Getting and Keeping Competitive Advantage

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Strategix Performance, Inc.

Do you know what your most important asset isdoing right now? We’re talking about your workforce:the people that deploy your capital, translate yourobjectives into strategies and strategies into execution,and serve your customers to generate value.Would it surprise you to learn that well over half of thetypical workforce does not know how their employermakes money or what its key goals are? And, that abouthalf of most incentive compensation dollars paid out arewasted? How can an enterprise acquire and sustaincompetitive advantage if less than half the workforce isaligned to its objectives? Of course the answer is, it can’t.

Do you know what your most important asset is doing right now? We’re talking about your workforce: the people that deploy your capital, translate your objectives into strategies and strategies into execution, and serve your customers to generate value.

Would it surprise you to learn that well over half of the typical workforce does not know how their employer makes money or what its key goals are? And, that about half of most incentive compensation dollars paid out are wasted? How can an enterprise acquire and sustain competitive advantage if less than half the workforce is aligned to its objectives? Of course the answer is, it can’t.

So it is that business performance management (BPM) – the processes and technologies of managing to key performance metrics – has emerged as a top priority for success-focused enterprises. But that begs the question: If managing performance isn’t already the core function of enterprise leadership, what exactly is? The reality is that because there are no formal governmentrequired “generally accepted performance management principles,” every enterprise essentially “grows their own.” We think there are some basic guidelines.

The Basic Rules

The bottom line in employee/workforce performance management (EPM) is that organizations made up of people behave like people. People aren’t machines, so it is a misperception to see businesses as machines with people as just gears in an engine. Organizations want to succeed because the people who own them, manage them and work for them want to succeed. But if the definitions of success are out of alignment – if the stakeholders don’t agree on the priorities – success won’t happen. So, rule one is: “Shared priorities.”

A well-known truth in BPM, EPM and enterprise incentive management (EIM) is, “what gets measured gets done.” This is because measurements, assessments and incentives are explicit expressions of your enterprise’s goals and objectives: your priorities. They tell your workforce what it takes to succeed.

For your workforce, business priorities are manifested in performance plans, goals and quotas, key performance indicators and metrics (KPIs), performance evaluations and incentive/recognition plans. These priorities are enabled by operating and human resource business processes such as training and coaching, and speed- and accuracy-enhancing technologies. All process, procedure and technology resources need to be in alignment to optimize goal achievement and performance success. If they’re not, you have workforce uncertainty. And, an uncertain workforce won’t fully commit itself to doing what you need them to.

Where does uncertainty come from? Sometimes it results from an absence of priorities. But, much more often it’s a consequence of conflicting priorities: Your objectives, processes and technologies – as the workforce perceives them – are not aligned and send contradictory and inconsistent messages.

Therefore, rule two is: “Enable certainty in the workplace.”

Workforce certainty is enabled by aligning:

• All employee business processes: eliminate contradictory work methods;
• All human resource strategies: don’t force employees to serve multiple masters;
• Business processes with enabling technologies: synchronize the “what” with the “how”; and
• Process execution strategies to both customers and employees: segmentation, life cycle and turnover management are just as important for the workforce as they are for customers.

Rule three is: “Set expectations and measure results.” Peter Drucker said, “The problem with management is they're measuring the wrong things.” In practice, that means goal setting and metric measurement that is untimely or irrelevant, not measuring all of the necessary metrics or using the wrong metrics altogether. Employee and business unit performance plans are mission-critical, and goals/targets/quotas need to be realistic and relevant. A word of caution: When it comes to goal setting, be explicit in what you ask employees to do, because they will give you exactly what they think you’re asking for, based on what they know, and what they interpret.

That is why a comprehensive, timely, accessible and accurate automated performance measurement system is essential. While there are many BPM/EPM reporting alternatives available today, because of the real consequences of inconsistent strategy execution, resist those that too widely disperse data-collection, reporting and analysis responsibilities: You don’t have thousands of CRM systems, you need one EPM system. Make certain that your BPM/EPM systems can integrate all of your disparate source data, and generate both scorecards/ dashboards and incentive plan results, because that communicates both “cause” and “effect.” Ensure that your scorecards and incentive automation encompass not just sales and revenues, but relationships and portfolios, cost optimization and profitability, service quality, performance evaluations and all of your leading and lagging KPIs.

Are Your Incentives Working?

More than virtually all other EPM and HR strategies, employee incentive/recognition programs are strong, explicit expressions of your enterprise’s priorities. The problem is that for many, “we know that about half of our incentive budget is generating the results we want; we just don’t know which half.”

Thousands of plan results over the past two decades have shown that 40 to 60 percent of most incentive budgets are lost on runaway plans, on employees who aren’t on the job long enough to make material contributions or employees paid for results that don’t fulfill key enterprise objectives (paying for sales when portfolio retention is the goal, or for widgets when revenue is the goal). While there are many more specific rules and guidelines for making incentives work, the general rule is “align incentive plans to priorities.”

The final performance management rule is “lead by example.” An underappreciated management reality is that senior executive leadership methods dictate how things get done in the organization: In environments of uncertainty, the workforce will “model” the leaders. Therefore, senior executives must recognize and embrace the “A”-List priority of implementing enterprisewide performance management. For BPM/EPM to succeed – with its ubiquitous impact on income statements and balance sheets – it requires the same rigor, consistency and universality that is applied today to financial management processes, systems and reporting, spearheaded by senior executive leadership, and making noncompliance non-negotiable.

Competitive Advantage

In today’s hyperreactive competitive environment, few enterprises can sustain competitive advantage by relying solely on intellectual or technological advances. Market and product innovations are rapidly co-opted by competitors. And, segment participants can easily acquire like technologies and processes in quick response to competitor initiatives.

The secret to long-term competitive advantage is not ideas, processes, products or technologies: It is your workforce. Technology enables business processes. Business processes enable people. And, people achieve the success. Long-term competitive advantage derives solely from the workforce, when employees are engaged, aligned, enabled and integrated into the execution of coherent business priorities and plans.

Success happens when the workforce is doing the right things (priorities), with the right tools (technologies), the right ways (processes). Performance management, intelligently conceived and implemented, provides dramatic and continual improvements in results by motivating employees to execute on desired priorities with relevant processes, and rewarding them for their successes.