I often teach, talk and write about the 10 Ailments that can disrupt, derail or even destroy an outsource or business relationship—and many of these ailments relate either directly or indirectly to the foibles of measuring performance.
A recent post by Paul Michelman on the HBR Blog Network stresses the necessity of getting the metrics right: “The wrong performance metrics will undermine good intentions every time.”
He uses call centers to show what can go wrong, and right, regarding intentions. Call centers, he writes, “all too often focus their performance reviews around cost-driven data like ‘average handle time.’ When representatives then try to keep calls as short as possible, they’re unable to solve complicated customer problems, driving up the number of repeat calls and the level of customer frustration.”
The Belgian telecomm provider Belgacom took a different approach. Michelman says Belgacom “switched from using average call time to a combination of two different metrics, one focused on customer satisfaction and another on resolving the issue on the first call. The new approach helped to reduce the overall volume of calls by 20 percent, while driving both higher customer advocacy scores and employee engagement scores.”
Those examples illustrate the beauty of moving from a simple counting or transaction-based approach to that of an outcome-based approach based on insight and on what needs to be accomplished.
That’s a basic tenet of the Vested approach. Rule #3 for example tells us to agree on clearly defined and measurable outcomes. And the ailments tell us the traps to avoid.
Ailment 9—what I call Measurement Minutiae—speaks directly to the problem of trying to do too much with your metrics. You can’t measure everything, but that doesn’t stop many companies from trying. The minutia that some organizations create is quite remarkable. We have found spreadsheets with 50 to 100 metrics on them. The thing is, if you try to measure everything you essentially measure nothing: you have a blur of meaningless numbers and little context or insight. Our research has shown that successful relationships reduce the number of metrics to between 5-10 key performance indicators, allowing them to focus on what matters versus everything that moves.
A related measurement ailment is Driving Blind Disease (Ailment 8): Many outsourcing agreements lack a formal governance process to monitor relationship performance. A company would develop arrangements but not outline how it would measure success. Typically they would focus on tracking costs but not measure important aspects of performance. As a result, outsourcing agreements often failed because of an unclear definition of success and a lack of proper alignment.
Then there is possibly the saddest of all the ailments The Power of Not Doing (Ailment 10). This occurs when companies invest big bucks in fancy software measurement tools and scorecards, but then fail to follow through and actually use them to manage the business. We have all heard the old adage “You can’t manage what you don’t measure,” but if the metrics compiled are not used to make adjustments and improvements, then don’t be surprised if the expected results fizzle.
There’s a delicate balance when it comes to metrics: avoid doing too much or too little—and ignoring what you do measure is even worse!
As Michelman notes, “If you mean it measure it. Put your metrics where your mouth is.”
Image: Measurement by whoswho via Flickr CC