Benchmarking as a Tool to Achieve Higher Performance and Effective Change Management
In the course of the last month I have had cause to think about measurement, key performance indicators and benchmarking for two separate events: a presentation to an audience of local and central government shared services practitioners; and a regional shared services discussion group.
As a former head of HR Shared Services for LloydsTSB I was and remain a firm advocate of the maxim "if you don’t measure it you can’t manage it" and frequently found myself referring to my "black folder" of 30 or so A4 charts and spreadsheets – always ready to back my anecdotes with supporting facts.
But did I really achieve higher performance and more effective change management as result of carrying round my black folder? Well, yes and no, frankly. I certainly understood the dynamics of my £30-million, 200-employee business and I understood its performance in my terms. My challenge: too often the judges of my performance, my customers, were happy to rely on their own anecdotes which in turn coloured their perception and their perceptions became their reality - and therefore mine!
In truth if your customer thinks - or worse, says - you’re substandard then no amount of operational data alone will change their view. It is certainly true that the degree to which your customers can truly judge your performance based on their own perceptions will vary depending on the service you supply. If the output of your shared service leaves little room for discretion then perhaps pure operational metrics will do the job. If your SLA is "process all employee pay and benefits on time and to 99.9% accuracy" then that should speak factually for itself. (Notwithstanding the fact that 0.1% in my case was 60 employees - and if you fail to pay 60 of the most senior employees in any organisation then no black folder will keep you in the job)
Importantly many services provided through SSCs are not so tightly defined, particularly in HR (e.g. providing employment law and policy advice to line managers). Believe me when I say answering 80% of calls in 15 seconds or less pales into insignificance if the quality and accuracy of the advice is poor. Here a better measure would be: the advice is technically accurate; the advice is appropriate to the business circumstances presented; and the advice enabled the business to make a decision and move forward.
So here measures of effectiveness will be more important than measures of efficiency. However it is always the efficiency measures which are easiest to measure and benchmark. Herein lies a deep black hole for the unwary.
Measuring what is easiest will lead you to the measurement of inputs; rarely will you stray into the territory of measuring outputs - or more importantly outcomes. Consider the following examples of a service level from the world of recruitment:
- Provide a short list of candidates to the recruiting manager within 5 days (input measure)
- Provide a short list of candidates acceptable to the recruiting manager within 5 days (output measure)
- Provide a short list of candidates acceptable to the recruiting manager and who will improve the performance of the team they join. (outcome measure)
What other reason can there be for recruiting new people into a team other than to at least maintain if not improve that team performance? That said, consider which measurement will be easiest to report and therefore likely to be put forward by the SSC!
The outcome measure also presumes that the recruiting manager or organisation can determine what constitutes superior contribution or performance.
This brings me round to another important lesson: definition of the measure is everything. It is most certainly true if you intend to benchmark your performance. How many times do you hear "ah, yes, but we’re comparing apples and pears". It isn’t good enough to compare apples with apples; if I may be forgiven for extending the analogy you must compare Bramley apples with Bramley apples.
Furthermore what you measure - and in particular what you measure when judging performance - is what you will get. Measure the wrong thing and you’ll not only get the wrong thing but you’ll encourage potentially negative behaviour. This is definitely true the more you link performance to pay.
Consider an airline that discovered from customer feedback that the main reason passengers didn’t fly again with that airline was the delay at arrivals in retrieving their baggage and clearing the airport. They gave the baggage handlers a new KPI: the first bag must be on the carousel within eight minutes of engine shutdown. They achieved it, of course, but most customers remained dissatisfied - unless of course theirs was the first and only bag to reach the carousel in eight minutes! What you measure is what you get...
Measurement must be linked to things which are of strategic importance to your organisation or things which are immediate priorities which may not necessarily be strategic. As you progress in your quest for better measurement you should progress from reporting data, to reporting information to providing intelligence.
Measurement, including KPIs and benchmarks, must also have a consequence: if decisions are never made as a result of reporting something you are likely to be reporting the wrong things. Think of the dashboard in a car. There are two lights: the air conditioning "on" light; and the oil pressure warning light. If you had to get rid of one light which would it be? How many of you are reporting that the air conditioning is on when you should be reporting the oil pressure? Consider which is easiest to report and you’ll probably find your answer.
Given the total manpower effort required to report anything in most organisations, despite ERPs, data warehouses and integrated systems, do you really want to be reporting superfluous information? In a team of nearly 200 I had at least four full-time equivalents turning data into information; and a further two full-time equivalents turning information into intelligence.
So can all this effort with measures, KPIs and benchmarks achieve effective change management? Quite simply: NO. Measurement etc is rational, logical and objective. Reaction to change is irrational and emotional – oh yes, and inevitable. Because we ignore the emotional and psychological needs of people experiencing change then most change fails. If you win hearts and minds you can use measurement to inform on progress and how much further there is to go.
Measurement is a tool for experienced change leaders not a substitute for them.
So in summary:
- Put effort and resource into measurement
- Definition is everything
- Measure only what is strategically important
- Don’t focus on efficiency to the detriment of effectiveness
- Measure outcomes wherever possible
- Measure the wrong things and expect the wrong behaviour
- If no one makes decisions with your information don’t give them it
- Measurement can only support change management
And finally…………as an old farmer once told me in a former life; "you won’t fatten that pig son by weighing ‘im every day"...