This article completes the trilogy started with DG 2 – Managing Performance through Indicators and DG 4 – Setting Challenging Goals.
(By the way, have you read those? If not, what are you waiting for?)
In these challenging times, with the economy registering negative growth, guiding a company towards results has become a manager’s principal role.
But what are these elusive “results”? A result can be seen as a consequence of a set of actions or events and can be expressed qualitatively or quantitatively. In management, a result is related to measurements shown by a company’s performance indicators, based on decisions taken by its executives.
For many years, when we talked about results, people immediately assumed we meant financial results — as if this were the only dimension worthy of attention. More recently, however, business results have gained a broader meaning.
Now, results cover minimally seven dimensions: results related to customers and the market, economic-financial results, people management results, supplier performance results, product/service results, partnership results, and results related to support and organizational processes.
Results related to customers and the market are analyzed to evaluate the company from the customer perspective, e.g., satisfaction, dissatisfaction, retention, customer base expansion and contraction, recognition by customers and by independent organizations, etc.
Economic-financial results reflect the company’s financial performance, e.g., gross and net revenues, profitability, operating and net income, earnings per share, etc.
People management results include well-being, satisfaction, development, performance of work systems, and the efficiency of the workforce, e.g., turnover, absenteeism, education level, occupational health, workplace accidents, incidents, etc.
Vendor performance results evaluate the performance of vendors and partners, i.e., those who deliver raw materials, components, and/or services at any stage of business processes, e.g., quality, delivery, price, reduction in losses and rework, etc.
Product/service results include product performance and process efficiency, efficacy and effectiveness, including aspects of the company’s image in society and the environment that contribute significantly to the organization’s overall results as a whole, e.g., internal measurements, readiness to respond, etc.
Partnership results assess the company’s performance in terms of its contribution to sustainable economic, social and environmental development through minimizing the potential negative impacts of its services/products on society, and how ethically and transparently the company interacts with society, e.g., percentage of revenue invested in environmental stewardship, social programs, etc.
Support and organizational processes results measure the performance of processes that support business strategy, e.g., number of nonconformities, number of preventative actions divided by the number of corrective actions, processes’ actual cost of divided by optimal cost, etc.
From this understanding of the meaning of “results,” a results-oriented company can be understood as one that integrates all its business systems around results specifications, specifications of results related to units, and specifications of results for all individual managers.
Thus, a results-oriented company realizes its vision of the future, formulating strategies and turning these into action plans, and sets and effectively communicates and implements challenging indicator goals, such that the company as a whole proceeds with everyone focused on the desired results. This presupposes periodic monitoring of results in critical analysis meetings, focused exclusively on performance evaluation. (I’ll tell you more another time about conducting critical review meetings.)
The evaluation of results based on sets of indicators, which must reflect the needs and interests of all stakeholders, leads the company to greater competitiveness, as the causes of inadequate performance are identified and discussed.