The Effective Use of Measurement

03-October-2012
03-October-2012 10:30
in Key Performance Indicators
by Colin Smith

When we visit the Doctor, we never complain when they measure our blood pressure or listen to our heartbeat with their stethoscope.  We understand that these measurements are being used to to help the doctor solve our problems.  In business, measurement is also used to solve problems and improve performance.  However, my experience of working with Small Business owners is that they tend to be somewhat suspicious of performance measurement.  Perhaps this suspicion harks back to negative experiences with measurement in the corporate world where measurement is frequently used to identify performers that aren't "measuring up" or as a prelude to redundancies.  If measurement is associated in your mind with the negative action usually taken to correct a performance problem, then it is little wonder it is viewed with suspicion and avoided.  Nobody likes being identified as the problem.

The purpose of measurement in small business is different.  The whole point is to enable the business and its employees to do better rather than to weed out problem employees.  When done effectively, measurement will change behaviour and help drive performance improvements.  When as a small business owner you understand the diffference between the way measurement is done traditionally and the way it should be done, you'll create an environment in your business where both you and your employees seek measurement rather than avoid it.

Exploding The Measurement Myth

In big business there is a perception that just because, as Peter Drucker famously said, you cannot manage what you cannot measure, that the simple act of measurement is tantamount to management.  As important as measurement is, measurement alone does not reliably change behaviour.  If it did, nobody would have any problems with anything that was readily measured.  The obesity epidemic sweeping the western world would not exist because anyone who wants to know can readily measure their weight, decide it's too much and want to weigh less.  The truth is that knowing doesn't always make much of a difference.  So what does measurement do?

Typical Response to Work Measurement

In psychological terms, measurement is an antecedent.  As mentioned earlier though, for many people it has been an antecedent to punishment.  I experienced firsthand employees hostility to measurement when I was fresh out of University.  My first role in the corporate world was as a business analyst and tactical project manager for a large delivered wholesaler.  I spearheaded a work redesign project for the company designed to improve the pick rate at the distribution centres in the network.  The initial step was to get some real world data on how long every step of the pick process took at different distribution centres.  So, off I went with my stopwatch on a whistlestop tour of the distribution centres for a week.  I don't think i've ever experienced such sustained hostility in my entire career than I did in that week.  About a dozen different people per shift wanted to know why the company was cutting jobs and several hostile calls came in to head office as a consequence.  The plan was actually to use improved pick performance to increase capacity in the distribution centre during a time of aggressive growth for the company, but despite the fact that the warehouse teams were busier thn ever, the sight of a stopwatch was enough to tip them over the edge, despite my assurances about the real purposes of the exercise.  It was almost like a conditioning experiment.  The presence of a stopwatch on a shift had led to pain in the form of layoffs so many times previously for some of these workers that the mere sight of one now caused them to presume that layoffs would soon follow.

I learned over time that two things are necessary to overcome the natural resistance to measurement.  These are:

1. Ensure that measurement systems focus predominantly upon desirable behaviours.

For a measurement system to contribute to your business goals, what is being measured needs to correlate to desired business results.  For the warehouse team at a distribution centre whose job it is to pick, pack and load as many orders as possible in the shortest amount of time with the fewest mistakes, it is relatively easy to measure the behaviours you are looking for as all of the above can be fairly readily counted.  However, many things in business cannot be counted.  This can be measured using behavioural observation.  In my first job, I went on to work with the sales teams to introduce a suite of relevant KPI's amongst them.  As well as measuring KPI's such as number of sales calls, conversion rate, units sold, average sales value and average margin, I established a number of other meaures on a checklist after each sales call, including a number of the behaviours we deemed desirable. These included a number of questions including the following:

  • Did I cross sell our new product?
  • Did I sell a promotion?
  • Did I ask for the order?     

We found there was a strong correlation between those who scored highly on the checklist and those that had the largest sales volumes.  We also used this analysis to diagnose individual performance issues. For example, if the salesperson had strong scores on the checklist, but comparartively low sales, it indicated there might be a problem in how the sales calls were being conducted or set up.  The sales region that piloted this programme moved from fourth in the company to second in the company within months and the measurement system was rolled out across the company.   

2. Ensure frequent positive reinforcement for desirable behaviours as they occur in the workplace.

In business we have to keep score.  However, only when measurement is used to set the stage for positive reinforcement do you see the full benefits of a measurement system.  Most people admit that they would do a better job they they currently do if they were properly motivated.  Small busines owners themselves are not immune from this and often struggle to motivate themselves effectively.  The benefits of an effective measurement system lie in capturing "discretionary effort" and measurement alone generally does little to sustain "discretionary effort".  "Discretionary effort" is that level of effort that people could give if they wanted to, but which is beyond what is expected and required.  Since this effort is above and beyond what is expected, paid for and planned for, it cannot be captured through punishment or threats.  My experience and the professional opinion of experts in workplace performance such as Aubrey C. Daniels is that positive reinforcement is the best way to capture "discretionary effort".

What is positive reinforcement? 

Positive reinforcement according to Aubrey C Daniels is any consequence that follows a behaviour that increases that behaviour in the future.  In business, somebody needs to inject positive reinforcement into the job or live without the benefits of "discretionary effort".  A congratulatory note, praise, public acknowledgement, money and a plaque or trophy are all examples of positive reinforcement.  In my experience, the most readily available reinforcement is social reinforcement.  No budget is required, it can be done at any time and done properly is something that the recipient will never tire of.  Ultimately, the exact details of what or how to positively reinforce somebody in the workplace will vary from individual to individual.  The idea is though that whatever it is causes more of the behaviour we are looking to reinforce, so we'll soon know if our attempts to reinforce ceratin behaviours amongst those that work with us or even ourselves have been successful or not.

In summary, measurement in order to be truly effective needs to be linked to desirable behaviours and increases in these desirable behaviours must be reinforced regularly.  The more positive reinforcement, the more likely we will see increased progress in the direction you want your businesses to go in.  If you need assistance in deciding what to measure in your business or how you can tap into discretionary effort through positive reinforcement, call Continuous Business Planning today.  We can help you move from wherever you and your business might be today toward the direction of your dreams. 

  

 

 

 

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