I listed two groups of words related to measurement on the whiteboard and asked the participants for the difference between the two.

The participants volunteered various interpretations and concluded that the words in Group A connoted general directions, intangibles, intentions, and expectations. The words in Group B meant specific outcomes or results desired.

Most of the time, people are more comfortable stating generalities ("I would like to be successful one day") than being specific ("I want to have $2 million cash by the time I'm 50"). Consequently, most targets are couched more in terms of intentions or expectations, rather than specific results desired. Being specific gives the impetus to achievement whereas an intention could remain just a desire or a wish.

The participants were asked to write down how they normally set targets in their respective areas of work. The results they came up with included the following:

Both Sales and Production said that they had set their respective targets well because they met the SMART criteria (that is, of being specific, measurable, achievable, relevant and time-based).

Targets are usually considered difficult to set for support groups, as not all their work is deemed quantifiable. Nevertheless, every functional group, be it a revenue or a cost center, has a contribution to make to the organization. However, the fact is that we are not used to establishing performance measures for the less-tangible and indirect contributions for them to be seen as partners to the enterprise, and this is something that needs to be addressed.

It is a common misconception that meeting the SMART criteria is all there is to proper measurement. Using these criteria, which are actually a checklist, requires that targets are set according to specifications. However, we need to look beyond meeting the SMART criteria for setting targets or establishing performance measures.

SMART says that targets must be specific, measurable, achievable, relevant and time-based. Though I have no quarrel with the specifications, they are not helpful in determining relevant key results areas. A checklist is not necessarily a thinking process.

Targets are specific results expected and are closely related to the needs, intentions or expectations of the organization's internal or external customers, as well as the aspirations of the one setting the targets.

For example, the intention to increase the organization's top-line sales revenue will contribute tangibly to its gross revenue. But what about collections? What about the quality of the product or the service level provided? What about the cost incurred in selling and collecting? Is the customer's overall satisfaction great enough for him to want to continue to do business with you or refer other businesses to you?

Assuming the top-line sales target is met or exceeded, but the collections are less than 50 percent on due dates, does that constitute a good sales performance?

Did the goods or services sold meet customer requirements, or were there returned goods? Were re-dos or re-designs needed? What expenses were incurred to achieve the sales revenue?

To be in the business for the long haul, the human or emotional aspect of meeting the target has to be taken into account too. If the relationship with the customer is good, beyond pricing and meeting specifications, the organization can be better assured of continuing business and referrals. With this in mind, organizations that pay sales commissions based on sales revenue alone would be well-advised to review their system. As Sally put it: "Professionalism in sales is not just achieving the top-line revenue."

This line of thinking prompted Paul to observe that in the Production area, too, their concerns were not limited to volume and timing: "We also have to worry about yield and meeting quality specifications. We must also consider unit costs, and have to ensure that in achieving our targets, our production operators are not so overworked that they have to take medical leave or get into accidents through tiredness. If they are so stressed that they resign, our future production schedules and production yield will not be met. We have to look after the customer well; but we also have to look after our own people well."

This opened the way for broadening the discussion to setting targets for the support groups. In recruitment, for example, this might require that the department adopt a position where it looks on itself as an outsourced recruitment agency engaged to recruit for the company. In doing so, it will focus more closely on what the line managers as internal clients require. As Ravi, the Recruitment Manager, put it in the course of our discussions, this would entail meeting "a broad set of expectations from our internal clients: that all vacancies be filled as soon as they become available; that all the applicants we shortlist meet the job specifications given to us; that we recruit as cost-effectively as possible and within salary grades; and that we don't recruit people who are likely to quit before they complete their probation."

This insight into the need for a balanced set of measures was reflected in the comments from the other support departments. Felix, from Facilities Management, spoke not simply of renovating the office within budget and by target date, but in such a way that there should be no need for further re-wiring, re-cabling, or touch-ups after handover and employees would be delighted with the new office. Frank said that his monthly financial reports would be "useful, readable, and user-friendly" and produced "without engaging temps or incurring overtime expenses." Above all, he guaranteed that they would be free from the errors that had made previous offerings "of little or no value to end-users."

In my experience, in organizations where targets are perceived to be something of a carrot-and-stick tool, the training sessions are muted and participants guarded and inhibited. However, it need not be like this, as the enthusiasm generated by the participants in this session clearly showed. Having participants from all areas of the business discuss and clearly articulate their expectations of each other in this way can sharpen the focus of each on how they can contribute by way of internal service to the overall health of the organization. In the Engineering and IT areas, for example, such considerations might include not only reducing machine/computer downtime and the attendant repair and maintenance costs, but also ensure that production's product quality is not compromised. Important, too, is the attitude that the various technicians might take to requests for assistance from the machine operators when machines are down. Including the reactions of the end-users to the maintenance team's support service can be another of those intangibles that can be so important. Good working relationships affect teamwork and productivity.

Two components are important in setting balanced targets for individual performance: efficiency and effectiveness.

To be able to deliver a quantity of product or service within a stipulated timeframe is being efficient. However, managers need to look at the quality of the service or product, the cost of achieving quantity and time targets, as well as the human reaction or impact associated with the achievement of the other expected results. This could be considered the effectiveness of the target. When we set targets, we need to establish a balance between being efficient and being effective, the characteristics of which are set out in Table 2.1 below.

Once we have a thinking process to establish performance measures, we can actually establish these measures and set targets for any field of human endeavor.

For example, when we looked at the Sales group's presentation earlier, we concluded that achieving a particular sales revenue within a certain timeframe was not enough to constitute a good sales performance, which also had to incorporate meeting customer expectations and being cost-effective in making the sale. This involves watching the expenses incurred in making the sale (such as entertainment and travel expenses), not forgetting customer satisfaction and fostering sound human relationships to ensure a long-term business relationship.

Setting targets is easy if you are talking about giving a number to the KPI. What makes it more difficult is that the targets must be challenging and yet achievable. But this could be seen as being quite subjective: what the manager may see as challenging, the direct report may perceive to be unachievable. This goes back to what we said earlier about anything measured getting done and anything measured getting improved. Things may not be done well and improved if there is no clear understanding and willing acceptance. The understanding is the logical part and the willing acceptance is the emotional part.

In truth, we are looking for commitment to the specific results desired, and not just dispassionate compliance with the targets set. It hinges on management as an art, too, and underscores the need for regular performance reviews, communication, motivation, coaching, and counseling sessions. It involves building a trusting working relationship between superior and direct report. Performers in support functions should be made to feel that they are running a business within a business with a captive clientele, meaning the internal customers. For those serving external customers, they will have to feel that they are stakeholders in the enterprise formed to serve external customers and clients.

Ideally, we would like a situation where the direct report wants to set targets that are so challenging that they have to be moderated, such that the direct report is not too demoralized when the targets are not met. If you can create such a working environment, then you have arrived as a leader and a manager of people.

The question then arises as to how to go about arriving at targets that are motivating enough for people to commit to, rather than simply to comply with.

A challenging target is one that is higher or better than the one previously achieved. But should it be slightly higher, moderately higher, or very much higher? Achievable implies that there is a high likelihood of it being achieved. The more conservative the target, the more achievable it is; conversely, the more ambitious a target, the less achievable it is.

With highly motivated individuals and those with a strong sense of mission in life, almost anything is achievable, and they are willing to take on challenges. Ordinary folks are sometimes envious and label such people "incorrigible optimists."

For the majority, especially when their bonus and reward are tied to targets, there must be a practical way to arrive at an understanding and agreement as to what constitutes a challenging and achievable target. This is not necessarily straightforward, as Tracy observed during the training session: "If you have a kind, lenient, or popularity-seeking superior, you can set targets that are easy to achieve. If you have an ambitious, demanding, or glory-seeking superior, the targets will be tough to achieve, and these are euphemistically called 'stretched targets.'"

While her observation may be true to a certain extent, it is not always the lenient and popularity-seeking superior that will use unchallenging targets. Some managers are under the mistaken impression that rewarding more than is deserved is motivating. But this is not motivating; it's manipulating. For the more demanding managers, the glory they are seeking may be elusive if people are not truly committed to the targets set.

One useful way to at least obtain understanding and acceptance is to estimate the most pessimistic and the most optimistic results expected, and then settle on a target somewhere between the two extremes.

The extremes represent low probability of occurrence; the in-between represents the relatively higher probability of achievement. You then review whether it is achievable after an agreed period, such as at the end of the first quarter.

To a certain extent, people who set low targets are not necessarily motivated by monetary rewards alone. More than anything else, they may lack confidence. These are the people who need encouragement and support with feedback and coaching.

After listening to all of this, Sally asked, "Let's say currently I have 10 complaints per month, whether justified or not, and I set a target of five complaints, which is an ambitious target. However, my boss says that in order to compete better we should have no complaints. How do we resolve this? If he insists and I have to do it, I will only be working for compliance rather than from commitment. So what should the target be?"

This produced considerable discussion among the group, with Imran pointing out that: "Having zero complaints is not necessarily a good thing. If customers don't complain, they may be taking their business elsewhere. There will be complaints, some justified and some unjustified. Some may even be misplaced notions of customer rights. Some could be beyond the control of the performer."

Martin expanded on this: "In practice, there will always be complaints and, hopefully, compliments. One way would be to set a target where compliments exceed complaints. The percentage of compliments exceeding complaints, whatever the type, should be increasing, for you to retain your customers."

Quite naturally, the discussion ventured into other areas of business activity, with Paul pointing out that the Production area was required to meet its schedules with no accidents, which was no easy target if "machines are old and workers are not safety conscious."

Asked for their comments on what they would set as a target for accidents in these circumstances, the other participants agreed that the target of zero accidents was correct. Henry pointed out, "If we really care about our people and claim that they are our most valuable asset, as many mission statements do, we have to live the talk."

When we want results to be challenging and achievable, we are thinking about being realistic. Achieving zero accidents is being realistic, as the experience of many Japanese companies has shown. If we expect zero error rates from nursing staff who dispense medicine, or from air-traffic controllers guiding planes to land, there is no reason not to have stringent targets in other areas where personal safety is concerned.

Hence, setting challenging and achievable targets should not be done mechanically as a checking-off of items on a checklist, without insight.

Tracy, who had been listening carefully to the discussion, spoke up at this point: "I have a question. Just the other day, we were discussing the need to have perfect punctuality rate in reporting for work, in case customers called and were not attended to. Objections were raised about the impossibility of achieving this because of traffic jams, crowded buses and trains, and so on. Similarly, if a machine is old and we know it will produce defects, setting zero defects as a target is one we know we cannot achieve and the will to do it won't be there. My question, then, is: Do we then take into account causal factors for not meeting a previous target, or potential causal factors when establishing new targets for the year?"

Both the reply and the source were somewhat unexpected. Frank was quite clear that "If achieving these things is a must, then it is a result to be pursued with intensity." He elaborated further with an example from his own field: "In finance, if we cannot get an injection of cash during hard economic times, we will have to fold. We simply have to find a way of getting the cash—beg, borrow, or look for a bail-out! It is a must, and creativity is demanded."

It was intriguing to hear an analytically trained person talking about the need for creativity and I was quick to reinforce the view that if a situation demands it, then it provides the rationale for the seemingly impossible target.

Most productive and dynamic companies will set the targets, and then look for ways to achieve these results, rather than giving excuses as to why they can't be achieved. Managers may understand this, but the team members down the line may not be able to perceive things with such depth of thought. Management will see it as realistic if a business situation demands it. Direct reports, on the other hand, may see it as merely being idealistic.

The tone from the top will set the climate and the culture of the place. If top management has a steadfast belief in things, and demonstrates that belief by setting equally demanding targets for themselves to address the situation, they are more likely to be able to change the mindsets of those who work under them and convince others to commit to the seemingly impossible targets.

That is leadership—not just operational management.

Having set the targets, the next thing to do is to take action. For project work, action plans are common. An action plan might look like that shown in Figure 2.1.

Figure 2.1. A Typical Action Plan

For example, marketing people planning a promotion drive may use an action plan to co-ordinate activities involving many people to achieve the results targeted. First, they list the targets set, then they brainstorm the activities, or what has to be done to achieve the targets. They then estimate the time needed for each step, and assign a person to be accountable for the completion of that step.

For each step there is a budget if direct expenditure is needed. If not, the cost will be the work hours expended relative to the duration estimated for each action step. There is provision within the plan to review the status of achievement of each step, when the team gets together to review results achieved and action taken, at periodic intervals.

Some organizations even anticipate what could go wrong at each step. They then plan preventive actions to reduce the probability of things going wrong, and institute contingency actions in case the preventive actions do not work. Others estimate the net worth of a project by comparing the value of the overall results stated in the target, and deduct the expenses incurred in effecting each of the steps.

Action planning can be useful for regular job functions such as recruitment or training programs and the steps involved can be incorporated into the company's operations manual.

As it is with any human endeavor, in any business there will always be a cause-and-effect chain. As Eugene remarked during the training session, there are times when results in the Engineering area are dependent on other people in other areas doing their part, and he gave the following example to illustrate his point: "If Purchasing is slow in procuring the machine parts we need, and the parts can't be supplied in time, then our downtime or maintenance schedule targets won't be met." Similarly, Accounts cannot produce comprehensive reports if they don't receive timely and accurate data; or production schedules can't be met if raw materials are not supplied on time or if operator vacancies are not filled with the right type of people.

When a part of the product/service-delivery process breaks down, the rest of the process is affected. However, someone has to be accountable for the results at each stage of the process. If the customer does not get his goods on time because of a disruption in the production or delivery process, the customer is going to hold Sales accountable for its commitment to delivery date. The customer will not be interested in internal cause-and-effect problems.

All departments within an organization are part of the product/service-delivery process, as illustrated in Figure 2.2. Each position-holder in the organization therefore has an internal customer who expects specific results from the internal supplier of product or service. These expected results come under the generic key results areas of quantity, time, quality, cost, and human reaction/impact.

Figure 2.2. Product/Service-Delivery Process

Some people ask how we can logically be accountable for disruptions in the supply chain or factors outside our direct control. The concept of delegation requires us to be accountable to the person who delegated the job to us, and this person is finally accountable to others for the results.

So, although logically we cannot be held accountable for factors beyond our control that affect our results, we are still accountable for the results expected of us. We must, therefore, anticipate and prevent potential problems that are likely to jeopardize our results. If the prevention fails then we have to take corrective or contingent action to reduce loss and the impact on overall results. If we can, we should put in place preventive measures to reduce the probability of occurrence of the likely causes for problems, so that we can be better assured of achieving the expected results.

Of course, there could be situations related to natural disasters such as earthquakes, floods, or epidemics. In such cases, managers are expected to put in place contingency plans to mitigate or reduce the severity of the impact on their results.

Every contributor to the results has to think of the "what-ifs" to work on, besides developing action plans. Planning and controlling are basic management functions.

Planning has been described as a basic management function to predetermine a future course of action which can be short term or long term. Controlling can be likened to a thermostat to assess and regulate an operation in progress or completed. Setting targets, therefore, invokes the need for planning and controlling, besides the soft skills required to manage for commitment to targets set.

The question then arises as to whether there can still be joint accountability for the same results. The answer to this is "yes." In training programs, for example, one of the key result areas may be that trainees apply what they learn. The target could be that 100 percent of participants apply what they have learned within two weeks of completing the training. The company expects returns on investment in its training efforts. So it is necessary for participants to apply what they have learned on their jobs. The problem is that when they return to their workplace, the priorities of their immediate superiors may not give them the opportunity to apply what they have learned. To ensure that their superiors support this result expected by the company, those who sent their direct reports for training should have the same key result area. In that sense, there is joint accountability.

In Sales, there could be a key result area which says sales collections are up to date. The target could be 100 percent collection of receivables that are more than 30 days overdue. Similarly, in sales collection, up-to-date collection is a key result area. It is also a key result area for Accounts. This is another case of joint accountability for results.

In production, too, it is evident that yield, a key result area, is the joint responsibility of both the Production and Quality Assurance departments, who are jointly accountable for ensuring that the required volume is produced at the required quality.

In the training example of participants applying what they learn back on the job, the Training Manager has that key result area and related target to achieve, as she is accountable to her superior and the company. Likewise, the line manager who sent his staff for training has that key result area and related target, and he is accountable to his superior as well as the company for the achievement of that return on investment in training.

So if both parties have to achieve the same results, then they have to sit down together and identify the complementary duties each has to perform to achieve the same result. The Training Manager has to ensure that participants at the training workshop acquire the skills and knowledge to be able to apply to situations on the job. During training, situations cited could be generic or simulated for participants to practice in and gain insights from. The line manager, on the other hand, will have to identify or provide real work situations for the returning participants to apply what they have learned, to follow up, and if necessary, to provide coaching on the job.

Transfer of training to the workplace is often neglected, which is why most companies do not derive many returns on their investment in training. Paul took me up on this point: "Sometimes, the line managers cannot perform on-the-job coaching," he argued, "because they do not have the necessary expertise!"

This is a valid argument, to which I would say that it is better to regard training and development as a means to an end, rather than as an end or activity in itself. People who apply what they have learned do so because the workplace environment supports that. To create that supportive environment, it is better to train to implement a system, a process, or a structure. The question of the manager not being able to coach will not be an issue as they would have been trained to implement the system too and part of the training would enable them to be able to coach direct reports.

As a final point on joint accountability, Sally suggested: "To ensure that both parties meet their targets for collections, for example, Sales and Accounts could get together to see who would raise the alert when an account is near overdue, who would inform the customer, and who would collect. I think it's important to be clear about our roles."

What Sally said actually touches on the nature of delegation. All the job functions people perform are delegated functions. For example, there will be a list of duties associated with collections; namely, alerting, informing and collecting. These are complementary roles to ensure that the targeted collections can be achieved and clear decisions must be made as to who is to alert, who is to inform, and who is to collect.

So, to a large extent, joint accountability results areas require teamwork and foster inter-functional working relationships. Roles must be clearly defined to avoid role conflicts when results are not achieved and shared glory when results are attained.

Henry summarized this section of the training session very neatly: "We can have very neat, balanced key results areas," he said, "but implementation requires total understanding and acceptance of the concepts and implications in other aspects of our work. Only then can people see the big picture and not be myopic about target setting. This has implications for teamwork and not just delegation."

This set us very nicely on the road to the next consideration about performance measurement: how to get measurement accepted. I asked the participants to consider why many people are resistant or wary about measurement, even though they know it is a very useful motivator for getting things done and getting things improved.

Felix volunteered the view that it is "the fear of failure and more so when results are tied to remuneration. Those who know they are capable will want measurements to confirm their achievements. Those who are not doing well, or are unable to do well, will prefer to justify performance with activities they have undertaken. They will tend to put forward efforts as key results areas, rather than actual results achieved."

He felt that average or acceptable performers would be anxious or confident, depending on whether the prevailing management style was encouraging or evaluative and pressurizing when results were not met.

In light of these comments, the question then arose as to how we should look at measurement, so that our concept of it is transmitted to the workforce for them to embrace it as a personal feedback tool rather than as some management action to be anxious about.

Henry was the first to respond: "If we use performance measurement as a control tool, and we use it as a carrot and stick, then employees are more likely to view it as being intimidating," he said. "However, if our objective is to give performers a tool to measure their own performance, just as a jogger would use a stop-watch to measure his workout, then no-one should feel anxious about it. In other words, we should sell it on the notion that it is for self-control, rather than for management control."

Frank took up the subject, approaching it from his particular area of expertise: "When we develop a budget, we track variances using the items in the budget as targets. That is managerial planning and control. But that is easily accepted because we are measuring the performance of the organization and there is no threat to personal esteem or face. However, if we use it as a device to track the performance of individual departments, it is like monitoring their performance. We notice that departments that do not perform well generally display signs of defensiveness. There is a personal stake and their discomfort level is higher. It's the same with individual or personal targets."

After a short silence, he continued: "If self-control is the emphasis, then the reporting of actual results versus the expected results of the individual should be viewed as providing information on progress. In that way, people would view measurement in a less intimidating light. But this is easier said than done. People will still be anxious about being measured, except when they themselves are responsible for measuring their own performance."

The managers had put it very well. There should be ownership of the results expected, and the notion of running a business within a business puts employees in the entrepreneurial chair, and the variances between expected and actual results are just updates for himself or his shareholders and stakeholders.

While there will still be some who will feel uneasy with having to measure their own performance, others will be very eager to do so. The task of management is to get the critical mass in between these two groups to be comfortable with it.

In the course of our discussions, a recent proposal by hospitals in Britain to pay National Health Service surgeons bonuses based on the number of lives they saved was brought up. This plan proposed to link the surgeons' merit payments to such things as patient mortality, rates of infection, re-admission, and post-operative mobility.

Newspaper reports on the proposal indicated that this would have the effect of deterring doctors from taking on higher-risk patients, such as the frail and the elderly, and from carrying out complex operations. Patients facing surgery were reported to be horrified by the proposals, and they questioned why doctors should be paid a premium for performing a basic duty; that is, to save lives. They felt that dedicated doctors would be insulted by the notion that they would only do their best on the operating table if there was extra money in it.

This is a classic case of measuring A and getting B, a perverted outcome that was never intended when the target was set. It is an aberration of the premise that anything measured gets done and improved. If these measures were to be implemented, the majority of doctors would perform fewer complex and risky operations.

The question arises then as to whether it is possible to refine the measurement system to prevent B from happening. In this case, quality was to be measured by the mortality rates, complications, and other clinical standards. They should perhaps have added a further quality measure—the proportion of normal and high-risk patients cared for. This could perhaps give greater rewards to doctors who care for a larger proportion of high-risk patients. Indeed, where greater recognition was accorded such cases, skillful doctors would be more likely to want to take them on.

The participants raised other, similar, examples of how quality of results might be defined differently. Felix, for example, pointed out that schools were at one time measured and ranked according to the percentage of passes their pupils attained, as well as the number of distinctions, credits, and passes scored. "This caused some school principals to be reluctant to take in weaker students," he said. "They forgot that their mission is to provide education to all who need it. The key results areas for schools have since been refined to include factors like level of improvement by the school. This gives recognition to schools that take in weaker students and enable them to learn better. So this is another way of defining quality of results."

Having considered these general examples from outside the company's field, Sally brought the discussion back to the specifics of Resu's activities and to her specific area: "In sales, many companies used to reward salespeople on gross sales revenue alone. As a result, salespeople worked hard to inflate sales volume and value to earn large commissions. But when quality measures—like the mix of new and old customers, and new and established products—were included, the payment of commissions was no longer just based on sales revenue or volume alone, and the better, more professional salespeople were revealed."

Summing up the above discussions, we were able to conclude that individual measures have to be comprehensive, and take into consideration quantity, time, quality, cost, and human reaction and impact. It may be more difficult and time-consuming to derive standards for quality and human reaction and impact, but these factors indicate the performer's level of professionalism.

Another pitfall to avoid is the way of stating measures. Businesses tend to establish negative measures such as resignation or turnover rate instead of positive ones like retention rate. They use reject rate rather than acceptance rate. They measure downtime rather than uptime, and so on. Yet another common pitfall to which many fall foul is that of confusing result with action. This could be because they are more action-oriented than results-oriented.

Sally pointed out that sometimes results look a lot like desired actions. "For example," she said, "a sales manager may have a target to launch a promotion campaign to generate more sales. Which is the target and which is the action? Both can be actions and both can be a key result area." In such a case, we have to look at one as an end, and the other as a means to an end. For that sales manager, the desired result could be to generate sales of a certain amount by year-end. The promotion campaign would be the means to achieve that end, or the action to take.

To launch a promotion campaign by a certain date would perhaps be a target for the Advertising and Promotion Manager. That would be his end and his means would be to select media reach, arrange the event venue, offer promotional incentives, and so on.

Paul, who had clearly been mulling over what had been said about the tendency to accentuate the negative aspects of measurement, had another perspective. "I am also asking myself whether measuring accident rates is enough to reduce accidents in the workplace, because accident rates are available only after the fact," he said. "Should we not also measure things that can help prevent accidents, such as housekeeping? Machine maintenance is already handled by Engineering to prevent accidents from machinery operations. So we should measure the preventive besides the corrective, shouldn't we?"

Eugene agreed: "I'd say it's better to measure the preventive than the corrective. It's cheaper and safer. How about also measuring near-misses like crates dropping from forklift trucks, people slipping and nearly falling on wet floors, etc.?"

These were very good suggestions and a further preventive measure may be the number of hazard hunts done per week. It might also be good to measure improvements instead of compliance. For example, it is better to measure improvements in delivery times, rather than simply concentrating on late deliveries.

Henry had another contribution about pitfalls to avoid. "We often take measures but we seldom act on them promptly after the results are known. Also, we tend to act only on the negative variances. Shouldn't we congratulate those who achieve positive variances and learn from their successes too? That is the human side of measurement. It is not about figures and statistics. It is about people and performance."

At this point, Frank added: "In Finance and Accounting, there's no such thing as a perfect measure. It is what is universally acceptable. That is also why we have so many sets of measures to measure the financial health of an organization. Yet some organizations have been able to conceal their financial ill-health. Also, many stock analysts have been proven wrong in analyzing the investment values of some stocks using financial measures and other projections. Hence, there is no such thing as a perfect measure."

Martin then weighed in. "It all boils down to the question of how accurate the measures should be. For example, if we want to measure customer satisfaction, we could commission a detailed survey among our customers. But every survey by a specialist agency costs money and time, and we may not be able to do this regularly. Besides, these surveys use random sampling and not 100 percent samples."

We cannot hope to measure everything accurately all the time. We can, for example, accept compliments over complaints as a valid indirect measure of the level of customer satisfaction.

The same would apply for employee morale, or what is sometimes referred to as "organizational climate." We cannot possibly conduct a survey every month to monitor employee morale, but we could use indirect measures such as punctuality, absenteeism rate, and retention rate, which are symptomatic of morale. These may not be 100 percent accurate, but they are acceptable measures. For business purposes, using what is practical, acceptable, and cost-effective to collect will often have to suffice. Some personality inventories and profiling instruments have also been regarded as having face validity. Yet, they are accepted as additional data to provide a composite picture of someone's personality make-up.

Indirect measures are acceptable so long as they are understood and accepted. In fact, it is safe to assert that there is no such thing as a measure with 100 percent accuracy and validity. For example, a panel of judges at a beauty contest will be an indirect measure of beauty. Some people might dispute the judgments, but they are accepted measures, unless we can come up with more-direct and less-cumbersome measures.

In training sessions, I usually ask participants to try setting targets for their professional/technical functions and/or their managerial functions. As a guide, I show them an example of a training manager's technical and managerial functions, as illustrated in Figure 2.3.

Figure 2.3. The Training Manager's Technical and Managerial Functions

In apportioning targets between the two sets of functions, as a rule of thumb, the higher the managerial position held, the more managerial functions there should be relative to professional/technical functions.

The relative percentages have to be agreed on between the manager and his/her superior. If the organization is young or a start-up, even senior managers may spend more time and attention on professional/technical functions to get the business going.

To end the session, I then showed the relative weighting between professional/technical work and managerial work on a hierarchical matrix (see Figure 2.4).

Figure 2.4. Relative Weighting Between Professional/Technical and Managerial Functions

Key Points to Ponder

• Things measured do not automatically get done or improved.

• An appropriate organizational culture is needed to foster commitment to specific results desired.

• Intentions and expectations need to be translated into specific results desired. This process needs to be learned so that every functional contribution can be measured.

• The SMART criteria have their limitations in assisting all functional groups to establish performance measures.

• The thinking process for establishing performance measures goes from identifying critical and key results areas, to creating key performance indicators as units of measure, to target setting.

• A balanced set of individual performance measures will include measures of efficiency and effectiveness.

• Measuring efficiency takes into consideration quantity and time—how much and by when certain quantities (in volume or value) have to be achieved.

• Measuring effectiveness takes into consideration quality, cost, and human reaction or impact—how well the efficiency has been achieved (the quality of the quantitative results achieved, the cost incurred, and the positive or negative impact of the results achieved on people).

• Managerial performance should be measured, in addition to technical or operational performance.

• Targets need to be challenging and achievable to motivate people to contribute to productivity.

• Every step in a product/service-delivery process can have balanced measures, so that everyone knows he is virtually operating a business within a business. The person in the next step is the internal customer who serves the ultimate external customer.

• Pitfalls to avoid in establishing performance measures include: confusing actions with results; being mindful of unexpected outcomes that pervert or diminish the importance of the original results desired; and using performance measures as a carrot-and-stick approach.

• It is important to get measurement accepted before implementation, as measurement can be intimidating even to conscientious workers.