In this lesson, you'll learn about feedback systems and recognition programs for various areas of the operation.
Feedback is the often-overlooked component of performance improvement. This may seem strange, but it's true. To help you understand how this happens, let's look at a typical exchange between leader and employee.
You're the leader. You and your employee agree that you want to reduce the cycle time on billing by two days. You also agree that the employee's focus is going to be on procedures rather than on technology. Both of you feel that the goal can be achieved within two months. Your employee leaves the meeting ready to begin the procedural analysis.
What's missing? Deadlines? Communication triggers? Progress reports? Essentially, you and your employee failed to establish a feedback system. Why didn't it get developed?
Very simply, the existence of an agreement and your trust in your employee cause you to overlook the need for a feedback system. When your employee leaves the meeting you are convinced that she
Has a clear understanding of what needs to be done.
Understands the importance of the improvement initiative.
Knows the deadline and its importance.
Will honor her agreement to achieve this goal.
Wouldn't life be grand if it worked that way? The reality is that during the two months preceding the project's due date, this employee
In other words, there are a lot of things that can distract your employee from the agreed-upon goal. You can help her remain focused on the goal by establishing a feedback system. Here's an example of a simple feedback system:
Week two: . The employee submits procedural changes that have the potential of reducing the billing cycle by two days.
Week four: . The employee presents the reactions of employees who will be affected by the changes.
Week six: . The employee provides procedural updates including oral and written communications to the affected employees and launches the improvement effort.
Week eight: . The employee reports on the early stage success, the obstacles confronted, and the solutions created.
The existence of these interim goals and deadlines intensifies the employee's focus throughout the two-month time frame. This simple step dramatically improves the employee's odds of being successful. If the employee becomes distracted and loses sight of this goal, you'll know it much sooner. You'll also be able to take corrective action much earlier than you would without the feedback system.
I know that we've discussed this before, but it bears repeating. When you establish a feedback system, be sure that the employee can monitor her progress. In the feedback system just outlined, you can see that it's easy for the employee to determine whether she
Identified procedural changes.
Obtained the reactions of affected employees.
Provided written procedures and oral instructions to each affected employee.
Obtained information on the success and problems her coworkers experienced.
Met the deadlines.
Now that you have a sense for the more common mistakes made with feedback systems, let's look at a variety of operating areas and determine what your feedback systems can measure.
There are two goals in marketing. The first is to create general market awareness; does the public know that we exist?
That's why you see pharmaceutical companies running ads touting their prescription medications. It's also the reason why you see the "Intel Inside" logo on every computer that includes Intel chips.
The second goal of marketing is to elicit orders. General awareness ads run by a pharmaceutical company won't influence the physician who is making the buying decision. He needs study results, drug interaction information, a clear understanding of possible side effects, and the cost of the medication. It's obvious that these marketing goals require different approaches and, consequently, different feedback measures.
Let's use the pharmaceutical company example. The company is marketing a cholesterol-reducing prescription medication. How will the company determine the success of its general awareness ads? What feedback systems can it employ?
The company can survey people within the age group that is at greatest risk of heart disease. These people are likely to have their cholesterol tested on a regular basis. The company's survey can include questions like:
Are you familiar with the names of these medications? (Provide a list that includes your medications and those of your competitors.)
What is the purpose of each of these medications?
Based on the ads you've seen, which medication would you consider most effective?
Would you ask your physician about this medication if you had high cholesterol?
If you had a loved one who had high cholesterol, would you suggest that she ask her doctor about this medication?
This information will tell the marketing people how successful they are in gaining public interest in their products.
The company can survey physicians with questions such as:
What percentage of your patients with high cholesterol asks about a specific medication?
Which cholesterol-reducing medications are generating the most interest with your patients?
Which medication produces the most inquiries? Which medication ranks second? Third?
Do patients who inquire seem to have a preference for one medication over another? If so, what's the reason for their preference?
Measurements from the physicians' survey may be less precise than the public survey. That's because doctors don't often track the frequency of patient requests for a medication. They do, however, remember their patients' questions. That's enough to help the pharmaceutical companies gauge the effectiveness of their market awareness campaign.
Tip
Make sure you understand the level of precision that exists in the measures you use. A lack of precision doesn't eliminate value, but it may diminish value.
With the information from these two surveys, the marketing team can assess its current level of success and establish goals for improvement. Assume that the surveys show that 37 percent of the public knows the name, but only 8 percent ask their physicians about the product.
There are several improvement opportunities available. The marketing team can pursue an increase in public awareness from 37 percent to, let's say, 40 percent. It can target higher rates of patient inquiry off the existing 37 percent awareness. Or the marketing group may pursue some combination of the two. The feedback from the initial effort provides the basis for new goals, new marketing messages, and new feedback. That's the cycle of continuous improvement worth employing.
Some of the things you want the feedback system to track are
The number of contacts with the physician before an order is received.
A ranking of the physicians' concerns about the medication; this information can reduce the number of contacts needed.
Whether physicians respond most often after a mail piece, a phone call, an office visit, or attending a seminar.
There are many activities involved in selling, most of them are easily quantified. Here are some feedback measures used in sales management:
Number of telephone contacts in a day.
Number of appointments made in a day.
Number of appointments cancelled or postponed each day.
Percentage of appointments that result in sales on the first call, second call, and so on.
Average size of the sale.
Profit margin on the sale.
Percentage of sales that come from existing customers versus new customers.
Production efficiency involves a lot of measures including quality, speed of delivery, material costs, labor costs, equipment costs, error rates, and rework costs. Here are some measures that address the various aspects of production:
Material costs.
Your vendors' defect rate on parts supplied.
Time required for each phase of production.
Reject rates.
Rework costs.
Percentage of shipments that go out early, on time, or late.
Number of units produced by shift.
Number of shipments returned by customers.
Credits given to customers for poor quality.
If you're experiencing high numbers on the last two items, you've got some serious problems. It's probably the result of not having feedback on the other items in the list.
You want your credit and collection function to strike a good balance between increasing business and improving cash flow. The following measures will help you achieve that goal:
The percentage of "new customers" who don't qualify for credit; this will give you insights into whether your sales force is targeting the right customers.
The percentage of customers who are delinquent.
The dollar amount of delinquent receivables.
Which industries produce the highest level of delinquency.
Which customers represent the greatest percentage of delinquent receivables.
How many collection calls your staff makes in a day.
How many calls it takes to collect the money.
What percentage of receivables get sent to outside collection services.
The amount spent on outside collection services.
Which outside collection service is most effective.
Human resources is responsible for the hiring, retention, and development of good performers. Mistakes in any of these areas are very costly to the organization. The following measures can be used to evaluate the human resource function's performance:
Employee turnover rate.
Cost of hiring an employee.
Cost of terminating an employee.
Length of time required for hiring a new person.
Percentage of new hires that leave after a month, three months, six months, a year.
Employee participation in discretionary training offered by the company.
Effectiveness of training.
Number of grievances filed.
Win/lose percentages on grievances.
Number of grievances filed against each leader.
Types of grievances filed.
One of the finance group's responsibilities is reporting financial information to operating managers and the general public. The finance group is also charged with paying bills and monitoring the company's cash situation. Here are a few items that the finance group might track to measure its performance:
Number of days required to provide financial statements to operating managers.
Number of adjustments required before publishing the financial statements.
Number of corrections required after the statements are published.
Cost of processing vendor invoices and paying bills.
Cost of billing customers and making deposits.
Number of transactions processed per person.
Cycle times involved in handling receivables and payables.
Timeliness of expense reimbursements.
Certainly, these are not all-inclusive lists. Nor do they cover all areas of operation. There are many more measures that can be tracked in each of these feedback systems.
The keys to a successful feedback system are as follows:
One of the greatest benefits you'll gain from a feedback system is focus. With all the demands made on us and our employees, it's easy to lose sight of what's important. Feedback systems provide focus and the means to maintain that focus every day.
Feedback guides success, recognition rewards success. Some say that success is its own reward. There is some merit to that statement, but the greater reward lies in recognition. Think about the satisfaction you feel when you achieve a goal. Now compare that feeling with the one you get when someone comes to you and says, "I just heard that you cut two days out of the billing cycle. That's incredible."
Which of these two "rewards" is more enjoyable? The latter, right? That's why it's so important to build recognition programs into your daily activities.
It may seem that we are drifting away from the performance appraisal topic, but we aren't. Remember, the goal of the performance appraisal is to help your employees become more successful. That success isn't going to occur unless you help them stay focused on their goals, allow them to monitor their performance, and recognize their accomplishments during the interval between appraisals. Now that we see how recognition programs fit into the appraisal process, let's look at different approaches to recognition.
I've seen organizations post employees' accomplishments on bulletin boards, banners, and, yes, in the electronic age, on the company's intranet.
Plain English
Intranet is a software network similar to the Internet except that its access is limited to the company's employees, customers, and vendors.
Some companies offer financial incentives, cash awards, trips, sports tickets, merchandise, or vehicles. The possibilities are endless. Others give gag gifts to add another dimension of fun to the celebration.
Still others bring in pizza or ice cream so that the whole team can join in the celebration. A reward that employees really enjoy is getting out early on a Friday afternoon. If my team had an unusually successful week, I'd send them home at 3:30 or 4:00 in the afternoon. It's amazing how much longer the weekend seems when you miss rush-hour traffic.
The form of recognition isn't as important as being recognized. Your employees know you care about them when you make time to celebrate their successes. The more that you demonstrate your interest in their welfare, the more they'll care about yours.
Caution
In Lesson 4, "Striving for Employee Satisfaction," I discuss the importance of recognizing an employee's personal best. The tendency is to recognize only top performers. If you recognize only your top performers, you risk having the majority of your employees lose interest in impoving their performance.
Feedback is essential to performance improvement. Good feedback systems provide information that is quantifiable, timely, and easily monitored by both you and your employee.
Feedback is essential for helping employees maintain focus on their goals. Lack of focus is the primary cause of missed goals. In effect, feedback guides success.
Recognition is the reward for a job ell done. It's essential to the employees' ability to remain motivated during the time between performance appraisals.
The more opportunities your employees have to celebrate success, the more they'll desire success. After all, everyone loves to celebrate.