Measuring Performance the right way

02 January 2019

By Ralph Watkins

Measuring Performance the right way

​It is a truism that, properly motivated, everyone comes to work to do a good job.

Yet, to the question ‘How do you know that you are doing a good job?’ I have often been surprised by the vagueness of the answers I have received from employees of many of my clients, large and small, across multiple sectors.

This is because they do not have clear targets.

Providing individual targets is something that can be a cultural challenge in companies that have not had them before; even in industries that naturally lend themselves to measures of production or sales. People can feel uncomfortable being measured on their individual contributions if they are not used to it. Yet, introduced with proper care and communication, I have seen it change organisations for the better in a remarkably short space of time.

I have seen these advantages of providing your colleagues with clear targets:

1.    Measuring individual performance identifies great performers. Recognising and praising great performers is a sure way to motivate and retain a company’s best employees. I have seen more that one example of people who were at risk of leaving an organisation changing their minds once they started to feel that their contribution was noticed and valued.

2.     Individual performance measures identify under performers. Often under performance can be dealt with through training, or simply through the fact of shining a spotlight on it. I have seen more than one employee motivated to do better simply through the realisation that they were not doing enough. Leaders who have no prior experience of managing under performance can find it hard to start doing so, but it is a vital part of the management skill set, and it is one expected by their team. I have said earlier, that people without targets may find it difficult to define how good a job they are doing, but every team will know who among them is, and is not, pulling their weight. And they expect their leaders to do something about it. I have seen too many cases where leaders have lost the respect of their teams because they let serial under-performers ‘get away with it’. When leaders do act to address underperformance, the response from the team is usually not (as they feared) “Why did you do that?” but “What took you so long?”

3.     Measuring individual performance, so long as it is done within a culture of mutual respect, promotes healthy competition between teams and individuals; and can also motivate the team and the individual to be better this month than last. One of my clients, a manufacturer, implemented the principle of performance measurement applied to the production: Within 6 months, production rates improved by 40%; turning around the customer wait time for a delivery from 6 weeks to one and a half days. This was achieved without any process re-engineering, or the introduction of new technology, but simply by holding team members to account for their individual performance.

Once a organisation has agreed to introduce individual performance measures, it is vital to carefully assess what those measures should be, and how success is rewarded. Here are some hints I have found useful.

1.    The measures should be challenging, yet attainable. Setting a target at an unrealistically high level means that people will become disillusioned with it – and with the leadership that endorses it. Conversely, setting too ‘soft’ a target will not drive performance. Some of the most successful roll outs of performance targets have been those where the whole team mutually agrees what needs to be achieved and has an input into setting themselves the target (as opposed to having it imposed upon them)

2.    The targets must drive the right behaviour. The key danger to avoid is targets that drive behaviour beneficial to the individual, but are not conducive to the long term benefit of the company. This can be a common issue with sales teams. For example, I have worked a company where each member of the sales team was targeted on sales generated; and rewarded with attractive bonuses for exceeding target, but there was no target around customer satisfaction. This drove a culture where the pressure of making a sale overcame any consideration of what was right for the customer. Sales people pushed customers into purchasing the more expensive products, even if they didn’t need them; or talked up the company’s products in exaggerated terms, in order to make the target. This short term focus on sales led to a long term decline the overall value of each customer, as unhappy customers took their business elsewhere. This also led to bad feeling between the sales and customer service teams, with the latter believing – correctly – that they were spending too much time trying to regain the confidence of disappointed clients. By introducing a set of targets which rewarded both sales and customer service (as measured by customer feedback and the average long term value of the customer), customer satisfaction and profitability were improved, without impacting on the sales volume.

3.    The targets must be connected to the overall goal. An example we may all be familiar with: A major supermarket, wishing to reduce the time their customers spent queuing at the checkouts, introduced a measure of how fast checkout operators were scanning items (“scan speed”). By focusing on this, and celebrating the success of those who scanned the fastest, the supermarket believed it would improve queueing times. The problem was that the queues were caused not by the time taken for checkout operators to scan, but for customers to pack (which takes more than twice as long per item). So, while the “scan speed” targets were being met, or exceeded, the queuing time for customers did not improve. In fact, the customer experience became worse as they now struggled to keep up with packing groceries that were being practically thrown at them. It was not until this was recognised, and an independent measure of queuing times was introduced, that different measures like investing in bag packing assistance and new technology like self scanning truly improved the customer experience.

At Vallum some of the best successes we have had are with businesses who have created their ‘Company scorecard’ of performance measures from the individual, and team targets of their employee’s performance measures. Communicating to everyone in the business how their company is doing against its’ goals is the first step to getting its’ employees to care about it. Communicating to everyone in the business how their individual contribution makes a difference to their business, is the first step to getting their employees to own it.

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