Performance metrics tend to have a religious-like importance in some industries. Specifically, one class of performance metrics will dominate an industry. For example: in retail, it’s normally something like “revenue per square foot.” In automobile sales, it’s usually unit sales. In service industries, it might be revenue per appointment or something. Every “grizzled veteran” executive in a given vertical has a set of performance metrics they love to breathlessly analyze.
Now, the last couple of years — let’s say a decade or more — has been tough for some of these guys. With digital tools proliferating and new ways to sell and track what you sell, the whole notion of performance metrics has shifted. What do most people do? If they’re north of about 58, they stick their head in the sand and pray for retirement. Option II is “Screech about how this new thing has no business ROI,” i.e. “social media.” If you’re younger, you might try to embrace some of these new concepts and tools.
Unfortunately, though, you need to embrace new performance metrics when you do that. Many people miss that step.
Let’s talk about internal and external performance metrics, why it’s a train wreck, and how to fix it.
Performance metrics: A good quote from a WalMart executive
From a new article on Harvard Business Review about “the tyranny of old metrics,” check this out:
Former Walmart.com CEO Carter Cast recalled to me, “Back in the early 2000s there were many things we wanted to accomplish with our online business but had a hard time doing because of the perception that we’d interfere with the well-oiled efficiency of the physical stores. For example, while we were one of the early companies to develop an ‘order online, pick up in store’ service capability, it took us years to launch because of the fear we’d slow down store operations. I understood the concern of our store operators, but customers were asking for the service.”
So imagine this scenario for a second. You are a CEO of a huge company. Your customers clearly want one thing — and it can probably make you more money. But, essentially, you cannot do it because if you do it, it will scare the pants off tons of your lieutenants who “own” certain areas of the business.
Walmart has been criticized for probably 10–15 years on its digital operations. You see why that might be? It’s not that they’re dumb or lack the ideas. The real reason is fear, relevance, ownership, competence, and ineptitude of the men who make the decisions there. “This makes us money, so why change it?”
Performance metrics: Internal and external
In an external sense, performance metrics should be tied to business ROI. Essentially, we’re talking about tracked data that has some relevance for your business growing. That’s what external performance metrics would be all about. ROI! KPIs! The Spreadsheet Mentality!
In an internal sense, performance metrics would refer to how you evaluate and develop your people. We’re all big (well, some of us) on “organic feedback” and “the check-in” these days, but in reality 88 percent of companies are still letting dick-less managers hide behind email and once-a-year performance reviews. We call that “our talent strategy,” which is one of the most laughable aspects of business overall. I’d almost love to see a CEO who flat-out admits it: “People don’t matter worth a shit. I’m chasing revenue from products!” That’s how they all feel, basically, but they couch it in 20,093 buzzwords about “the war for talent.”
(** Vomits in trash can **)
Performance metrics: The change issue
Here’s the problem: change is hard. What’s even harder? Change management. That’s an ultimate thing that companies lip-service. In absolute and real terms, most companies barely exist in the industry you think they exist in. Sure, go call Apple a “tech company.” It is in some ways. It’s also not even remotely that anymore. You could call it a “health care company” and be more right in some respects. Business models are shifting, and rapidly, but some well-heeled oil executive isn’t about to claim he’s anything but “an oil guy.” Change and specific business terms are very hard for people. You get in with one crew, one industry, one vocabulary and you embrace that for years and years.
That’s the problem with performance metrics externally. Honestly, there are dozens of metrics out there that mean nothing. An example from that article linked above is Rackspace. The key performance metrics for IT hosting were always cost. Rackspace came in and did theirs around customer satisfaction. They beat the market in that way. See the point here? Existing executives were reluctant to change, probably calling hundreds of meetings and analyzing cost structures. Turns out those were the wrong performance metrics for their business and industry. They got, to an extent, “disrupted.”
I can’t even go that deep on internal performance metrics, but I’ll say this. In general, the reason we do the exact same shit about people and hope it might work differently is because we let HR “own” performance metrics, training, reviews, etc. No one cares about HR. Executives believe it’s “hot chicks and random guys” who do compliance for them. That’s it. Easiest way I can say that.
How do we improve performance metrics?
Let’s keep this section fairly simple.
- Determine what drives your business forward
- Figure out how to track that successfully
- Make sure you have a team in place that can scrub, analyze, and report on the data
- Use the data to find new pockets of what customers want from you
- Avoid silo-by-silo bullshit and survey scores and spend real time, money, and effort here
- Move it out of HR
- Stop promoting assholes to management
- Try to use data in the form of People Analytics
None of this is rocket science, but we often miss the boat entirely on it. It’s why so many businesses are middling, run-your-people-in-circles bullshit. See, we’ve been doing the same thing in a given business for 15 years. There’s new performance metrics we could chase and try, but it scares everyone. Here’s the issue: technology has evolved (revolved) to the point where we can see those performance metrics on our phone while waiting for Starbucks. Now there’s a new host of problems. Do we need all these middle managers? What are our people doing all day? This got easier, but if work is easy, what can you put yourself on the cross about? Does this mean the robots are coming to automate us?
Instead of dealing with these questions head-on, we just create a bunch of drama, bullshit, and fire drills to fill our days. Then we go home and ask “What’s on Netflix?” Hell of a time to be alive.
Performance metrics and buzzword boulevard
You ever notice that every speech and article using the term “performance metrics” never really mentions specific metrics aside from using that term? Interesting, right? Ha. I barely mentioned any specific performance metrics — although some at the top! — so I guess you can sue me too.
All this said, what else you got on performance metrics? Any stories from where you work?
I’m Ted Bauer. I like to think and write differently.