Christopher Wren (CR): Now I really want to focus the last 10 minutes or so of our presentation on how do we know what our performance management targets should be and how do we set targets. One of the things that we see more and more is a kind of ad hoc method of setting targets. When I am in front of a group of people, I often ask, how do you set your targets? One of the things that I hear again and again is that leadership seems to be seemingly just randomly taking targets.
I have seen this happen time and time again someone will say well how are we doing this year? Well, let’s improve by 10% next year. How are we doing this year? Let’s improve by 20% next year. There is really no rhyme or reason to how we set targets for various measures. So as we get better at selecting our measures and validating the data, I hope that we stay with target setting as the next logical step in the process of maturity and measure.
Connection Between Outputs and Outcomes
So let me show you this model. What this model is basically demonstrating is the connection between outputs and outcomes. In other words, on the left using the logic model flow you will see various outputs in a retail environment. So let’s picture a drug store for instance. So the outputs will be how the store looks, and you can measure that. The merchandise selection, you can measure that. Our associate’s performance, we can measure that, customer service and the checkout process all are very measurable at kind of a tactical level.
The question really is how do the outputs on the left impact the real results on the right, which will be our real measures of success. The measures of success in the retail environment would be likelihood to recommend, how likely are you to recommend this retail store to a another customer, frequency of recommendation, how often do you recommend the store to someone else, wallet share, which would be if you do shop at a drug store what percentage of the time you shop at that drug store and finally how often are you going to come back to that store and buy again. So those are the outcomes.
Where to Invest to Get Higher Outcomes?
The question is where to invest and where to put your money on the left to get higher outcomes on the right. Do we want to invest in the merchandise? Do we want to invest a customer service training, and what should the targets be for those outputs to get those outcomes?
And right now there is not a lot of science in many environments between the left and right. We are not sure where to invest next. We are not sure what the target should be on the left to drive the best possible results on the right and this is something that you can only answer through an evaluation process. So scorecard target setting really needs to go back to evaluating what’s working and what has the greatest impact. You know the shorthand of course is biggest bang for your buck, where are we going to get biggest bang for our investment.