The Reality of Business

The Best Way to Measure Business Performance: The Truth Behind the Metrics

• Bob Morrell and Jeremy Blake • Season 6 • Episode 7

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How do you measure a company's performance effectively? 

Join us for a lively exploration of performance measurement in organisations, complete with a humorous sketch that pokes fun at the murky world of target setting. We unravel the history of performance measurement, tracing its roots from the chaos of the Industrial Revolution to the precision of today's AI-driven insights. Discover how methodologies have evolved over centuries and how companies today strive to balance efficiency with societal goals like sustainability and corporate social responsibility.

From the post-war emphasis on customer satisfaction to the balanced performance measures of the 1980s, we highlight how the landscape has dramatically shifted. The conversation then takes a modern twist with the introduction of tools like the balanced scorecard and OKRs, and how real-time insights provided by big data and advanced analytics are disrupting traditional metrics. Are OKRs poised to replace KPIs, or do they coexist in a complex performance ecosystem? What the hell does that even mean?

Finally, we dive into the challenges inherent in the traditional focus on quarterly targets, particularly in large public organisations. The implications for employee morale and the systemic pressures tied to these targets are scrutinised, as is the critical relationship between learning and growth. With a blend of humour and insight, we critique the flaws of conventional metrics and advocate for a more holistic approach that values employee well-being and customer experience. 

Tune in for an episode that promises to transform the way you think about performance measurement and its role in personal and organisational growth.

For more info, free resources, useful content & our blog posts, please visit realitytraining.com.

Reality Training - Selling Certainty

Speaker 1:

Bob, thanks for coming in this morning. I'm going to be with you for just a few minutes and give you something to go away and digest. So here you go, If I just give you those. Those are the new targets.

Speaker 3:

Oh, these are the new targets for the next 12 months.

Speaker 1:

A full year, absolutely the full year in your hands.

Speaker 3:

You know exactly where you are and how we're going to measure performance okay, and how have you managed to arrive at these interesting sets of figures you've just given me?

Speaker 1:

well, it's not something I'd normally share, but fine, I'm happy to disclose some of what we do. We it's quite complicated. We look at a whole range of things, a whole range and we pour over figures and we look at last year and we play with some variables. We look at different percentage uplifts and we have to also factor in the different people in your teams and how they're behaving and what they're actually doing, and then we arrive at the right figures that will enable us to have a very good grip on what kind of performance we're after of. Which targets are you know? A part of that?

Speaker 3:

I see. Well, I'd very much like to have a look at some of the data that's driven your choices.

Speaker 1:

I'll stop you there. So I've already shared enough. This is really bored stuff. We do this work. If your career continues to progress, as I'm sure it may, you'll be there one day, but it's not your territory for now. I've really told you enough. It's, as I said, quite complex how we arrive at this.

Speaker 3:

All right, so there's a kind of a club who is involved in this and those that are in it.

Speaker 1:

I think you're now being slightly cheeky, so look, I'll catch you later. All right, Okay.

Speaker 3:

Welcome to the reality of business.

Speaker 1:

This is Bob Morrell, and I'm joined by my friend and colleague, Jeremy Blake, good day and thank you for pressing play and hopefully the title has some interest for you.

Speaker 3:

So we are going to spend this episode looking at how companies measure their performance, and this is a subject that we come up against quite a lot in our work. We meet different organizations and they talk to us about their targets and their KPIs and all the things that they do to measure how well they're doing. And this feeds into the sketch that we did at the beginning, because, of course, these KPIs and things feed into targeting, and, in fact, the first ever podcast that we did was on the subject of targeting, and it's something that we come back to again and again because it's such a controversial subject. There are so many different ways that you can look at it, so we thought it would be a good idea to take this subject of performance measurement for organizations and see if we can delve into it a bit and find out where it all comes from. Where do these ideas of performance measurement come from and what are the different methods that you can use? So that's what we're going to be focusing on today. Anything to add to that, jay?

Speaker 1:

well, my question is, bob, because this is you, this is your. You've probably worked our format out. Now, listeners, it's changed's changed. So I'm just intrigued, bob, where did you?

Speaker 3:

start. Well, I'm going to be entirely honest. So listeners will, I'm sure, have listened to our recent episode on AI. We did a very in-depth dive for beginners into the world of artificial intelligence, and so for this episode, I have put everything into the world of AI, chat, GPT and, apart from my own knowledge and experience of this, I have got the entire history of performance measurement in companies over the last couple of hundred years and I've asked it a key question as well that we're going to look at the answers to and that's going to give us all of that info.

Speaker 1:

Well's my point, ai, as we've talked about, is it? You know, a research tool if you like, but it's such a broad topic. What was the thing that you thought I've got to start here? What did you? Was it the history? Because you're a history buff, did you start with history?

Speaker 3:

well, the question that I've asked is for the, the bot, to research the history of how companies measure performance over the last 200 years. What are the major differences, what are the most effective methods, and how else should companies measure their performance and their people? So it's a very broad question covering all those different topics, and I've been given a very broad and comprehensive set of answers to those questions.

Speaker 1:

As you're reading through. What will interest me is which bits you concurred with, as DiCaprio would say in his wonderful film. Do you concur? Did you agree with it or did you go? What that's not my, that will interest me. Did you agree with it or did you go? What that's not my, that will interest me.

Speaker 3:

So there's one thing that you and I have come up against a lot, and that is organizations who have quarterly targets, so they measure their performance by quarterly targets. I now know the reason for that. Oh glorious, yes, please.

Speaker 1:

Categorically. So don't hide away, let's go straight. Okay, let's give the listeners well let me. We've worked with obsessional north.

Speaker 3:

We have, we have but I now understand where this comes from. So let's first of all go back 200 years, because 200 years we are back in the time of the industrial revolution, and this is a period that you, of course, know lots about jeremy and um what do you want to know?

Speaker 1:

well, what was the major conflict?

Speaker 3:

that was going on at that time, so going back to 200 years, 1810 to 1820. What was what was at its height?

Speaker 1:

which country do?

Speaker 3:

you want me to go to uk for starters?

Speaker 1:

yeah, well, we've got um. What's it called? What what's it called? Wellington was involved. It's the Napoleonic Wars, jeremy. Oh yeah, I thought you were talking about just the UK problem.

Speaker 3:

Yes, but we were at war with France. That was the major conflict at the time. So it was the Napoleonic War.

Speaker 1:

Hang on, peterloo. And all of that is just coming out of that, isn't it? Yes, it is Peterloo Massacre.

Speaker 3:

It's, yes, it is exactly in that period, yeah, so what you've got there is the start of industrialization. So a lot of coal mining going on, a lot of power being created, a lot of textiles being woolen mills created and sold, and also, of course, huge industrialization in terms of ironwork, steelwork, the creation of weapons. All these things taking place in Birmingham and Liverpool and Manchester.

Speaker 3:

The creation of weapons, oh, proper weapons, proper guns, with, you know, rifled barrels and things like that. It was a very, very industrious time. So if you were running your 19th century factory, jeremy, and I can just imagine you strolling about the halls of workers in your top hat, nice waistcoat. Just had a nice lunch roast potatoes, the usual stuff. You're going to be thinking are my workers actually being as productive as they can be Because I'm paying them a few pence a day to turn up and manufacture these things? How do I know that my output and my productivity is working? So how do you think performance was measured in the 19th century? What were the major ways they did it?

Speaker 1:

Well, I'm going to start with.

Speaker 3:

It's basic.

Speaker 1:

Yeah, I'm just saying they only looked at output. Probably they looked only at what could a man or a woman? So let's take its wool and let's just say it's the first stage of the wool production. Let's just say a sheaf or whatever. How many sheaves can a man produce in a day? I'd get my measure and then I'd want others to replicate that same output interesting expression yeah, I mean alan partridge, I think.

Speaker 3:

I think we'll use the word product. What? How many products can this person produce? Yeah so that's called piece rate. Yeah, okay, so workers were paid based on the number of units they produced in a certain time scale.

Speaker 1:

Okay, did they look at a good worker to get the initial measure, or did they not even bother that?

Speaker 3:

well, it's funny you should say that because at the same time, in the late 19th century, so a little bit later, we have the first time and motion studies created, introduced by your friend, frederick winslow taylor, named after the local town in Buckinghamshire where he used to go to the George, and those studies analysed the efficiency of tasks and aimed to optimise worker productivity. And in fact there's a very good film, charlie Chaplin. I think it's Modern Times, that's it, where they really take the mickey out of maximizing the time a worker is in place and um and so what you're looking at this point is simple production counts, basic accounting systems to track costs and rudimentary financial statements right the way through.

Speaker 1:

But you're right, they're all doing that.

Speaker 3:

They're all stuck on the piece rate the quantity of output and labor, with limited consideration for quality or innovation, because ultimately you've got to produce the stuff and get it out and get it off or any other measures of health and environment of the worker, and so on, and so on absolutely so.

Speaker 3:

Then we move into the early to mid 20th century and what you get there and this must be because you have the emergence of public companies and stock markets you have a shift towards financial metrics because companies become bigger and become more complex. So then you get the first usage of things like ROI return on investment Really which was popularized by a gentleman called Alfred Sloan of General Motors in the 1920s and it became central.

Speaker 3:

So ROI is 1920s yeah, central metric for evaluating business performance, your return on investment, and at the same time you also get cost accounting so you can more closely attract and track how you're paying for things, the things that come in and then what you're being paid for things going out, which allows you to then monitor your costs and your profits more closely.

Speaker 1:

So just a question here. So I'm interested about competitive forces. Let's say I and I want to just keep it really basic so that we step change our understanding as we go. I own a woolen mill, you own a woolen mill, I want to sell more units than you. I've got my piece rate. Okay, am I just flogging to increase the peace rate? But not knowing how I might increase the peace rate, I'm not even innovating. You're saying no or am I? No, I'm literally that Okay.

Speaker 3:

But I think what you've got, especially in the industrial revolution, you have no shortage of demand. Okay. So, whatever you're creating, you are going to be able to sell because there is a demand for it. Whether it be in this country or another country, there is a demand for the product.

Speaker 1:

But I might have greed to produce more output because of the demand. Yeah, and so, therefore, is this a ruthless time where.

Speaker 3:

Yeah.

Speaker 3:

Yeah, but is the demand for work and do workers have the power to change and move and Well, right the way through the 19th century, you have the chartist movements, you have various revolutions in other countries against this, because, ultimately, things that are products that everybody needs will have a rate, will have a price, and if I can get my workers to produce those things for a few pence less per person per day, it's going to make me more money.

Speaker 3:

That's my lever and that's where I think you get the emergence of communism, for example, which approaches it in a more fair and equitable way. But yes, as we move into the 20th century, we get those new ways of measuring return on investment. We get the first proper financial statements, profit and loss accounts and balance sheets, and so the shift is from output to financial outcomes, with performance largely measured by profit, efficiency and return on investment. Efficiency and return on investment, so those more basic factors of how much I'm paying to produce something. You look at it more holistically that this is what I'm getting back for the investment I'm making.

Speaker 1:

Going back to the sketch we did at the beginning, I'm still saying I want 10 out of you a day. I've still got my initial measure of performance. Yeah, but I'm not necessarily thinking beyond technological improvement of the lathe or whatever to increase that output.

Speaker 3:

No, and in fact I don't know that that particular element of imposing a target upon someone has actually ever changed, regardless of the methods the post-World War II era, from 1950s onwards and we move into much more modern strategic planning and diversification. So then we have a friend of the podcast, peter Drucker appears in the 1950s and he created this idea of management by objectives. So you have a clear, measurable objective for employees and you go look guys, this is what we measurable objective for employees. And you go look guys, this is what we're going after, and you move towards it. Now I think you could also say, now that extends into things like project management and and stuff like that that we all understand that you have a clear objective, beginning and middle and end, and off you go lots of people still aren't even on Drucker's page.

Speaker 1:

You know the guy guy who was still doing conferences and interviews up to about 100. Some people still don't even know what the objective is and what they're actually doing or why they're bothering.

Speaker 3:

Which is why at the same time you get the emergence of strategic business units. So a large corporation will then organize around a business unit with its own performance targets and its own metrics, which then feeds into a whole. So, very much like we have clients who have retention departments, new business departments, technical and support departments, each department will have its own business to some extent and then that's run effectively.

Speaker 1:

And less effectively in some, as collaboration becomes harder and you end up with silos, but that's probably something else to talk about another time.

Speaker 3:

Well, yes, but then you see at this point. So you move from the idea of now we can measure financial stuff, now the financial metrics are dominant because that's the key factor. But at this point stuff like market share starts to come in product quality because you get more competition. Customer satisfaction begins at this point. What year does that? This is now 50s to 70s, the idea that our customers are going to be happier Before you want the world to take it Now.

Speaker 1:

The customer satisfaction of your product over someone else's. Wow, okay, so that's when you get. That's still new, isn't it Still relatively new? It's still.

Speaker 3:

But then if you think about it, you know it's that competitive drive where certain brands are market leaders for years and then competitors comes in and then it does become a market, and then you have to measure other things to see and also the shift from commodity commodity product, like I need to eat a loaf of bread yeah I need some milk too.

Speaker 1:

There's now six people making chairs just in my town, so my the customer satisfaction of that production, of that unit becomes a measure. That that's fascinating. There's people alive today who were born when that became a measure for the first time. That's bizarre.

Speaker 3:

So then we move into the 1980s up to the early 2000s now, so there's a good 20, 30 years of this now and we then move into balanced performance measures. So this is the combination of financial and non-financial indicators. So that's your balance scorecard, which was developed by Robert Kaplan and David Norton in the early 1990s, and this introduced a more holistic approach, looking at all these different elements, internal and external, and they also included things like learning and growth perspectives as well. So that's an interesting addition. And then you have a thing called TQM, total Quality Management, so the continuous improvement and quality across all areas of an organization. And actually I'm sure at this point you'd have some Japanese management stuff being thrown in here as well, so working on the work with the workers stuff being thrown in here as well, so working on the work with the workers. So you then have this shift in this period to a more balanced view of performance and you're recognizing that of course there are financial factors, but there are also non-financial factors which play a part.

Speaker 1:

In performance. Yeah, that's the point.

Speaker 3:

So then you come into the last 20 odd years and there's a huge emphasis on sustainability, stakeholder value and digital transformation. So over the last 20 years, as markets shift from traditional to digital, then you're going to have a huge shift in people and what they're doing and how they're doing things and how you're selling things and how people are accessing what you do. So then you've got methods like things I've never heard of. Have you ever heard of triple bottom line? No, sounds likea dance. The triple bottom line is a method that expands the focus beyond profits to include social and environmental impact, so you're measuring the performance based on people, planet and profit. I know you'd like that.

Speaker 3:

So then we've got agile performance management, oh yes, so that's continuous feedback, goal-setting performance reviews, and that's dynamic and flexible and it aligns to the needs of modern, fast-paced organizations. Then another one I never heard of OKRs yes, I know that. Objectives and Key Results. So that's used by Google and they're used to set ambitious goals and track progress with specific, measurable outcomes. And then, of course, huge data analytics, the use of big data and advanced analytics. That gives you real-time performance tracking and predictive insights, which, of course, is where things like AI starts to come in.

Speaker 1:

Have OKRs replaced KPIs, or not really? I suppose loads of companies still talk about it.

Speaker 3:

I would imagine they're interchangeable. So the summary of the modern performance measurement is a more comprehensive data-driven aligned with broader societal goals, not just the goals of the organization, including things like sustainability and CSR corporate social responsibility, which is another big thing that we come up against. So there's quite a few things here to look at.

Speaker 2:

You're listening to the reality of business brought to you by Reality Training. Selling certainty. We're a leading sales training and coaching company based in the UK For information on how we help our clients improve their businesses check out our website, realitytrainingcom.

Speaker 3:

There are big differences in how you measure performance. So you've got the scope and the focus of how you measure things. Things like customer satisfaction, employee engagement we see lots of those surveys. Sustainability you know how do you go about measuring the scope of that? How sustainable are we as an organization? What's our social impact? You know these are quite hard things to go out and do a survey in order to get a number a number of results.

Speaker 3:

Yeah, then you've got time frame, because of course people have annual statements and annual accounts, we do that sort of. But then you have what about real time? What about now? What about predictive stuff on where we are now for next week or the week after? We're much better able, using tools like AI, to be able to use that tomorrow?

Speaker 1:

that's an interesting question. So without naming the client, do you remember one of our very first jobs, when we proposed there was only seven months left in their financial year? Yeah do you know I'm talking about already yeah, I know exactly who you're talking about.

Speaker 1:

Yeah and we were said we have to get the roi within the financial year. We went okay, so do you naturally add on the months that we no, no, no, I'm afraid we're in it. I went what? And they had to get some return on investment within the time period or we'd never get more work and it would be a failure and bizarre. So talk about time. You've talked about the invention of the quarter, because it was quarterly output and I guess that seasonal variations for sort of industrial revolution type products, they would have seasons perhaps.

Speaker 3:

Is that part of it?

Speaker 1:

of why they were quartered.

Speaker 3:

No, there's another reason why they're quartered. I'm going to come into that. It's very dull, I'm afraid.

Speaker 1:

why they're quartered, but the question I'm trying to come to you with and I'm thinking aloud the obsession with time. To you with and I'm thinking aloud the obsession with time. Why do so many companies only produce a year long measurement? We have our financial year, we have our calendar year. We've done this in a year. Why is only a year? And why can't we look at things over a longer period? Because in our families, in our homes, in our society, we look at the renewal and regeneration of a village over years. We look at our children's education over years. We look at the renewal and regeneration of a village over years. We look at our children's education over years. We look at a university degree over three years. We look why performance in a year? Why do?

Speaker 3:

we just stop press the button. So you and I run a private company. I think it's fair to say we are less concerned about our annual performance, broadly okay, if we had a public company, jeremy, we would be obsessed with nothing else, I'm afraid but why why? Because your shareholders expect a dividend within that year they want it in their bank within that, of course.

Speaker 1:

Okay, so it comes back to a date of payout it does right it's down to money in the end.

Speaker 3:

now there's a few other things here. There's now much more use of broader uses of employees who are involved in giving continuous feedback and aligning goals with the organizational objectives, and that's something we've seen a lot of more recently. And, of course, technology. So technology is improving. Ai is coming in managing big data, giving people deeper insights and more precise measurements, which then makes it easier to measure performance as well.

Speaker 1:

So that's a really fantastic and quite quickly done sort of overview of it all and going off to tangents, what's the bit that seems nonsensical to you, that actually should be ripped up and binned?

Speaker 3:

Well, ok. So I asked it what's the most effective modern methods? And it said the top four are the balance scorecard still used hugely the objectives and key results. So, again, just setting an objective and going for it, agile performance management and data-driven decision-making those four are the top four. Okay, and in answer to your question, if you look at how well should companies measure performance, you then come into those areas that we've already touched upon, which are really hard to measure. So how would you measure your or my holistic employee wellbeing, jeremy? How would you measure that? Mental health, work-life balance, career development, all that stuff? That's difficult, isn't it?

Speaker 1:

I think what's interesting if you're a small company listening and we are, you suddenly think about that we don't have huge numbers to tally up. We've got a small group of people, but how do you measure holistic Employee well-being? Holistic employee well-being, employee well-being that's just one.

Speaker 3:

Jay. The next one is impact on society and environment, Our innovation and adaptability. To some extent we could say something about. But the fourth and fifth, cultural and ethical alignment and stakeholder satisfaction. Which could be a shareholder? It could be other employees, suppliers, partners. There's all those different elements that come in here.

Speaker 1:

The first thing you're talking about is well-being. You couldn't state terms to a company saying this is how we're measuring your well-being.

Speaker 1:

You'd have to allow that, as you were saying a minute ago about 360 continuous improvement, you'd have to allow anyone to vote on what they think might be a measure because if if somebody said, well, we haven't had many people taking days off work, that fails in the nhs, who famously take less days off than anyone when they're sick, they have an incredible service attitude. Even when they're feeling rough, they go into work, which actually, as adam k always states, doesn't help because you pass your cold to six more people, the more nurses go and doctors and health care and admin. So you couldn't just have a measure like oh, we have only had two days off, that wouldn't, that wouldn't cut it.

Speaker 3:

You'd have to allow employees to input into those measures so those are the main methods that the companies use to measure their performance, and we can see that there's been a technological and actually I would say an ethical move over the last few years to change how we monitor things. However, I still see every company having a financial target, yeah, having a thing they're aiming for, whatever it may be be. Now let's move on to this area of quarterly targets, because this is a bugbear of ours. I know the reasons why now, but I just want to look at it from the perspective of outsiders looking in. So let's do another little sketch. Jeremy, I want you to tell me that over the last quarter, your team's done amazingly well, but you've just fallen short of hitting your target and I'll respond Okay, so I'm your boss, jeremy, how's it looking for this quarter? It's the last day.

Speaker 1:

How's it going? Phenomenal, in short, absolutely extraordinary. Everybody has lifted up their results. It's been an incredible team effort and as I looked at, I was up late around midnight. We are literally six grand off and it doesn't seem like we'll claw the 6K back in today. But it's such a near miss. To me it's a hit, it's just glorious.

Speaker 3:

Well, it's really nice to hear you look at it that way, and thanks for you know, and please pass on my my thanks to the team for all of their efforts and I, indeed I extend my thanks to you, but you will be aware that I I will have to report back that we failed in this quarter to achieve what we set out to do, so this will be looked upon as a failure. I'm afraid.

Speaker 1:

Hey, hey, hang on, hang on, hang on. Who you're reporting this back to?

Speaker 3:

this goes back to the board and to the shareholders.

Speaker 1:

They don't need to know. We've worked really hard. No, no, no.

Speaker 3:

We're a public organisation and they are entitled to know that we have failed to hit target this quarter which is disappointing.

Speaker 3:

You know the way that this organisation works. If you don't hit your quarterly targets, it is viewed as a failure. You're going to give people who've gone over their bonuses. Surely We'll come on to that Now. We'll stop it here Now. This is what we know. Some organisations do. They work to very strict quarterly targets and if you don't hit them, regardless of the effort that you have made, bearing in mind that all targets are really guesses you will view that as a failure and you might have employees killing themselves to do business and try and hit that target.

Speaker 3:

But if they don't do it they will be viewed as failures, despite their brilliant efforts for you. We always thought this was a scandalous thing that took place. However, I have asked the question why do many large organizations have quarterly targets? Okay, these are the reasons. If you have a quarterly target, that gives you a frequent checkpoint allowing you to assess the performance and make adjustments before problems may escalate. And this helps if you have market changes, competitive pressures or internal challenges and in fact, we do see organizations bring in offers at various points and what have you?

Speaker 3:

Also, if you've got a quarterly target, you've got time to performance monitor individuals and teams over that period as well. Rather than waiting for an annual review, you can try and improve things on a quarterly basis. The main reason for having quarterly is that public organizations produce quarterly earnings reports and these are required to report to the markets so that then managers and investors and shareholders can decide how well a company is doing. And, of course, it affects share price. That is the main reason that it is quarterly, because those earnings will contribute to an upward swing or downward swing in a share price, which could increase or decrease a company's valuation. Jeremy.

Speaker 1:

So the innovation potentially required? And I'm thinking of an Italian gentleman we worked with who missed his target. Every single summer in Italy he sold to universities a lot. He sold a particular software but the staff would not return from the summer break to begin the university reset till about September the 3rd and they had never in the history ever signed anything until about September the 7th. So it didn't matter what he did, he would miss. And what would be marvelous is if, even though all that stuff you've just said continued, but adjustments were made in the performance measurements of individuals, then some of the other scorecards you're talking about, like mental well-being and all that would, would see an uplift. But again, who's going to do that if they're a big business?

Speaker 3:

arguably that's when you broaden these conversations to more employees and get that kind of feedback so that you could possibly do that, but we know that in many cases that doesn't happen. Now there's also a few other general things. There's a belief that if you have a quarterly target, it keeps your teams focused and motivated. They've got a near-term goal. It's tangible, easier to achieve than the long-term annual target and it can prevent complacency, so you get consistent effort throughout the year.

Speaker 1:

You and I know that that doesn't necessarily sound accurate.

Speaker 3:

I agree. Now you could argue that your friend who knows he's going to have a dip in a certain month of the year, if he thought about it, he could perhaps pre-empt that by having certain conversations a bit earlier. You know, there are ways and means of doing it.

Speaker 1:

It's just the systemic of how an officious university system works.

Speaker 3:

Absolutely Now. Then of course you can celebrate if you do hit and if you have a quarterly target hit, you can have short-term success celebrations, which boosts morale and that reinforces a culture of achievement. So remember for all the teams who don't hit target in a quarter those that do will be lauded and taken abroad and go for big nights out.

Speaker 1:

I was a beneficiary of this. Of course, members around me who were not was a beneficiary of this, of course, members around me who were not, and I would stand there with my cheap frames, um, with my, you know, whatever the award was for the quarter, and you'd look around at the other teams because it was never really done off site, it was always done on the low cost, you know, yeah, and you might be handed a bottle at lunchtime and spin around your swivel chairs and other teams. Look at you go.

Speaker 3:

I just missed but you see, I know organizations, if they hit their quarterly target, they will take people off to barcelona for the weekend and spend tens of thousands, because those costs are nothing compared to the share price holding of the company overall. So that's why hitting it is quite important. Now there's a few other things. There's things about adapting to change and being flexible. There's a bit about testing testing strategies in a quarter. You can learn from those outcomes and refine it and approach it differently in the next quarter. So that would be good if people did that more. And then what you've got is other things like short-term and longer-term objectives. If you've got a quarterly target, that might help you bridge a gap between a longer-term goal and general. You know shorter-term stuff. So that's quite a nice way of looking at it. There's a few other elements here. You can organise your incentives accordingly.

Speaker 1:

You can give more regular feedback you're sounding like a fan of these now.

Speaker 3:

I'm not a fan, but what I didn't understand is all of the reasons, of which there are many why this works so well, can work so well allocating resource. Now I'll take your point here. Lots of organisations will have a quarterly target, with none of the things that we've talked about no.

Speaker 1:

So you talked about allocating resource. We are 10 miles to go. The front rider's tired. Let's change the rider. You know, whatever that happens in sport, there's none of that. You've got to still hit it, mate. There's no, Nessie, brilliant agile mixing of resources In some companies. There are. There's no, necessarily brilliant agile mixing of resources In some companies there are, but I don't know. It'd be quite interesting to look at the do quarterly measures work? That could be a whole paper, couldn't it? It could be.

Speaker 3:

I think that's actually quite an interesting thing because it's reliant on your market. If you're a public company, if you have a market that is happy for investors to sit and go, yeah, we'll wait a year, let's see how you do in a year, then you might not have to report so regularly. But I think we have very volatile markets that are very data driven. Can't see a trend, an incline, whether it's up or down, then that is going to make the value of a company, especially if it's a very, very large company, be affected hugely, and that's why but I also think society drives multiple changes.

Speaker 1:

So if we're talking about post-pandemic work and measures which is all part of this, then measuring performance, presenteeism isn't a measure anymore. We've talked about that in the past. Some of the measures are harder to track. We're not putting cameras on people, we don't know who's in the office, all those classic measures that you began with of person sat in position in factory. Let's measure their piece rate. We don't see that person sat. The factory is now their home, being a service economy for many, many companies and organizations. We're not measuring output of units, and so it gets more and more complex, doesn't it? So if you were to say what measures matter most for performance today in this hybrid working world, where would you go?

Speaker 3:

Well, it's funny, you should say that. So I also ask the question what is the best way for companies to measure their performance? So we've talked about all the different options that you've got and we've talked about why you might want to do it quarterly, and actually the things that have come back are the things we discussed earlier Balance scorecard, but in particular, finance, customer internal processes, learning and growth. If you've got those four things measured, then you've got a pretty good idea how you're doing, whether you're a public or a private company.

Speaker 1:

Give them to me again, sorry. Financial customer, financial Yep, customer Satisfaction, that sort of stuff Yep.

Speaker 3:

Internal processes. How effective are they?

Speaker 1:

Yep.

Speaker 3:

And learning and growth.

Speaker 1:

Okay, let's come to the last one, because that's our business. Okay, of course, I came off a call yesterday. Company isn't going to do the project with us or anyone. Yeah, that company doesn't measure learning in any connection to growth whatsoever. I think lots of companies not just them, but they were very vociferous and honest that they don't.

Speaker 1:

Lots of companies don't equate learning to growth. We beat the drum of that. We talk about learning over time improves knowledge, attitude, skills, performance and so on, and the company grows, the individual grows, individual grows, company grows. What about that? Do we need a new design of some kind of new performance measure? Because there isn't an A-level. You know you and I have youth that take exams and lots of listeners. Do you know? I've got a daughter who's been measured on two years of work and it's you've got these results. The other daughter, the same there is no exam with the business we're in. The financial director wants the conversion rate to go up, wants the managers to be better leaders and the delegations all this stuff, but there is no actual measure for that. So you've talked a lot about a whole number of different measures, but what could be a new invention to measure learning's connection to growth?

Speaker 3:

but then I look at all the other options here and in here. It's the same stuff kpis, okrs, your triple bottom line, which is my favorite. It's the same thing. It's people, planet, profit. That's it now. If you remember, many years ago we used to watch a film with indra nui of pepsi cola, talking about her focus on doing better. By doing better with the environment, you can be successful as a company and not put cost on society. That's your people, that's your planet, and if you use those thoughts, you can actually use it to drive profitability as well. Those things all kind of work together. Now, that's a holistic approach, isn't it?

Speaker 1:

It is, is retention a key measure of learning? If you're learning, you want to stay.

Speaker 3:

Well, that comes under the triple bottom line. That includes employee wellbeing. So yes, it does.

Speaker 1:

Again. I guess some people you can't change their minds if there's no value placed upon learning, because I think lots of people will hope that there's another group of people who will fill their shoes and therefore, although people are leaving and it's costing me money to recruit there's enough people on the planet I'll find some more to do the job, however good they may be. I don't mind if I haven't grown these individuals while they're under my care.

Speaker 3:

Well, let me give you another little thought on this. One of the other things you can measure and this is number six in the list of the best ways to measure is your friend of mine, mps. Oh, please, wow. So you have organizations, and we know them. Organizations right now who are monitoring their performance based on the net promoter score the likelihood of a customer to recommend their products or services to a member of the family or a friend. Now, we've done a number of episodes on this. Nps is an extremely flawed measure. Nps is an extremely flawed measure. It actually measures the wrong thing more often than not and is not a measure that should be relied upon. Lots of companies will manufacture their NPS. How many times on a call has someone said to you oh, we're going to send you through a little survey just to let you know. Nines and tens are good.

Speaker 1:

Giving you a little nudge there, the whole thing's manufactured and we go into detail on an upcoming in our upcoming book. Whose side are you on? Absolutely loyal bonding and strategic lies. It's interesting that that's still in there. So some companies. I had a thing the other day. I was asked if I wanted to enter a competition and I said yeah, great, and he said we fill in this. I said this isn't a competition. How many winners he goes, I have no idea, but it was NPS.

Speaker 3:

Yeah, absolutely so. Sadly, when you ask the question, what is the best way to measure a performance? It is different variations on similar things Finance, operational work, the customer and the employee. If you work on those four things, you're going to be relatively successful. What I would hope is that organizations wouldn't look at those things and go right, we need to do something for the employees, I know, let's send out a survey, let's tick that box right. Or we need to do something for the customer. Let's do an offer that ticks that box. Or we need to be a bit more efficient. Okay, customer, let's do an offer that ticks that box, or we need to be a bit more efficient. Um, okay, let's do a project to drive performance in this area. Yeah, let's do that, and we need to make some more money. So let's work out how we make some more money in terms of conversion. Or, uh, let's drop the price on something and so, or bundle something, so I don't know well, you, you can.

Speaker 1:

You can cheat the well-being performance. So we know of a number of companies who enter the Sunday Times best place companies to work for and they time the pay rise and the bonuses just as they fill in the forms and that matches very nicely what the Sunday Times measure and puts you into a good company to work with.

Speaker 3:

Well, we've worked for people, Jeremy, who've said it's funny, I'm going to send out my employee survey just when your project finishes. So people have just been trained, just been developed, they've just seen Jeremy and I running around on a stage somewhere and for a moment they feel slightly better towards their employers than perhaps they had done, and the survey comes back relatively positive as a result, and sometimes you think, well, where's the harm in that? And there is no harm in it. However, what I think is the overriding theme I've learned from going through this information is that these measures and the way they are implemented and I think that's the key thing how are they implemented? Are they implemented fairly? Are they implemented in the way we you know, demonstrated for you where just missing is a failure and that language is used and, which is very demotivating, that the world is variable by its very nature then I think they're pretty good guides. If you use them rigidly and strictly, I think they can be draconian, painful and demotivational.

Speaker 3:

And I think part of the talent of a decent manager, a decent director, a decent board is to go right. What are we going to measure? How are we going to measure it and what is our style going to be in doing this? Because we don't want it to be something which restricts us and demotivates people and ends up becoming a cost. Because if you get some of these things wrong, as we can see it, is going to be costly.

Speaker 1:

It is fascinating and I'm a bit aware of my brain's whirring, and whirring is the idea of what we can't see you know, and I'm thinking of sport and how advanced sport is and continues to advance. I'm thinking some of the post-olympic interviews of athletes and you know that idea of continual. I think you called it something earlier about this continual, continual improvement or whatever. There was a did you call it tqm? Something about continuous improvement and the way that's fed back you don't mean the triple bottom line no, there was something about continuous improvement.

Speaker 1:

Okay, objectives and key results. No, it was tqm and I wrote it down. But the idea that in sport we're looking for, you know, little gains, little things. The bit that I'm sort of stuck on is that the way sport advances and improves, that learning and growth into performance, which isn't just the goal, it's the team effort, all of that. I think business has a lot to learn and could take some of those attitudes and measures into business, of how you measure performance, translating them, which is very hard to do because sport is, you know, elite athlete and we're talking very much non-elite humans in in many roles and yet we want more out of them well in researching this, I think.

Speaker 3:

The other thing which I think we must come back to is what we started the podcast with targeting how do you target and how do you manage targets and Jeremy played an interesting senior person talking about how they all got together and used some kind of secret method to bring together the targets to then impose them upon their employees. Targeting is a very, very difficult and, in some cases, dangerous pastime.

Speaker 1:

I think what you've proven is that it's almost becoming the most basic poor measure of performance that exists.

Speaker 3:

Yeah, because it is a guess. It is an educated guess always.

Speaker 1:

And whether I hit or miss, my performance may be wonderful, it may still be good, but technically it was 500 quid off or whatever it was. Or you know why is it a miss?

Speaker 3:

Because somebody stuck a different number in a box and the funny thing about targeting is that sometimes, especially when it comes to sales targets, sometimes people just don't want to buy when you want them to.

Speaker 2:

sometimes people just don't want to buy when you want them to.

Speaker 3:

I remember when we do training sometimes we say look, there's three things that you've got to answer for your customer. Why should they buy this product, why should they buy it from you and why should they buy it now? And that's the key thing here Sometimes now doesn't suit me. I may like the product, I may like you, but I might want to buy it next month and that might not suit you. It's still a sale. But it's funny how sometimes we go well, that's a failure. No, it's not. They're going to buy. It's just a perception of how that may or may not work, so interesting.

Speaker 1:

It's great, great topic.

Speaker 3:

Thank uh it's a pleasure dived in there and we will return to this at some point. What I think I'd love us to do is come back with a new episode on targeting at some point and how that's done, because I think that is it's almost.

Speaker 1:

What could the new target even be in light of all these other measures? But the other one I'm interested in is how do you measure the application of learning to make any attempt to hit those targets? Yeah, I suppose the sadness of the integrity around it. What was the Sophocles quote you found last night? It's something like to fail with integrity is far better than to achieve with fraud.

Speaker 3:

I think it's very interesting that we're talking about Sophocles Jeremy while I'm looking this up, here we are. Who was Sophocles Jay?

Speaker 1:

He was a Greek he was. He walked around, didn't wear much.

Speaker 3:

No, sophocles was a playwright, he was the Greek Shakespeare. Okay, ancient Greek Shakespeare Was he? Thank you? Yes, he was. And he, he said this rather fail with honor than succeed by fraud. There you go lovely, there we go wonderful. On that bombshell, we'll leave you. We'll see you for another podcast soon, but in the meantime, thank you for listening. Cheery bye, thank you.