An objective performance evaluation is an illusion, but many leaders haven't realised it.
Many leaders live under the illusion that performance can and should be measured in simple, mechanical and objective ways. It is not possible. There wil always be subjectivity, whether we like it or not.
A key element in the performance management process at Statoil is what we call a “Holistic performance evaluation”. “Holistic” means not only applying a 50/50 weighting between “Delivery” and “Behavior” (as defined by the Statoil Values), but also “pressure testing” of business performance as measured on both financial and non-financial KPIs before drawing any conclusions. The “I” in “KPI” stands for “Indicator”, they are not necessarily telling us everything. There is a reason why they are not called KPTs, Key Performance Truths. This evaluation concept is described in more detail in a story which I shared on MIX a few years ago, "Taking reality seriously".
We do have some in-house critical voices. Some leaders find this kind of performance evaluation more difficult, because it involves assessment and not only measurement. Yes, it is more difficult, but leadership is not meant to be easy! Others complain because they find it involves too much subjectivity. They would rather see performance as being about hitting a fixed target only, which they regard as something much more objective.
Really? Think about it. What happened at the time when such a target was established? Then, in the autumn the year before, we were trying to describe what good performance looks like 15 months down the road. We did this surrounded by a lot of uncertainty, forcing us to make a lot of assumptions. Should the number be 8? Or 10? Or maybe 12? When we finally conclude on 10,3 (a decimal or two makes the whole exercise look more scientific), it is a relief. Soon, all that uncertainty and all the subjectivity we just applied is behind us and forgotten.
But we have just been forced (we have no choice) to be very subjective at a point in time when it is actually quite difficult, due to all the uncertainty forcing us to make all those assumptions. Why on earth should we then forego the opportunity to also be subjective afterwards, when uncertainty has become certainty, and we have so much more information and hindsight insights about whether hitting 10,3 was great performance or not?
True objectivity is wishful thinking. There will always be subjectivity up-front, and ignoring this fact does not make it disappear. Yes, it is easier if we don't have to repeat it again afterwards. But again, leadership is not meant to be easy. If performance evaluation is only about adding up the number of green and red KPIs and conclude, then the only qualifications needed is basic math (or a calculator) and not being colour blind. Shouldn’t we have somewhat higher expectations towards those doing this important job?
So, when you report to the city via your financial report.... you give these "subjective measures"?
OR, you give objective financial measures?
If objective measures are good enough for you organization- why are they no good for the individuals who go to make up that organization.... after all there is nothing in the organization other than people.... its just a legal entity... and its end of year financial report is just a measure of the value those people added over the past year.
If the city don't accept subjective measures... why would the management?
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Julian,
Thank you for your comment. Towards the city Statoil provides extensive sustainability information on top of the financials. It seems to be appreciated and taken into account, but we can only hope for that to happen. Internally, we set the rules of the game, and going for a holistic approach was not a difficult decision. The concept is highly appreciated by a big majority of managers and employees.
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In my opinion... and its only my opinion .... when organizations have subjective measures people tend to spend time lobbying in their pursuit- there comes a degree of politics in the organization.
Objective measures don't encourage this.
To help difficult kids a therapy is to take them into the back woods and camp. Why? Because the rules in nature are non-negotiable- whereas in everyday life they spend their time negotiating and pushing boundaries.
Everyday folk at work will do the same- but not to such a destructive degree- perhaps they don't service their car so regularly or don't buy house insurance.
At work they do this sort of stuff too.
However, given that the organization has a whole load of objective measures it must provide the outside world- it seems sensible to make sure these measures are the basic ones everyone starts with at work.
You have to pay for these measures anyway- so why not get that cash doing some work in the organization rather then just being spent in the finance dept?
I was a bit confused by your post- you were talking about measures and then slipped into a discussion of targets.
You can't measure the future you know!
At best you can only measure the present- usually measures only reflect the past.
A bit like running backwards through the forest and measuring if you hit a tree or not.
You can only "predict" the future- and that's always subjective- these aren't measures.
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Julian,
I am talking about setting targets and measuring performance against those targets. These targets can never be entirely objective due to all the uncertainty at target setting time. We have to make a lot of assumptions when we are trying to describe what good performance will look like 15 months down the road. So subjectivity is not a choice upfront, but a very sensible choice afterwards.
The other issue is that measurement alone is a too narrow and mechanical way of describing performance in knowledge organizations. We need a broader and richer performance language, without the "dumbing down" that measurement alone often leads to.
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My 2 cents : I think Bjarte that you get a real point from an extra angle.
Whatever the choice to keep on fixed targets and objective evaluation, with one or two digits after the coma precision against the on target delivery, the ability to react about the unpredictable business evolution within the timeframe of the review must be a key performance criteria.
Impact for the companies sustainability is as much important as precisely hitting the forecast.
So not instead of, but as an additional input.With subjective risk and opportunities after facts analysis.
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Putting performances in a proper perspective is difficult. Consultants and authors have proposed several balanced approaches that can be further broadened by getting different people involved.
Among these approaches, Kaplan & Norton's Balanced Scorecard is the best known. The International Integrated Reporting Council has come up in 2013 with their definition of the 6 capitals. In 2014 W. A. Sussland's "The Innovative Enterprise" proposed a model of the 5 strategic resources, which interlink to show the business-value and who, where, and how business value has been created/destroyed.
Arthur Andersen Consulting submitted "Being approximately right is more important than being precisely wrong". Approximations can be perfected over time, precise formulas can only be reengineered ... in more precise formulas.
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