Stretch Targets in a Balanced Scorecard

This is the transcript of an in-person customer seminar hosted by InetSoft on the topic of "How Performance Management Consultants Work." The speaker is Christopher Wren, Principal Consultant at TFI Consulting.

You need to set stretch targets at each level of your balanced scorecard, and by all means, if somebody meets the stretch target, you better celebrate the success. That is something great. And I always work with managers, and I keep telling them you should focus two-thirds of your time on emphasizing the good, and only one-third of the time in those things where you need further improvement, because that will really drive your people

Your people will stand behind you like one if you are going to do that. And that’s a tough thing. I work with organizations where there are a lot of engineers, and I am an engineer myself. Engineers are a really peculiar bunch. They don’t like all that mushy stuff, right, I mean they just don’t. It's like emotional intelligence. What’s that, never heard of that. So it's one of those issues that you are going to really have to address.

Another one is you have to define is roles, responsibilities and hold people accountable for their performance however, with holding them accountable, you also have to allow them to succeed. So measures should be used as an early warning sign.

The Manager's Responsibility for Scorecard Measures

When somebody has a measure assigned to them, and that measure goes bad, then it is the manager’s responsibility, the manager of that person’s responsibility to say, hey, I see you are struggling in that area, what is it that I can do to help you out? Instead of, what the hell did you do, this thing is red, okay. It's a whole different mindset.

One organization I work with, they actually had a measurements group, and every month, all the department managers got into this room with their leaders, and there was this gentleman upfront that was fantastic in terms of performance measures, a very good guy, very technical. And he stands at the front, and he goes through the performance measures, and is like dah-dah-dah, you suck, that type of thing, right.

It’s like in school, an old fashioned school. So you have the school teacher standing at the front, and he is looking at the colors, and whips are passed out essentially. Guess what, everyone hates that meeting. Everyone hates that person. That person is one of the unhappiest persons in the whole company because he is just doing his job.

However, the way he does his job is not the right way. He was not set up to succeed. What change we did was very simple. Instead of having him report what the measures were, the report was sent out to everyone before and we essentially motivated each of those managers to report on their own performance. It's just small change made a complete difference. So it's those kinds of things.

View a 2-minute demonstration of InetSoft's easy, agile, and robust BI software.

The People, The Processes, The Historical Background

So in summary, effective performance management really involves more than the analysis of financial data, well any data on results. It's not just scoring. That’s only a very small part of the game. Performance management involves people, processes, policies, and tools. It requires a balanced approach.

You can't just go in there and say, the metrics tell me this. Here is a perfect example I use all the time. I have a bank account, and Mike has a bank account, right. Let’s just say we are measuring this, right. Mike’s bank account has got three grand in it, and mine has got two grand in it. What does that tell us? Tells us absolutely nothing, right.

So the first lesson is you got to look at how did he get to three grand, and how did I get to two grand, and the next question is where is his going to be tomorrow, and where is mine going to be tomorrow. So you have to look at the people, the processes, the historical background; you have got to look at all of that before you use a number.

Too many organizations I have seen reacting on numbers and doing the wrong thing. And you have all heard the story. I mean here is a typical example. A customer care representative and utility, or wherever it may be, right. There is always that notion of how do we measure productivity, hey that’s a good one. How about we measure the number of calls completed by each customer representative each hour, and then we know which ones are the better customer representatives, which ones are the worse.

View live interactive examples in InetSoft's dashboard and visualization gallery.

Performance Management Process and Tools

Guess what that leads to consequence wise. They answered, and they hung up, They answered and they hung up as many times as they could, without listening to the customer, without being nice to the customer, without saying hello or good day or how else can I help you, is there anything else you need assistance with, any of that.

So what happens? Well, customer satisfaction drops dramatically. At that point, you really don't need any increased productivity anymore because there is nobody calling you anymore. Performance management process and tools can be easily integrated to managing performance of people, equipment and processes.

I do want to put out the caveat, that being said, get your ducks in a row first. Figure out what do you need to do process-wise, procedure-wise, policy-wise before you think about automation. If you cannot do it manually, believe me, the tool is not going to do it for you automatically.

And then performance management really does create a focus on discipline, accountability, ownership, and commitment. Performance management has to be set within the framework of continuous improvement. It has to be set within the framework of corporate culture that is really committed to wanting to get better and better and better each year where people are proud to come to work and where people are really interested in making the organization to be the best one in the industry.

And last, this is going to be of course the sentence I always add for the Chief Financial Officers, effective performance management saves you a lot of money because you will unleash levels of performance that you will never have seen before.