Avoid the Folly of Flawed Employee Performance Metrics

As companies become more data-driven, so have their employee performance metrics. Yet the very metrics that are often used to gauge employee performance might actually discourage the behavior those companies want to promote.

This common workplace pitfall is grounded in two basic realities.

What gets measured gets managed. Employees tend to behave in a manner that is aligned with how they are evaluated and rewarded.

What’s easy to measure isn’t necessarily what’s right to measure. Organizations often gravitate toward easy-to-measure performance metrics, even though the behaviors they wish to cultivate are relatively complex.

Examples abound of how organizations fall victim to the “folly” of employee performance metric design:

Service centers that measure how quickly staff handles calls then wonder why employees don’t spend ample time to completely resolve a customer’s issue.

Companies that obsess over quarterly sales targets then are surprised when executives make short-sighted decisions which compromise the business’ long-term health.

Organizations that focus on individual performance to assess employee success are then dismayed when they observe a lack of team work and collaboration.

Manufacturing firms that measure workers on the volume of product they deliver then struggle with widespread quality issues on the finished goods.

Sales divisions that measure employees purely on top-line growth are then surprised to see how unprofitable newly -acquired accounts are.

Human resources departments that measure recruiters on candidate “yields” from job fairs then find many unqualified applicants in their interview pipeline.

Without careful and thoughtful design, metrics that are meant to manage employee performance can actually sabotage business success. To avoid that outcome, keep these three points in mind:

1. Think about what employee behaviors are most valuable to your customers.
What do your customers care about most? Perhaps it’s how long they have to wait in line, or be on the phone with your staff. Even more likely, it’s getting their issue resolved on the first try.

Make sure your employee performance metrics are aligned with your customers’ interests. If customers value speed of service above all else, then put that at the center of your measurement methodology.

If other considerations are just as critical to them (such as the quality of the product, or the efficacy of the staff), then gauge performance on those dimensions as well.

For example:

Conduct post-purchase customer surveys to assess overall satisfaction with product quality (and, indirectly, the performance of those making the product).

Track the number of employee-submitted product enhancement suggestions, thereby encouraging staff to translate customer feedback into constructive improvement ideas.

Or measure how frequently customer inquiries are resolved on the first contact, indicating the staff’s effectiveness at understanding and addressing customer needs.

2. Use metric “checks and balances” to avoid over-rotating on any one measure.
A singular focus on a particular performance metric can be counterproductive. The behaviors that businesses try to encourage among staff can rarely be tied to just one metric. Doing so usually ends badly. Employees become obsessed with outperforming on that single metric, regardless of the consequences.

Guard against over-rotation on any single metric by creating a balanced system of measures.

For example, let’s say you want to encourage a sales-oriented culture, but want to avoid misconduct. Rather than measuring staff only on sales generated, complement that metric with ones that gauges account profitability and customer satisfaction. Then, only reward salespeople for achieving revenue targets while also meeting those other performance thresholds.

3. Consider unintended consequences and perverse metric-driven behavior.
This is perhaps the most important element of good employee performance metric design. Look at your employee performance metrics through a critical lens.

Carefully consider all of the ways by which a metric, engineered with the best intentions, might nonetheless promote undesirable (or at least customer-unfriendly) behavior. Based on how detrimental and probable those unintended consequences are, tweak your approach accordingly.

That might mean abandoning some metrics in favor of new ones. For example, consider a call center that chooses to measure customer satisfaction instead of call handle time. (The latter metric often leads service representatives to rush callers off the phone.)

It may also mean adding “check and balance” complements to existing metrics. For example, an organization that uses 360-degree evaluations to ensure that individual achievement does not come at the expense of collaboration and collegiality.

The development of effective employee performance metrics requires a delicate touch. Success measures, and the reward systems they support, shape employee behaviors in meaningful and sometimes subtle ways.

A thoughtful approach to performance metric design can help companies use metrics to their advantage. The result is a powerful “behavioral current” that steers employees in the right direction.

And the value of that is… immeasurable.

Author Bio:

Jon Picoult is Founder & Principal of Watermark Consulting, a management advisory firm that helps businesses impress their customers and inspire their employees. Contact Jon at www.watermarkconsult.net or follow him on Twitter @JonPicoult.