Driving Human Metrics

When describing the critical ingredients for a successful IT program, we often see the phrase “People, Processes, Technology”. As individual components, all three are jointly necessary for successful management and transformation of any organization. We should emphasize the importance of the order in which we list them—people are by far the most important resource to an organization. People leaders often say that having people be successful in their roles is critical to the success of the organization. Yet organizations often spend proportionally less effort examining if they have the right people to be successful (much less spend the resources to develop and manage the careers of those people). This is the opposite of how an organization should behave if it values outcomes, and not simply outputs.

The proliferation of articles in industry journals lately suggests an increasing emphasis on the importance of metrics in IT service delivery. The reason for this, as Information Technology as a practice has matured, is actually twofold: first, businesses are increasingly expecting every business unit be able to demonstrate efficacy (usually something akin to a ‘return on investment’); second, competent technology leaders understand that a service offering that isn’t measurable is a service offering that cannot be improved. To put it another way, if you can’t measure it, the likelihood that it is critical to the business is quite small; and if you can’t measure it, you have no idea how well you are doing it.

Now, to return to the original discussion: if people are the most critical component in Information Technology management--necessary to drive successful outcomes--why do we struggle to effectively measure, develop, and reward the critical contributions of our people? In part, individuals perform based on how they are incentivized; unfortunately, many “performance metrics” actually penalize qualities that we should encourage (e.g. risk taking or creativity) by focusing on output such as tickets closed or number of goals met. And if we focus only on performance metrics, we miss the critical aspect of employee engagement—how fulfilled employees are in their role. High employee engagement has been strongly correlated with low turnover and high productivity, which are both critical ingredients for businesses to have positive outcomes. Performance metrics alone, while important, do not give us what we need: a way to measure how well individuals are performing and how engaged and fulfilled they are in their roles.

While other performance and production metrics remain important, concepts such as engagement should be measured and emphasized with equal weight

One approach that has gained in popularity recently is the use of KPIs, or Key Performance Indicators. KPIs tell you both what a business unit needs to do and what to measure in pursuit of the organization’s long-term objectives. Performance metrics measure outputs, things done or produced; KPIs measure outcomes, or states/conditions achieved. Thus, every KPI is a metric, but not every metric is a KPI. A good example of a KPI might be, “Increase customer retention by 25% in the next fiscal year by reducing cancellation events by 50 per week.” It supports a long term strategic objective common to most businesses (increase revenue) with a specific objective to measure. So how could we employ KPIs to measure employee performance?

Objectives and Key Results (OKRs) are proven to effectively the bridge a destination with your current state and, KPIs via OKRs engenders responsibility and ensures that expectations on desired outcomes are aligned. This approach encourages fulfillment rather than output chasing because efforts are targeted in pursuit of larger strategic objectives. This effectively encourages high performance by linking individual success to positive business outcomes and makes performance management another aspect of measuring what matters to the business: the success of its people.

While other performance and production metrics remain important, concepts such as engagement should be measured and emphasized with equal weight. One approach is to target activities that increase positive responses to key questions within the employee engagement survey. These targeted questions frame the Objectives (or the ‘O’) within ongoing OKRs. The Key Results (the ‘KR’s) or KPIs will target growth in elements such as staff training utilization; and recognition activity application; or the level to which individual contributors are involved in strategic planning activities; or targeted inclusion of work items derived from within the contributing team.

With this tandem focus, the overarching outcome of enhanced performance is now seen from all relevant lenses. These tightly interdependent OKRs and their supporting activities drive the desired outcome; without the strategic overlay provided by KPIs, performance metrics provide interesting and valuable data points (e.g. number of people that have taken training) but neither drive action nor give insight into employee engagement. When engagement and fulfillment are considered as an input and driver of performance, the use of OKRs in support of KPIs offers two perspectives of measuring people performance in pursuit of objectives and encompasses both outputs and outcomes.