How to Set Great Performance Metrics and Expectations.
One of the most common frustrations among business professionals is performance metrics. Performance metrics are how employers value the contributions made by their employees and how employees clarify the expectations of their employer. It’s a simple tool that when used with intentionality can be a powerful asset for a company, but when used wrong can be one of the fastest ways to lose top talent and discourage your workforce.
I’ve been on both sides of the table. I’ve had performance metrics set for me and I have set performance metrics for employees I manage. I’ve had realistic metrics assigned to my role and have had unrealistic metrics assigned. I’ve also assigned realistic and unrealistic metrics. Here what I learned from these uncomfortable situations.
Why We Use Performance Metrics
Performance metrics were created for one thing: driving profitability. This started in the manufacturing days when employees were paid a daily wage. To earn your daily wage, you needed to accomplish a daily task. As labor laws and standards were developed, we moved to a more stable workforce where day laborers became employees, eliminating the practice of distributing wages on a daily cadence.
Moving away from a daily task with a daily wage added a level of complexity to measuring the effectiveness of employees. It also decreased the visibility employers had into the contribution of each individual employee.
Employees could show up to work and fail to accomplish their tasks, yet still get paid. Not long after, we transitioned again into a digital workforce where jobs tasks are more and more difficult to quantify. Naturally, this creates a need for job accountability, which is why performance metrics have become a standard practice for modern organizations.
The practice of implementing performance metrics in itself is not a cause for employee frustration.
When done correctly, it helps employees to thrive and feel accomplished with the work they are doing.
When Performance Metrics Go Wrong
Employee frustrations with performance metrics only become an issue when the metrics employees are being held accountable to attain are created for reasons outside of role accountability. For example, sales reps should be accountable for setting appointments and closing deals; the finance department should be accountable for maintaining budgets, salaries, and other financial tasks, the reasons why the individuals were hired.
Performance metrics go wrong for four main reasons:
1. The expectations are unrealistic.
2. The metrics are not directly related to the role.
3. The metrics are not measurable.
4. There is no clear path to success.
Keeping it Realistic
Every founder I’ve ever met has lofty goals. In our minds, we see our vision and we want to live that vision out ASAP. The problem is that our vision doesn’t always align with our reality, and sometimes it takes time — read five to ten years — to build that vision.
One of the most devastating things we can do to our employees is to demand that they make our vision a reality on an unrealistic timeline. This pressure leads to setting goals like 100x revenue growth year over year, 5x efficiency increases quarterly, and maintaining a bi-weekly release velocity. The simple reality is that your employees might be able to achieve goals like this one or two months out of the year, but trying to maintain these goals makes your employees feel as if they are constantly failing, even though they are working their asses off.
If you’re a venture-funded company, this reality is in your face every day. It’s important to shelter your employees from unrealistic demands and bipolar tendencies of investors and board members.
Setting metrics requires a level of intimacy with the various roles in your organization. Every individual you hire has a specific task that makes them a key player on your team. If they do not, congratulations: you’ve just identified some organizational bloat.
It’s important to set a metric specific that is easily measured for every role in your organization, but not all roles will be measured the same. Great employers know that to keep their ship running smoothly requires two types of employees, the technician and the administrator.
Technicians are specialists, they do one thing really well, like writing software or closing deals. These individuals should be measured on a set quota.
Administrators tend to be jacks of all traits, they can write some code, they can interact with clients, and they can manage a team. These individuals should be measured on a growth metric.
The difference between a set quota and a growth metric is simple. A set quota is a daily expectation that can be achieved inside of the 8 hours that an employee is in the office. Generally, you will have overachievers and underachievers. Pick a number that is right in the middle of the two groups. This will keep your best performers happy and those who lag behind working to get better. With the exception of new technology, this number will not fluctuate year over year.
A growth metric is something that cannot be achieved by doing the same thing over and over. It requires thinking outside of the box and optimizing. Administrators can optimize their team by finding and providing new technologies, managing a healthy team culture, and implementing new systems. This is where your bottom line growth comes from. It’s important that your administrators know that it’s their job to make this growth happen and not pass it on to the technicians.
If It’s Not Measurable, It’s Not Attainable
This is the most simple aspect of performance metrics. Every metric should be easily measured with a number. Judging employee performance by time spent in the office, personal growth, or third party perspectives does not yield accurate assessments.
A Clear Path to Success
The final and most often neglected frustration with performance metrics is not setting a clear path to success. As founders, we are forced to think differently than our employees. We see a problem and break it down into a series of steps, so for us building a path from A to Z is an everyday practice. For employees, however — especially younger employees — creating that path is not always as simple.
When setting a new performance metric, it’s important to work with your employee to know if they are confident that they will be able to make this objective happen. Most likely, at first, they will tell you that they can accomplish the task. If you see them stall out or get frustrated, it’s most likely due to them getting stuck creating a path to success.
So solve this, simply work through the task with them. After doing this one or two times, you will see that they begin thinking about problems differently and are able to build their own success paths without any additional support.
Setting fair performance metrics can be one of the most rewarding things that an employer can do for an employee, and happy employees can lead to speedy growth in your organization. Next time you are frustrated with your company’s growth, instead of turning up the heat or threatening salaries, talk with your employees about how they are doing with their performance metrics. Maybe they just need some encouragement.