How Incentives and punishments affect measures

A recent forum discussion I was involved in centred around how you should engage people with measures and the effect of incentives, on the culture of performance.

In my experience there are several aspects that alter the culture of performance, of which incentives (at the normal levels in organisations) is one of the least influential. One of the more dominant is:

Punishments, penalties and the culture of failure:

People will distort measures, or resort to dysfunctional behaviour, to avoid poor ones if there perceive (rightly or not) that they will be punished for them (and whether the punishments are implicit or explicit). It also applies when the messenger gets punished. When the need/urge/peer pressure/management pressure to avoid these penalties supersedes their common sense, you get the sort of silly situations that the NHS had with patients waiting in ambulances to stop the watch starting on 4 hour waiting times.

They will hide information, distort it, be economical with it, or report it differently to avoid this.

A (not THE only) way around this is to retrain the behaviour and address the underlying belief about failure and punishment. If the staff realise that they can learn from the information and it is a failure to learn that will be seen as poor performance you are starting to change the game. Again this relies in explicit messages and actions from management.

Again it comes back to local utility and understanding its value at that level, so people can make informed, sensible judgement and decisions with the information (not necessarily measures) they have at their disposal. They can also refine their judgement as they learn from the situation.

In other words, all of this is about the culture, messages and context that surrounds the discussions about measures. Understanding what is the current norm. HOW you invite people into the discussions, the baggage they bring, the context they have learnt their existing cultural norms from and the extent to which you can signal changes.

For this reason I have no "favourite way" to engage teams in measure discussions. Only questions I ask, and signs I look for, that tell me what the situation might be like. In many cases it can be excellent - in others, more problematic, and I apply different tools in different situations.

Phil Jones
Excitant Ltd
http://www.excitant.co.uk/

Trusting staff to develop and provide measures for you

Do you trust your staff?

A post on the PMA forum reminded me of a conversation I once had with a client's middle management team. It was during the balanced scorecard measures design workshop.

I suggested they talk to their staff about the measures and targets and even use some subjective measures.

They back peddled rapidly and said "No way!".

I asked why?

They said, "We don't trust them to do that honestly!"

I asked - "So how did you as managers create a culture where you employ people but don't trust them, and have trained them to lie to you?"


Long pause.....


".....And what are you going to do about it?"


Even longer pause....


Oh, such fun.

Phil Jones

Principles of Effective Balanced Scorecards Part 3

Like many organisations, this FTSE 100 Company's executive team had a vast amount of data at their fingertips. Their monthly report contained around 120 measures. The Chief Executive could drill down to individual retail outlets, and look at Saturday's product sales for all their categories, first thing Monday morning.

We had been brought in for a relatively common problem. As the Chief Executive put it, "They don't get the strategy". So we read through their strategy documents and interviewed the executive team to understand the strategy. At the first workshop it became clear that what was in the paperwork was not what they considered important. Like many organisations there were vast reams of documentation and thinking in some parts (retail offering in this case) yet very little about the store positioning (having the right offer in the right place).

Why they didn't get it is a story for another newsletter. By the time we had finished the Executive team were down to 26 measures to manage the strategy for their business. But here is the interesting bit: Only 12 of those measures were amongst the 120 in their monthly management report. The other 110 in their management report were useful diagnostics and detail, but they were not part of changing behaviour and driving the organisation forward. Performance measures vs managers of performance. Moreover the 14 missing measures were spread between

• Those concerned with the culture, skills and behaviours that would help to change the organisation and move it forward
• Measures of what the customers actually thought.

Aspects of the strategy that were not represented in the management report. In particular this covered the vital new product & service development pipeline and store portfolio management.
In other words they were now starting to measure what was important and what they wanted to change, rather than what they could measure. So principle 4 is

4 "Measure what you want to manage, (not manage what you can measure)"

Yet this behaviour is so common, so it is important to understand why. Why do organisations end up having so many measures that they cannot see the wood for the trees? Why do they tend to measure what they can measure, rather than standing back and thinking what should we measure.

Well there is a simple reason for this. They are doing it because it makes sense. Imagine for a moment you have just taken over a new role. It's a department, unit, organisation, product you do not know. So what will you do? You'll dig around, walk about, talk to people and gather as much information as you can. It makes sense when, as a manager, you are in a diagnostic and fact finding mode. You are trying to find out what is going on with a unit, department, product or process. You gather as much information as you can to piece together a picture and diagnose the underlying problems and causes. You put in place ways to measure what is going on.

But this is completely different to motivating someone. If you want to influence a person's, team's or organisation's behaviour how many measures would you use? 120? 100? 50? Of course you wouldn't. You would use maybe 3 or 4 or perhaps 6 at most. Any more and that would confuse the issue, wouldn't it. So this leads us to principle number 5:

5 "Be absolutely clear what you are using your scorecard for"

There are plenty of examples of this in the private sector but an interesting (but not amusing) example comes from the public sector. In the health service some measures are generated by parliamentary questions. An Member of Parliament asks a question and a measure is set up to answer the issue that is raised. All the hospitals in the land are not responding to the Department of Health's requirement to provide more information. So a measure is created. But what stops it being measures. The MP get their question answered and moves on. Yet now all these administrators are collecting this information, which is no longer required. They get added to. They do not get removed. When I was first told this story it included a room in Leeds where the printouts are piled up and locked away and no-one ever looks at them. Whether that is true or not is irrelevant. Most organisations have done similar things in the past.

So a useful test of any scorecard or strategy map is, "What am I trying to achieve?" "What purpose is this serving and what effect will it have on the organisation?"

You will appreciate that this is why we spend time with clients working on what the information is used for and helping them move from continual diagnosis to influencing behaviour and checking that it happens. You will of course recognise that as performance management.

As you think about how your organisation does these and what diagnosis would help you can think also about the workshops we can customise to suit your particular circumstances and needs. When you want more information on these take a look at
http://www.excitant.co.uk/Seminars_workshops.htm

By paying attention to just why you ar e measuring, you will start to improve the value of your balanced scorecard in your business. Of course, you realise, there are other key principles that will make a difference. In your next few newsletters we will look at how strategy, people, focus and ownership affect things. In subsequent newsletters we will also set out

"Ten top tips for successful implementation and operation".

Of course if you are impatient, we can do on-site seminars and workshops to help your organisation make sure your investment in performance management and its strategy make a real difference.

More soon

Phil Jones
http://www.excitant.co.uk/