Experts define high-performance culture as a set of shared beliefs and values set up by leaders. These shared beliefs and values are then embedded and communicated through different strategies that eventually form employee perceptions, behaviors, and understanding.
All companies want their employees to arrive each day motivated, prepared, and energetic to do what it takes to make the work done. However, it’s more of an idealism than a reality. A State of the Global Workplace report from Gallup shows that only 15 percent of employees are engaged at work. Meanwhile, new research from Zenefits revealed that 63.3% of companies consider employee retention more challenging than hiring.
The pillars of a high-performance culture
Several reports and case studies emphasize the impact of motivation on employee performance. While there are means to address waning motivation, a “well-performing” company isn’t good enough. With the capacity to trade globally, and markets immersed with companies scrambling for market share, it is more critical than ever to have a distinctive, high-performance culture.
There are many frameworks to analyze high-performance culture in an organization. One example of a well-developed and data-driven framework for assessing a high-performance culture can be seen in the Organizational Health Index.
Developed by McKinsey in 2017, the Organizational Health Index (OHI) survey measures 37 individual management practices and nine outcomes against a global database of more than 1.5 million individual responses.
The pillars of a high-performance culture are:
Innovation and learning;
Coordination and control;
The role of OKRs in building a high-performance culture
Objectives and key results (OKR) is a goal-setting tool used for measuring organizational/departmental/individual objectives through challenging and ambitious key results. Extracted from the organization’s visions and missions and aligned with the department’s goals, OKR involves activities such as planning, activating, managing, and adjusting.
With OKRs, teams can cascade and align goals to the different levels of an organization, defining outcome-based key results that help verify the success of the objective. OKRs act as a guide for daily work and connect all employees to a larger purpose, which is what the organization intends to achieve.
If OKRs are perceived as more than just a goal-setting tool and instead as a communication one, it shows why the OKRs are brilliant at building a high-performance culture. The effort of achieving daily goals at the individual and team levels eventually leads to the achievement of the overall objectives at the organization level in the long run.
As a result, when implemented correctly, OKRs can help a company enable a high-performance culture and achieve far more than their team thought possible. OKRs help the organization adopts performance culture in the following ways:
OKRs provide organizations with a clear direction, coordination, control, and orientation.
Direction, coordination, control, and external collaboration play a vital role in helping organizations jump from their current state to the state they want to achieve. To guide the organization in achieving what they desire, it’s important that the organization ensures that its vision and strategic clarity are understood by the stakeholders in every layer, and while doing so, the organization must also facilitate the involvement of its employees.
OKR helps organizations align priorities and make sure everyone at every level in the organization moves towards the same goals. Employees must be given the opportunity to provide their insights when the organization decides in the next 12 months. It is recommended to start with an OKR workshop where all key stakeholders responsible for company strategy ask for and gather input from employees on what they think the top priorities should be.
Those inputs can then be aligned with the existing company strategy and broken down into three to five OKRs. The process can be done using collaborative notes and documents or even a whiteboard to ensure that collaboration and ideas are well-captured. The goal of the process is to reach an agreement on what priorities should be achieved in the following year.
The process is then followed by aligning the company OKRs with team and individual OKRs. OKRs provide teams and individuals with a clear set of directions and achievements. OKRs are also a reason to remove things that are unrelated to the scope of the objective they wanted to achieve, keeping their focus and avoiding unnecessary activities or resources.
If every team gets the opportunity to create their own OKRs that they will be working on in a particular quarter, for example, it can assure a successful OKR program while helping the organization realize its strategy and maintain its focus.
OKRs increase employees’ motivation, innovation, capabilities, and accountability.
OKRs can be used to develop a set of productive behaviors that establish an essential motivating culture. Through the process of building OKRs, employees set the outcomes they’ll achieve. These outcomes are in line with the organization’s setup that supports autonomy and motivation.
In addition, OKRs focus on outcomes over outputs. It is a way to resolve organizational problems and gives employees the flexibility to experiment, innovate, and think outside the box. It also allows a humanistic approach, rather than a systemic approach. OKRs promote positive behavior by providing continuous reflection and iteration about the organization’s goals, sharing progress updates, and keeping goals collaborative, all while observing freedom and trust.
More than just a goal-setting framework
OKRs are more than just a goal-setting framework. They enable stronger and healthier relationships within companies and support powerful dynamics in an organization that will significantly increase performance levels.
To start doing the OKRs right, companies can hire an OKR expert to start partnering with their organization or provide their managers with training. The KPI Institute’s Certified OKR Program can equip them with the right tools, knowledge, and guidance in deploying OKRs in their organizations.
The COVID-19 pandemic has left a strong mark in all aspects of our lives. It has impacted society – our habits, routines, and the way we interact. It has pressured the economy, its financial stability, and the way we do business.
Thus, what has changed in the way managers are doing performance management in these volatile times?
1. The way we do strategic planning
Before the pandemic, risk management, scenario planning, and business continuity plans were specific to large corporations. Nowadays, even small organizations will have a plan B ready for different scenarios of the COVID-19 evolution. There are industries, like retail, where all planning revolves around foresting based on historical data. Nowadays, using data from the past to plan the future seems a futile attempt to regain the feeling of control.
Moreover, most organizations, regardless of their industry, rely on annual if not 3 to 5 years planning. It is obvious that in the present circumstances and given the complexity of managing a business nowadays, these strategic planning practices seem useless.
2. The importance given to performance measurement
More than ever before, real-time data is a vital management tool. Access to data is critical in managing a crisis. One of the positive side effects of the pandemic was the pressure to digitize operations that create opportunities for data collection and better measurement of operations.
3. The way employees can be evaluated
Remote work and hybrid systems (combining work from home with office time) are no novelty, but in the COVID-19 circumstances, they gained significant recognition and became the norm rather than the exception for many organizations.
Managers and team leaders can no longer directly observe employees. There is a series of soft competencies, like communication, collaboration, proactivity, and creativity that are very difficult to evaluate in an online working environment, and yet they are essential skills for many jobs.
What is the way forward?
1. A different way of planning
Risk management must be an inherent part of organizational strategy, regardless of the company size. You don’t need a risk management office to have a proactive management approach and handle risks well. Small organizations can use their performance scorecard and populate it with leading KPIs or Key Risk Indicators.
For example, setting a red line level for # Days in accounts receivable can help you manage better cash flow, monitoring # Safety non-compliances can provide insights into the risk exposure to # Work accidents resulting in mortality. Identifying different scenarios in key areas of business and having contingency plans can give any organization a heads-up in case of a crisis.
Strategic planning must concentrate on shorter time horizons and reassess a series of factors that organizations may not have considered on a quarterly basis.
Government interventions, international economic context, competitors’ reactions, customers’ preferences, customers buying power, suppliers’ situations, internal capabilities and optimization potential, and employees morale and productivity are factors that have changed post-pandemic and need to be investigated. Moreover, agile strategic planning processes must be set in place to enable the organizations to react fast to changes.
In the face of chaos, the most effective tool to put everyone on the same page is to use clear objectives, KPIs, and initiatives, even short-term ones. The challenge is to adapt the measuring and reporting of performance to respond to tight deadlines. Data must be available fast, preferably in real time.
Thus, identify five to 10 KPIs that are easy to use, concise (tackle the problem directly), and can be collected with high frequency (weekly, monthly). These will be the ones that help you navigate a crisis. Now is the time to replace complex measurements and reports with simple yet relevant tools.
In the medium term, most likely for many organizations, the entire strategy must be reconsidered and linked to relevant performance scorecards in which simple measurements can be combined with more complex KPIs to provide a holistic overview of performance.
3. Focus on building the right mindset for each job than defining the specific job outputs
Many organizations invest a significant amount of time in identifying the right KPIs and targets to capture as precisely as possible the employee’s performance or productivity. Moreover, the more complex the job is, the more difficult it is to capture all contributions in relevant KPIs. In a volatile business environment, such an approach makes targets and KPIs obsolete the moment they are communicated.
The performance criteria used for employee evaluations should be flexible, easy to adapt and more focused on the extent to which the role is successfully achieved, as compared to looking at operational details. For example, it should be less important if the employee delivered one or three safety awareness sessions to factory workers if their awareness level is at the desired level.
One methodology that can be used at the employee level is the Objectives and Key Results Framework. OKRs are set and reviewed quarterly, but they can be changed even more often if the result set is no longer of interest. They emphasize on the importance of personalizing the objectives and key results and making the employee accountable for setting and monitoring them. Not all key results have to be KPIs; some of them can be reflected by completing an initiative or other types of results.
The end purpose of an OKRs system is not to compare employees or indicate what percentage of your staff are high performers. This methodology aims to facilitate communication, clarify expectations, align work activities to corporate strategy, and to provide a tool for managers and employees for discussing individual performance and improvement opportunities.
Working in a team can create synergy, since a good team will likely produce better results than individuals working separately. However, measuring team performance is even more challenging than measuring the performance of each employee separately, since you have to take into consideration each and every member’s performance, in relation to the others’, as well as the overall team’s.
In general, employees are members of departments. A department is a subdivision of an organization and an individual, generally, can only be part of one department. That being said, nowadays, teams are more flexible in how they are formed and how they operate: a team can be a temporary group formed to work on a specific task or project. Therefore, employees can be members of only one department, but several teams.
The first step is to link the team results to the organization’s goals, by cascading the objectives and KPIs from the organizational level to the team level. It is not very productive to have a well-performing team whose work does not help the organization reach higher performance goals.
Key aspects of team performance measurement
There are many indicators and measurements that can be useful when considering measuring your team’s results. In what follows, we’ve put together a list of the most widely employed benchmarks, so that you may get a general feel for what is considered useful to keep track of.
Employee attendance: Employee attendance is an important aspect of team performance since absenteeism incurs excess costs and will have an unwanted effect on team productivity & employee morale.
Moreover, late employees can be the source of annoyance or frustration, which will reduce team cohesion and further reduce a working unit’s effectiveness. Therefore, attendance related KPIs should be the first ones to track, when we talk about team performance:
% Absenteeism: Indicates the percentage of employees within the team who are repeatedly and/or unexpectedly absent, out of the total team members.
$ Lost time accounting: Measures the potential revenue lost because of idle workers or wasted hours within the team.
# Time lost by starting work late: Measures the volume of time lost due to employees starting their working hours late.
Client satisfaction: Every team has an internal/external customer, which is why satisfaction can be a good measurement unit. Improving customer satisfaction will eventually result in a more efficient production process, better service and ultimately, lead to more satisfied external customers. The most important KPI to measure in this regard is the following:
% Customer satisfaction: Measures the level of satisfaction exhibited by the team’s customers (current employees, distributors, vendors, departments, or external clients), towards the inter-functional services provided, be it communication, productivity and/or responsiveness.
Employee retention within the team: A low retention level or a high turnover level is usually connected with low levels of efficiency and productivity, which in the end can lead to a negative impact on an organization’s overall results.
This aspect can be influenced not just by the team performance, but also by the HR department’s performance, the working environment and work policies, the supervisor, as well as the promotion and professional development opportunities for the future. However, high level of employee turnover within a specific team could indicate team-related problems.
The most important employee retention KPIs to measure are the following:
% Employee turnover: Measures the rate at which employees leave the team in a given time period (e.g., month, quarter, year).
% Employee retention rate: Measures the total number of employees retained at the end of the reporting period, expressed as a percentage from the total number of employees that were in the team at the start.
Employee satisfaction: Studies suggest a direct correlation between employee satisfaction, employee engagement and increased performance. Employee engagement can be increased through various company efforts, such as facilitating the development of skills for its employees, giving them a sense of trust and integrity, and clarifying their opportunities for future career development. The most important indicators to take into consideration, when looking to improve or maintain employee satisfaction, are the following:
% Employee satisfaction: Measures the employees’ satisfaction and motivation level, with aspects regarding their job and working environment: job responsibilities, team and management, workplace, and professional development.
# Employee Engagement Index: Measures the engagement level of employees in their work activities and responsibilities, in terms of enthusiasm, commitment and discretionary effort.
Productivity of individuals: Productivity of individuals is a key element of team performance. The following KPIs help measure a team’s contribution to the organizational goals, and the contribution of its members to the general team results:
$ Profit per employee: Measures the team’s contribution to the overall profit pool. It is a particularly important ratio in customer-focused businesses, such as those in the service sector.
$ Sales per employee: Measures a team member’s productivity and efficiency in generating sales.
% Human Capital Return on Investment (ROI): Measures the return on investing in a team’s human capital, after adjusting for the cost of financial capital.
$ Human capital value added: Measures the value added through productive activities, by a team’s members. Reflects the adjusted operating profitability figure, calculated by subtracting all expenses except for labor expenses, from revenue, and dividing the adjusted profit figure by the total headcount.
OKRs or KPIs?
In some specific cases, where the productivity of a team is not directly linked to the organizational revenue or profit (ex. support teams), it is more advisable to use OKRs (Objectives and Key Results), instead of KPIs (Key performance indicators), to measure productivity.
OKRs contain a well-defined objective and one or more key results. OKRs help define how to achieve a goal through concrete, measurable actions. So, in case of the support teams, these results should be measured to track team performance, as they will be able to paint a more accurate picture of their efforts.
It is a complex process to measure team performance; therefore, it should be analyzed from numerous angles, according to each team’s specialization and workload. It should be noted that the aforementioned indicators are not the only ones which can portray a group’s results. However, if you are looking for a quick introduction into this topic, these KPIs will serve as a sustainable foundation on which you can build your employee management system.
As the Objectives and Key Results (OKRs) framework becomes increasingly well-known for companies that want to better execute their strategies, but still benefit from the flexibility and innovation of their capabilities, its complexity increases as well due to the particularities of each organization’s environment.
Most professionals interested in performance management must have heard by now about a new hip approach – Objectives and Key Results (OKRs). So, what is it all about? Why is everyone so mesmerized by this new system?