All Belts understand the importance of measurement in process excellence – how vital it is to have the “M” in DMAIC – and by implication the need to have control targets for those measures in order to understand performance and variability.
Commonly these measures also are adopted for gauging the performance of a Green or Black Belt in order to make them responsible for maintaining the results of a DMAIC project. For example, a Belt may aim to keep a process at a particular control level as part of their yearly goals, and receive a bonus if they are able to follow through. But this small step – linking measures to rewards as part of an annual objectives and appraisal process – is often taken imprudently and can create distortions in how the business processes are run.
Distoring the Process
When reward and recognition are brought into play, every control value can become a target value. Because failure to meet a target is considered negative, this can directly or indirectly affect an employee’s appraisal. If the appraisal process requires a minimum number of objectives per year, people may select targets even if they are not relevant.
Once set, it may be difficult to change a target, even when it would be correct for the business to do so. Increasing a target goal is resisted by the managers (because it will make the reward harder to obtain) and appraisers resist decreasing targets because it makes it “easier” for people to get their reward.
Also, when DMAIC project measures are linked to a reward process, employee efforts may become focused on achieving their objectives, irrespective of whether it is the current issue or priority for the business.
Why Do Rewards Go Wrong?
Writer and consultant Peter Drucker, said, “Management by objectives works if you first think through your objectives. Ninety percent of the time you haven’t.”
Given the amount of effort invested in setting and reviewing objectives, the 90 percent is troubling. Is it better not to have any measures at all?
In Out of the Crisis (MIT Press, 1986) W. Edwards Deming, the quality expert and consultant, advised managers to, “Eliminate numerical quotas for the workforce and numerical goals for management. a. Eliminate work standards (quotas) on the factory floor. Substitute leadership. b. Eliminate the obsolete concept of ‘management by objective.’ Eliminate management by numbers, numerical goals. Substitute leadership.”
Few companies, however, have adopted Deming’s advice. Objectives, with specific, measurable, achievable, relevant and time-bound (SMART) metrics, are an integral part of the daily management of many companies. Great ingenuity and time are invested in defining the objectives, the SMART measures, and in reviewing and assessing organizational performance.
Avoiding the Side Effects
Each improvement or re-engineering of a process is an opportunity to roll back the problems related to tying metrics with rewards. Three methods for achieving this goal:
1. Use every opportunity to review measures and decide whether they are still relevant and meaningful, and can be measured properly and without undue effort. Remove those that fail these criteria.
2. Help people to understand that not all metrics are equal. While some measure the important outcomes of business processes, others measure input or intermediate stages. These are important, but they are there for diagnosis and control rather than to indicate success or failure.
3. Relate all appraised measures to the stakeholder of the organization (not of the individual department or business unit) who would recognize and have an interest in them. This way, when compromises are needed, they can be assessed objectively by their impact on the business, rather than subjectively as a failure of the employee.
Think First, Then Set Objectives
Objective setting and the appraisal process are a valuable method of managing organizational performance because they obtain clarity on what is important and provide a means of recognizing and rewarding hard work. But remember Drucker, and think through objectives before setting them.