Page 19 - Performance Leadership

8 • Part I A Review of Performance Management

results of a certain process, your employees will start focusing on it.
There are numerous examples: If the CFO starts tracking the days-
sales-outstanding (DSO—i.e., the average number of days it takes cus-
tomers to pay their bills) on a daily basis, instead of assuming that
customers will pay within 14 days or so, the people in the accounts
receivable departments are more likely to pay attention and exert
greater effort to make collections. If hotel managers and their front desk
staff are held accountable for the percentage of guests that fill out the
customer satisfaction survey, they will be more likely to remind guests
of the survey. The marketing manager of a professional services firm
whose objective is to generate leads will structure the firm’s Web site
in such a way that it collects customer feedback.
Measurement helps us not only to focus on our goals and objec-
tives, but also to balance our actions. If you measure production
speed alone in a manufacturing process, it is likely that quality issues
will arise. For balance, you also need to measure how many produced
units need rework. If a procurement department is only measured on
how much additional discount it can squeeze out of contract manu-
facturers, it becomes hard to avoid unethical practices, such as the
use of child labor in low-wage countries and the use of cheaper and
environmentally unfriendly materials and production processes. Pro-
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curement departments need to identify a balanced set of metrics that
includes ethical issues as well as price. When evaluating a manage-
ment-level employee for promotion, human resources managers need
to identify a set of metrics that evaluates candidates on more than just
“accomplishments,” such as how respected that person is within the
organization.
In each of the functional disciplines within an organization—finance,
sales, marketing, logistics, manufacturing, procurement, human
resources (HR) or information technology (IT)—measurement is a key
element of management, and ultimately of bottom-line performance.
I am not suggesting that measurement is the only driver of perform-
ance: Business processes are crucial in creating an efficient organiza-
tion that makes few mistakes and makes optimal use of resources.
Leadership is important in order to create a culture in which people
feel motivated to give their best. And a good overall strategy is needed
to distinguish a company from the competition.