Measurement is vital to drive performance and, as the saying goes, “what gets measured gets managed.” Selection of measures should be presided over carefully and then those measures need to be connected to positions in the organization structure through formal reporting relationships and performance evaluation mechanisms.
Professional services firms need to select a variety of different measures to track performance. For the majority of small and mid-size firms, key measures will be linked to labour productivity by individual, job and overall quality.
The type of measurements also vary. Effectiveness can be measured on a team level or an individual level. Generally speaking, individual measures are more effective in driving individual performance than team measures because the individual contribution is diluted in the numbers posted by the team. However, team measures are also effective in driving the performance of the individual.
It is crucial to identify which measures are important, although if the staff does not accept accountability for performance against those measures, they can be restricted to become an academic exercise. Every member of the staff should know who is accountable for performance against which measure, who should be monitored through the organization chart. These measures should then be reviewed regularly with senior management to create a continuous flow of accountability. Regular informal reviews should then be followed up by a formal performance evaluation process that includes setting goals for future improvements in performance against past results.
One of the biggest challenges facing professional services firms is talent drain, or “brain drain”. Attrition rates tend to high as talented partners and employees walk out the door, nullifying the firm’s investment in training and development with them. So what can a firm do to retain them? Firms that are successful in retaining talent work on the key metrics that their top talent is most interested in:
(a)Hours worked (benchmarked to the region and industry)
(b)Work-life balance
(c)Level of Supervision, direction, and support
(d)Mentoring
(e)Pay and promotion activities (benchmarked to the region and industry)
There are numerous potential pitfalls with the implementation of measures that can reduce their effectiveness or even lead to their complete failure.
The first step in any such endeavour is to make sure that the key staff understand why a measure is important to the business and its strategy. To curb fear, they must also understand how management will utilize the information and how it will benefit them.
The method of capturing the data must be thought through thoroughly. After implementation, a few hiccups must be expected as the staff changes the way that they work in order to assimilate the data or get in the habit of using reports.
During this period, management usually needs to channel its focus on the new measures, with more frequent reviews and requests for the data. It is important that staff actually see management making use the data and it doesn’t reflect that they are pointlessly working to produce data or reports that are simply filed.
Lastly, be certain that your middle managers are effective at using the data to discover problems and hold staff accountable. This requires frequent review of projects in process and the knowledge of how to manage people through the numbers, which is not natural for most people – but these skills can be taught.
Using the right measures, management and owners get a better idea of how much they are actually earning for their time. This allows for better management decisions in areas such as which future project to bid on, how much to bid, and what areas make the most profit to concentrate sales activity on.