Measuring Performance Outcomes

Leading at Light Speed is an essential new leadership book by Eric Douglas synthesizing the best business practices into 10 Quantum Leaps that build trust, spark innovation, and create a high-performing organization.

Chapter 2, Sharpen the Focus, talks about building a Balanced Scorecard to measure performance.

When people know you are committed to measuring performance, trust develops. The development of a scorecard is an important aspect of leading at light speed. A balanced scorecard is a term used to describe a set of performance measures that holistically evaluate the health of the organization – not just one part of it, such as its financial performance. If you’ve followed the prescriptions of this book thus far, you’ll discover that by assessing your core values, as well as your mission and objectives, you will possess a balanced scorecard.

A balanced scorecard needs to capture three different dimensions:

• What will be measured (the metric)
• What you’ll aim for (the target)
• The current performance (the baseline)

In measuring core values, you should be focused as much as possible on outcomes, rather than outputs. Outputs give indication of the quantity of manufactured products or delivery, like baseball bats. Outcomes gauge the definite value appropriated, such as higher output of customer satisfaction or trustworthiness. As the following diagram shows, performance goes up when an organization focuses on measuring outcomes.

The re-occurring theme I find in organizations revolve around tracking the number of sales calls per sales person or the amount of products produced, and not on the measurements of customer satisfaction, retention of loyal clients, or profitability. Not only does this produce skewed behaviors (such as the salesperson who simply makes call after call); it also breeds resentment and turf battles. So when you’re putting together your balanced scorecard, make sure you’re focusing on the right stuff. The process will promote a higher level of synergy throughout the organization. It will also help you clear away any lingering ambiguity about your core values, your vision and your goals.

For instance, sustaining competitive advantage in pricing might be measured through comparing with other leading companies. The table below shows how that could be incorporated into the scorecard.

Another core value for your organization might be reliability. As you look more into it, someone might recommend a performance goal of six defects per thousand units (the coined “six sigma” standard). Someone else might state its difficulty. After more intense discussion, you conclude that maintaining an error rate of twelve defects per thousand is what’s essential to your company’s success, given the other core values. So that’s added to your performance scorecard.

Lets consider customer approval rate? For consideration, the overarching performance goal might be an average rating of 90 percent on the yearly customer approval survey. Many individual factors of satisfaction might be measured, like telephone hold times or responsiveness to complaints. You can include those implications into the overall customer approval rating.

There are many examples of balanced scorecards. Every company should have its own. Each will include its own relevant measures. Lets reflect on the balanced scorecard from a law firm. It succinctly captures both the metrics and targets that it deems important.

Once you have your balanced scorecard, you should start communicating it throughout the organization. If leaders make the effort to hold themselves accountable for spreading the outcomes of the balanced scorecard, it will affect the behavior of the rest of the company. That’s why public communication about the scorecard is so important. When leaders promote accountability, it cultivates trust. If executed well, your performance scorecard will speed up the process of change and grasp everyone’s attention on ways to improve the company’s performance.

Take this free work survey to discover how well your company measures up to the 10 Quantum Leap of high performing organizations.