Measure Performance and Motivate Employees

CUNA’s E-Scan newsletter
June 4, 2010 | COMMENTS

Business leaders usually don't expect profitability and efficiency to rise during a recession. And they might not have experience—or much of a comfort level—using operational metrics to motivate frontline employees.

But that's just the situation described by strategy + business magazine at StockPot—a business group within the Campbell Soup Company. Campbell 's profitability stabilized in 2007 but shot up 50% during the 2008-2009 recession. Under the new team:

• Plant efficiency jumped 23%,
• Employee engagement scores increased by 14%, and
• Workers surpassed their United Way campaign goals by raising 27% more than the previous year.

The StockPot team accomplished this by focusing on a limited number of measurable performance objectives. They did so in a way that was personal, spontaneous, and positive. They found a way to lead with balance, drawing together formal mechanisms and the informal community.

Formal and informal

In every company, there are really two organizations at work: the formal and the informal. The formal organization is the default governing structure of most commercial firms, which:

• Runs on rules, operates through hierarchies and programs, and evaluates performance by the numbers;
• Trains senior managers in the “hard” disciplines like finance, technology, or operations; and
• Deploys tangible factors like job descriptions, organization charts, process flows, and scorecards.

The informal organization, on the other hand, emphasizes the company's human aspect, which:

• Revolves around values, emotions, behaviors, myths, cultural norms, and uncharted networks;
• Proves vital, especially in situations of change or transformation; and
• Includes less-positive aspects, such as unexpected opposition, anxiety, and fear of change.

Organizations that sustain high performance have learned how to mobilize their informal organizations while maintaining formal structures, each in sync with the other.

But it's difficult for any manager, even one inclined toward the informal, to understand exactly how to lead “outside the lines.” There's no universal recipe book: The right balance of formal and informal measures will look very different depending on the company, the business, and the circumstances.

Leaders who are well-versed primarily in formal measures might be less comfortable dealing with what they see as the “fuzzier” aspects of an organization. They might assume that a company's culture is largely the by-product of formal measures. They might also believe that informal measures require time-consuming “high-touch” conversations, which busy leaders never quite fit into their schedules.

In creating balance for an organization, one place to start is with performance goals and metrics. This means figuring out how to use metrics (which are usually quantitative) to evaluate and improve performance (which is often qualitative ).

Values drive performance

One of the keys to driving change at StockPot was plant manager Ed Carolan's focus on metrics that motivate. He needed to make the organization more values-driven, and that required an understanding of how employees currently viewed company values. So Carolan and several members of his team:

• Conducted a series of small-group roundtable discussions among all employees;
• Learned that people worked in routines they had followed for years, often with little or no attempt to improve those routines; and
• Found that morale was poor, collaboration was minimal, and teamwork was virtually nonexistent.

Carolan and his team synthesized input from the roundtable discussions, made a list of proposed values, and distributed them to employees. Then they asked people to vote for the ones they thought were most important and boiled the values down to a short list.

This process proved to StockPot employees that their opinions and feelings mattered. They developed a greater sense of ownership of the values than they would have had with a list created by the leadership.

With these values in place, the leadership team shaped a strategy with only a few essential elements. For each element, they identified one or two metrics to track performance. One key metric was “service to our customers.”

Service to customers was strategically important given the company's increased focus on retailers with high expectations. The ability to serve customers well was a source of employee pride, and the metric tapped into and reinforced an emotional energy to help drive coordination between shifts, efficiency improvements, and quality assurance.

As successful as that measurement was, Carolan was careful not to add too many more of them. “You want a small number of metrics to create focus,” he notes. “When there's a proliferation of metrics in a bunch of detailed scorecards, it can be difficult to ensure everyone is aligned with what really matters.”

Teams that win are the ones that figure out the short list that matters most. Having a balanced set of measurements makes it more likely that everybody can find at least one that really motivates them.

Creating synthesis

Success at StockPot was the result of the plant manager's unrelenting insistence on performance—both individual and group—and his ability to employ metrics in a way that was meaningful to his employees. His approach was neither “all hard” nor “all soft.” To informally reinforce the numbers and help make them meaningful, Carolan's team:

• Aligned strategy with action, so employees understood how values translated into daily work.
• Set up dynamic processes that were constantly improved upon by suggestions from frontline employees, managers, and leaders.
• Promoted the constant circulation of new ideas.
• Supported networks that had grown organically, cutting across rigidly defined groups and structures.
• Encouraged pride among employees—pride in the company, in one another, and in their daily accomplishments.

Business leaders who are comfortable with formal and informal approaches will make the most progress toward integrating the two, whether among teams or entire enterprises.