics of Measurement , Bain & Company Essay #2]
    • "…as you move down in the organization, you will find that often over 50 percent of the metrics being used have little relevance to company results." [Amir Hartman, Ruthless Execution , FT Prentice-Hall, 2003]
  • 13. One of the biggest problems in organizations is lack of alignment among ‘measurement systems’ Organizations with poor performance measurement will be poorly aligned, with functions pursuing their own self-interest and often working at cross-purposes Project Management Information Technology Not only don’t most organizations have a single integrated measurement system, but the disparate measurement systems don’t even communicate! Budgeting Sales Operations Customer Service Human Resources Marketing Finance Learning
  • 14. In most organizations, financial measures are the only organization-wide ones “ The CFO is the shadow CEO.” – corporate executive
  • 15. Most organizations are drowning in data
  • 16. Measurement in most organizations is a mess! In The Agenda , Michael Hammer puts it this way: “ A company's measurement systems typically deliver a blizzard of nearly meaningless data that quantifies practically everything in sight, no matter how unimportant; that is devoid of any particular rhyme or reason; that is so voluminous as to be unusable; that is delivered so late as to be virtually useless; and that then languishes in printouts and briefing books, without being put to any significant purpose.... In short, measurement is a mess." 2 3 4 5 6 7 8 9 10
  • 17.
    • Measuring the wrong things
    • Measuring `looking good,' rather than `being good’
    • Measuring too much
    • Sub-optimization (measuring in functional silos)
    • Cheating/gaming
    • Using measurements to set targets and make judgments without adequate knowledge of the system
    Unfortunately, bad measurement practices proliferate in almost every organization
  • 18. On a personal level, how people “experience” measurement is the key to how they will respond to it
  • 19. So much measurement is being used to for self-serving purposes "Most often when we see illogical behavior, the fault is in the measurement system, not in the employees." [Brian Joiner, quality expert and author] An auto industry financial analyst said she spent 75% of her time finding ways to justify decisions that had already been made.
  • 20. Some common examples of ‘measurement dysfunctions’
    • Measurement of cost leading to poor quality
    • Measurement of errors leading to less innovation
    • Measurement of call time leading to poor customer service
    • Measurement of individual achievement leading to less collaboration
    • Measurement of profits leading to expense deferrals
    • Measurement of headcount leading to costly and ineffective use of temporary and contract labor
    • Measurement of productivity actually measuring how much of the wrong things people can produce
    • Measurement of everything related to production , except the delivery to customers
  • 21. You get what you measure, so make sure you’re measuring the right things!
  • 22. Measurement is imperfect Measurement System Flaws Flaws Flaws Flaws Flaws Opportunity Motive Manipulation = f (Opportunity, Motive) It is easy to manipulate measurement (and too often the organization doesn’t really want to know the truth).
  • 23. Most measurement is perceived as a negative force
    • Traditional Measurement
    • Monitoring
    • Reporting
    • Control
    • Justifying
    • Judging
    • Triggering rewards/punishment
    • Negative accountability
    • Positive Measurement
    • Visibility
    • Communication
    • Feedback
    • Understanding
    • Prediction
    • Learning
    • Improvement
    • Positive accountability
    "Many measurement practices and systems signal distrust through their emphasis on monitoring and control." - Jeffrey Pfeffer
  • 24. No wonder there is a great deal of fear and skepticism about performance measurement!
    • Used against us from a very early age
      • Parental measurement
      • Measurement in school
      • Measurement in the community
      • Measurement at work
    • Perceived as manipulative
    • Causes a fixation on what is being rewarded
    • Induces fear
    • Used primarily to monitor and control
    • Focused on the past (retrospective)
    • Rarely used for purposes that are perceived as positive
  • 25. Most people don’t even want to be involved in measurement
    • Too difficult, time-consuming, and tedious. (“It’s too much work.” “It’s boring.” “By the time we do the measurement, the data is obsolete.”);
    • It’s someone else’s job. (“I just leave it to the accountants and other specialists.”);
    • Lack of understanding (“It makes me feel stupid.” “I don’t know what to do with the data.”);
    • Lack of resources (“I can’t do everything!”);
    • Bad experiences (“It’s been used against me.” “We already did it, and it didn’t work.” “It’s used unfairly.”);
    • Lack of confidence (“I don’t trust the data.” “It’s too subjective.” “It’s too political; people just use the numbers they want.”);
    • Lack of involvement (“Why should I do it? Nobody wants my input.”).
  • 26. Measurement tends to be threatening and is resistant to change “ Measurement is one of the most sensitive issues in any organization.” - Eliyahu Goldratt “ Why would I want to change the measurement system that has rewarded me so richly?” - IBM Vice President
  • 27. The confusion between ‘measurement’ and ‘evaluation’ causes particularly big problems Too often evaluation and its consequences prevent learning from measurement
  • 28.
    • Very poor measurement underlies most performance ratings
    • Most employees do not trust performance appraisals…and actually hate them.
    • Deming called performance appraisal one of “the deadly diseases of management.”
    • The system that people work in may account for 90 or 95 percent of performance and yet performance appraisal only considers the individual.
    • Only 29 percent of employees feel that they are adequately recognized for good performance. (Mercer Management Consulting)
    • “ The only way to prevent teamicide is to simply give everyone on your team a gushing review. But, if you do have any choice in the matter, I'd recommend that you run fleeing from any kind of performance review, incentive bonus, or stupid corporate employee-of-the-month program.” - Joe Spolsky
    Performance Appraisal
  • 29. Understand what measurement is actually saying
  • 30. The purpose of measurement is to assist in making more effective decisions and creating knowledge and wisdom Learning about, and from, measurement is crucial to increasing organizational intelligence
  • 31. Measurement can be used negatively or positively
    • Measurement should facilitate improvement; it shouldn’t be about absolute performance.
    • Take the threat out of measurement, and amazing things can happen!
    Unfortunately, most people have a lot of experience with the “negative side” of measurement. Both participants and spectators love measurement in sports and games. Measurement at work is often perceived negatively.
  • 32. The “Context of Measurement” makes all the difference and it is as important as the measurement itself
  • 33. There is a serious “measurement leadership” gap Who is currently leading measurement in your organization? Who are the key measurement stakeholders in your organization who can become “measurement leaders”? Improving measurement is one of the highest leverage things any organization can do.
  • 34. Types of measurement
    • Informational measurement : When measurement is used as a source of information for organizational members to improve management and the work being done, it is enormously valuable
    • Motivational measurement : However, when measures are tightly linked with rewards or the threat of punishment, the informational value of measurement becomes subordinated to its use for inducing people to do specific things
  • 35. Danger of Rewards
    • ‘ Extrinsic’ Rewards can:
    • Be manipulative
    • Destroy cooperation
    • Ignore complexity and blindly promote simplistic behavior
    • Discourage risk taking and creativity
    • Undermine interest and intrinsic motivation
    • Become entitlements and ‘takeaways’ if not given
    Alfie Kohn, “ Punished by Rewards: The Trouble with Gold Stars, Incentive Plans, A's, Praise, and Other Bribes”
  • 36. Rewards also increase the potential for dysfunctional measurement
    • The greater the rewards and the tighter the linkage, the greater the likelihood for dysfunction
    • “ Many companies are shooting themselves in both feet with their reward systems. They pay on results that are easy to measure rather than the right results.” - Frederick Reichheld
    “ In complex human systems, there are always many ways to make things look better in the short-term.” - Peter Senge “ Measuring is a powerful tool. But some things are not easy to measure and may even be impossible to measure directly and the very act of measuring can often cause distortions or unintended side effects. Measures used without due care and consideration can be misleading and dangerous .” – David Gurteen
  • 37. Rewards increase the potential for measurement dysfunction (examples)
    • Vasili Alexeyev, world champion weight lifter
      • Measure rewarded: Number of world records broken
      • Behavior: Increased weight a gram at a time!
    • Fast-food restaurant manager
      • Measure rewarded: “Chicken efficiency” (the ratio of number of pieces of chicken sold to those thrown away)
      • Behavior: Waited until customers ordered chicken before cooking it!
    • Training manager
      • Measure rewarded: Learner satisfaction
      • Behavior: Focused on running enjoyable courses
    • IT service sales executive
      • Measure rewarded: Sales closed
      • Behavior: Sold ‘solutions’ that could not be delivered at the price
    • Software developer
      • Measure rewarded: Lines of code
      • Behavior: Produced a lot of code with a lot of errors
  • 38. Rewards increase the potential for measurement dysfunction (examples)
    • Warehouse manager
      • Measure rewarded: Low cost
      • Behavior: Maintained dangerously low inventory of spare parts
    • Shipping department
      • Measure rewarded: Productivity (pallets loaded)
      • Behavior: Shipped pallets whether the pallet contained 1 or 50 items
    • Manufacturing company
      • Measure rewarded: Monthly sales volume
      • Behavior: Offered excessively high incentives to customers
    • Purchasing department
      • Measure rewarded: Price discounts
      • Behavior: Bought unnecessarily large lots
    • Airline executive
      • Measure rewarded: On-time performance
      • Behavior: Moving planes away from gate to wait on tarmac
  • 39. There are many routes to rewards; measurement tells people what they are Rewarding the wrong behaviors is the most wasteful thing that any organization can do.
  • 40. There are five keys to the effectiveness of rewards
    • Contingent on the right performance
    • High value to the recipient
    • Timely
    • Appropriately presented
    • Perceived as fair
  • 41. Make sure you’re rewarding the right things If You Want… Then Reward… Not… Profits Profitable sales Any sales revenue Teamwork Collaboration Individual efforts Quality Process improvement Lack of defects Training effectiveness Skills used on the job Course satisfaction Innovation Creative ideas Conformity Customer retention Customer loyalty Lack of complaints Safety Safe behavior Reported accidents Productivity Acceptable production Total production Problem Solving Problems found and solved Problems hidden
  • 42. There are five keys to the effectiveness of rewards
    • Contingent on the right performance
    • High value to the recipient
    • Timely
    • Appropriately presented
    • Perceived as fair
  • 43. How to maximize the value of rewards and recognition
    • Personally appropriate
    • Generationally appropriate
    Employee’s feeling of being recognized Extent to which the reward symbolizes the accomplishment; how memorable Anticipatory impact, control over behavior Financial worth of the reward
  • 44. There are five keys to the effectiveness of rewards
    • Contingent on the right performance
    • High value to the recipient
    • Timely
    • Appropriately presented
    • Perceived as fair
    The value of rewards is discounted by delay
  • 45. There are five keys to the effectiveness of rewards
    • Contingent on the right performance
    • High value to the recipient
    • Timely
    • Appropriately presented
    • Perceived as fair
    Most rewards are given impersonally
  • 46. There are five keys to the effectiveness of rewards
    • Contingent on the right performance
    • High value to the recipient
    • Timely
    • Appropriately presented
    • Perceived as fair
    The magnitude of rewards is comparative; unfair rewards & recognition is a major demotivator
  • 47. Rewards & Recognition
    • Rewards and recognition are often dealt with outside of the context of Performance Management
    • Inadequate attention is given to the importance of measurement
      • You can’t reward and recognize what you don’t measure or measure well
    • Rewards and recognition is often done poorly because people think that it’s easy
    • Doing it well will pay huge dividends – because what you reward is what you’re ultimately going to get and how you reward is going to have a profound impact on morale
  • 48. What To Do
    • Recognize the difficulty of the challenge of measurement and rewards
      • Realize that there is no easy answer or quick fix
      • Measurement and rewards are deeply engrained in organizational DNA and are resistant to change
    • Become more aware of the problems we have discussed relative to measurement and rewards
      • Be particularly aware of how easy it is for measurement dysfunctions to occur
      • Help your organization understand that measurement and rewards are inextricably linked
      • Identify particularly egregious existing measurement/reward dysfunctions; make them visible
      • Help your organization become more aware of the dangers of allowing those with ‘vested interests’ establish measures
  • 49. What To Do (continued)
    • Estimate the costs of measurement/reward dysfunctions
      • Create a business case for change
    • Take a holistic “performance management” approach to measurement and rewards
    • View performance holistically and in the overall organizational context
      • Emphasize the importance of cross-functional alignment
    • Become more of a strategic business partner
      • Become more knowledgeable about the organizational strategy and value drivers
      • Measure what is most important to the organization as a whole, not just to isolated functions
  • 50. What To Do (continued)
    • HR should fill the “measurement leadership” gap, if no one else steps up to do so
      • Identify other potential measurement leaders
      • Make measurement leadership part of your leadership development curriculum
      • Obtain senior leadership support for this effort
    • Be sensitive to employees’ “measurement experience”
    • Be an example of the effective use of measurement and rewards
      • Use the principles discussed in this presentation in the HR organization
    • Increase the positive use of measurement
      • Use measurement more for learning and improvement
      • Make performance appraisal more of a feedback and learning process
  • 51. What To Do (continued)
    • Upgrade “measurement literacy” in the organization
      • This might be one of the most important opportunities for HR leadership in the future
    • Increase the dialogue about measurement and rewards
      • Build learning and dialogue opportunities into the organizational learning schedule
    • Develop an organizational action plan for improvement
  • 52. References Dean R. Spitzer, Transforming Performance Measurement: Rethinking the Way We Measure and Drive Organizational Success , N.Y.: AMACOM, 2007 Dean R. Spitzer, SuperMotivation: A Blueprint For Energizing Your Organization from Top to Bottom , N.Y.: AMACOM, 1995. Bob Nelson & Dean R. Spitzer, 1001 Rewards & Recognition Fieldbook , N.Y.: Workman, 2003. Dean R. Spitzer, “Power Rewards: Rewards That Really Motivate,” Management Review , May 1996. Dean R. Spitzer, “How to Develop a High-Motivation Compensation System,” Performance & Instruction , October 1995.
  • 53. Thank you! Dr. Dean Spitzer [email_address] www.deanspitzer.com