Is it true that if employees are engaged that they will perform better? Or is it true that if employees perform better they will be more engaged?
Despite all the words we have written about how to make work more fun, we still haven’t found which of these is more true. But what we do know is that everyone wants to perform and, deep down, to excel. Take sports for example. Most of us like to win, and to be part of a winning team. Don’t you?
Feedback on performance
Most sports give instant feedback on our performance. And being on a winning team is a source of pride.
James A. Belasco and Ralph C. Stayer write about this in ‘Flight of the Buffalo’ (1993).
“Bowlers are good examples. How many would keep bowling if you hung a sheet over the pins so they couldn’t see how they did on every roll?
This situation is similar to how most traditional companies work. The people have no means of knowing how the things they do affect the company. Any information they receive is unrelated to what they did, or it is so old that it is no longer relevant.
But we all share a deep desire for feedback on our performance. We can tap into this deep well of energy and commitment in organizations by helping employees build systems that measure their performance against those things critical to success.”Is it true that if employees are engaged that they will perform better? Or is it true that if employees perform better they will be more engaged?Click To Tweet
Measure the right stuff
The importance of performance measurement is not new. Peter Drucker allegedly wrote: “If you want it, measure it. If you can’t measure it, forget it.” Those words are as true today as when Drucker wrote them.
Belasco & Stayer: “People love to be measured. But measure the right stuff. The right stuff is that which creates great performance for customers. The right stuff is what helps you keep learning. The right stuff is what helps you continuously improve.”
Here is where it often goes wrong in traditional companies. They believe it is a manager’s job to measure the performance of employees and teams. They think that he or she needs to control employees because employees are not capable of, or motivated to, manage their own business.
And that’s wrong!
Progressive performance management systems
Progressive companies show that employees and teams can easily manage their own affairs as long as they know what performance is expected, and when they can track it in a transparent manner. That’s why these companies put transparent performance systems in place.
Belasco & Stayer; “Every machine operator, every janitor, every secretary, must know exactly what great performance is for their jobs. If your current system does not do that, you have a serious obstacle.
Does every person in your unit know how he or she is performing? At the end of each day or week? If people don’t know how well they are doing, you can’t expect them to do it well.”Progressive companies show that employees can easily manage their own affairs as long as they know what performance is expected, and when they can track it in a transparent manner. That’s why these companies put transparent performance systems in place.Click To Tweet
So, performance of employees, teams and the organization should be visible to all—and in a transparent manner. That is, not filtered through another party like a manager or supervisor. The data also need to be real, not sanitized, and available in real-time.
This sounds relatively simple for smaller organizations. But how can you do this in larger organizations? Let us describe two large and progressive organizations that have such performance management systems in place.
The first is the Dutch health-care organization, Buurtzorg. They have >14,000 employees in >1,000 self-managing teams. Each team has a maximum of 12 people.
Buurtzorg’s purpose is to help sick and elderly patients live more autonomous and meaningful lives. There are, however, no managers in the whole organization. That means that there are no managers to do performance management (and control).
Instead, the Buurtzorg teams are measured on key indicators, including:
- Number of customers
- Productivity (there is a productivity target of 60%, i.e. 60% of contracted hours must be billable)
- Client satisfaction ratings
- Employee satisfaction ratings
Performance of all teams against these indicators (and others) is monitored centrally, and all teams are ranked on a transparent ‘internal performance league’. This ‘league’ is visible to all employees via an intranet called BuurtzorgWeb.
All can instantly view his or her team’s performance relative to other teams and a national benchmark. Teams and employees who fall below organization targets are notified individually.
The ‘internal performance league’ makes relevant information available so as to manage daily issues at work and to establish organization goals. It is not seen as a control mechanism for top management.
Instead, it creates awareness of what is really going on, and everyone gets an opportunity to monitor and adjust faster, as required. It replaces the traditional top-down control by a performance management system based on peer-review.
We found a similar system based on a transparent ‘internal performance league’ at the progressive Swedish bank Handelsbanken. They have >12,000 employees in ~800 local branches in Sweden, the UK, Denmark, Finland, Norway and the Netherlands.
Handelsbanken’s goal is to achieve higher profitability than the average of peer banks in their home markets—and to have more satisfied customers, and lower costs, than their competitors.
Since the early 1970s, Handelsbanken has been strongly decentralized with a philosophy claiming that ‘the branch is the bank.’ Most important business decisions are made at local branches by the local staff. They know their customers and the local market the best.
Handelsbanken does not do any budgeting, however. They believe all employees should be able to compare their performance with that of peers.
That’s why, in the absence of budgets, all local branches are measured on a cost-to-income ratio (C/I-ratio) which acts as a formal competitive benchmark between the different branches. As a result all local branches compete with each other teams in an internal league, with results published each month on their intranet.
Next to the C/I-ratio there are also other indicators (such as trends in business volumes, customer numbers and audit ratings) that branches and regions look at to gauge a healthy business development.
The transparency of the performance of all branches makes it possible for branches to know how well they’re doing compared to peers, and offers meaningful comparisons.
This ‘internal performance league’ helps to drive performance, continuous improvement, and discussion between branches to learn from each other. It creates healthy peer pressure, as all branches aspire to good standing in the league.How To Foster A High-Performance Culture (Just Like Buurtzorg And Handelsbanken)Click To Tweet
The performance results of both of these organizations speak for themselves:
Buurtzorg outperforms competitors in many aspects. For example, they score a client satisfaction rate of 9.2 (on a scale of 1 to 10). And 98% of Buurtzorg clients would recommend Buurtzorg to others. Plus,they score 8.4 on employee satisfaction.
The performance of Handelsbanken is equally telling. Their profitability is higher than the average of their competitors over the past 47 years. And they have been the most cost-effective bank in Europe for several years. And perhaps even more importantly, Handelsbanken has been among the highest levels of customer satisfaction of all banks since independent surveys began.
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