The title of this article is the title of the first chapter in my favorite management book. I believe it to be the most important of all management principles.
Measurable results say a lot. By sitting down with middle managers, salespeople, operations personnel, etc., and agreeing to what measurable results you want them to achieve during a given period of time takes a lot of the mystery out of performance evaluations.
Historically, independent business owners and managers have not done a very good job of providing employees with what they must do in measurable terms to earn a raise, receive a bonus, get a promotion, etc. Instead, I frequently hear managers say that to get ahead their people must work harder, think outside the box, apply themselves more intensely, put in more hours, etc. While each of these descriptions may make sense to management, they are difficult for employees to get their arms around.
In my first job out of college, I received a five percent raise which was double the raise my counterparts received. I was told that I received the five percent raise in pay versus the two-and-a half-percent raise my coworkers received because my boss believed my performance in my first year to have outshined the others in my group. But for the life of me I couldn’t figure out exactly what it was I did that was so outstanding.
The truth of the matter is that my company did not measure performance. Raises were given at the discretion of management.
Because neither I nor the other members of my team knew precisely what we were measured on, all we knew to do was work hard. How about in your company? Do your people know precisely what they must do to receive a raise or a bonus? Or are they kept in the dark as to what measurable results lead to a predetermined raise in pay?
While most companies pay their salespeople a commission tied to something measurable; perhaps sales, perhaps gross margin or perhaps some of both. But inside salespeople, drivers, load pullers, administrative staff, buyers and credit managers are often unaware of any measurable goals their supervisor holds them accountable for.
From the standpoint of the employees, discretionary raises are better than no raises, but they fall short in one major way: the amount of raise each employee receives oftentimes is determined by what the employee did lately.
If an employee accomplished something really exemplary in December (assuming a December 31 year end), he or she most likely was rewarded more highly than an employee who did something equally exemplary in March or April.
By the same token, if an employee did something really stupid in December, the bad judgment is likely to be fresh on the supervisor’s mind when raises are announced in January and will influence the amount the employee receives.
Virtually everything in the sports world is measured. As a consequence, performance standards are crystal clear. When a professional athlete’s performance exceeds the coach’s expectations, both the coach and the athlete know it. There is no doubt. No argument. Everyone understands the performance criteria.
Employees cannot train to achieve fuzzy goals. As a result, morale is almost always lower in organizations where employees have to guess as to why they received a particular raise or a given bonus.
If the managers in your organization have not yet sat down with each employee and discussed what each is expected to achieve in measurable terms, I strongly suggest that you do so immediately. I suggest that you go ahead and do it now while you still have a few weeks left in the year. If you’ll make this one modification to your management style, I can just about guarantee that your company will be more productive.