If we're managing to outcomes, how do we know we're doing a good job?

Happy new year! As we kick off this year, I wanted to talk about one of the most important and often overlooked components of transforming your business into a customer-centric organization that manages to outcomes. Part of the reason organisations struggle to switch to managing to outcomes is that its difficult to measure employee performance. Once that becomes difficult, how do we know someone did a good job? How do we know if that person should receive a raise? A promotion?

With every organization I’ve worked with over the past decade this has always been one of the last considerations. In fact, most organisations don’t think about this key aspect of their digital transformation until it’s too late. While it may not be easy to implement new ways of working, processes, team structures, vocabularies and cadences it turns out that it’s far easier than messing with your staff’s performance management criteria. This is particularly true in organizations that have been around a while. If we’ve got employees who have been with us for 10 or 20 years and we move the goalposts on them now, how will they react? Will we have a mass mutiny on our hands?

Choosing success criteria that makes sense for a customer-obsessed company
 

Here’s the root of the challenge: measuring success when managing to output is easy. It’s binary. Did the team deliver the product to market on time? On budget? It’s easy to measure that which makes it easy to determine whether a reward is warranted. When managing to outcomes, we face a spectrum of results. Did we increase retention by 50%? Well, we increased it by 38%. Is that good? Bad? How do we know the teams are actually customer-centric? Making decisions based on learnings?

In order for our digital transformation to take hold and for our teams to be truly customer obsessed we have to change how we measure their success. Instead of measuring the delivery of product we have to measure their decision-making process, their learning behaviour and how they are setting out to prioritise and do work. This is not an easy shift for any organization and it will challenge what it means to be successful at your company. We are, indeed, moving the goalposts for our employees. They’re not necessarily being moved further away but they are being moved in a different direction.

What does performance management criteria look like for customer obsessed organisations?
 

Let’s get specific. What should you measure to determine if your company is customer-centric, managing to outcomes and truly agile? Here’s an initial set of suggestions for criteria you should measure:


Criteria to measure:Prioritizing
Description:When choosing tasks to work on, the employee can consistently refer to the OKR (objective and key results) that the work supports
Target:90% of prioritization decisions made with an associated OKR attached


Criteria to measure: Understanding the customer
Description: When choosing tasks to work on, the employee can clearly articulate who the target audience is for the work, why it would benefit them and how they are expected to interact with the work product
Target: 100% of stories developed have an associated persona and a clear user outcome for doing the work


This is just a sampling of the type of criteria you’ll need to use to measure performance and customer-centricity in your organization. There are many other things you could measure. All of them, though, will challenge your current set of performance management criteria because in all likelihood, today, you’re measuring delivery. As you consider how successfully your agile transformation is changing the way your teams work you’re going to have to change how you measure that success.

This is where these transformations truly come to a head. If we ask our teams to work differently but reward them for working in the old ways they will inevitably optimise for what gets them paid. This will be the death knell of our transformation. But, if we believe strongly in this new customer-centric way of working, then the way we measure our employees’ work and success will have to change as well.

What have you seen work well for rewarding an agile way of working? What hasn’t worked well?


Upcoming Events

MORE Live Online Class offerings — Josh Seiden and I sold out 1 of our 2 January cohorts. The Australia and New Zealand time zone friendly cohort has a few seats available. Use code C2LOLJAN10 to get 10% off that course and join us next week. This has been a fun, hands-on way to take a class with us from anywhere in the world.

January 15 – Live Online Office Hours with Jeff Patton — Spend 2 hours asking questions and discussing answers about product management, scrum, lean ux and agile with Jeff Patton and me. This low-cost block of office hours is our attempt to provide more face time to anyone struggling with these challenges. Best part? You can bring the whole team.

Certified Scrum Product Owner courses with Jeff Patton also scheduled already for 2020 in London, Paris, and New York (Class 1, Class 2).

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