Note: In this four part series, Kim Shepherd details how her agency, Decision Toolbox, uses a performance driven workforce model to achieve success. In this installment, Shepherd outlines the essentials of the PDW model and how it is used at Decision Toolbox. Parts two through four will post on consecutive Thursdays.
I like big ideas. Like many CEOs, I could do strategic brainstorming all day. But success comes in the performance — a great strategy will fail through poor performance, while strong performance can make a weak strategy look good.
This is just one reason why Decision Toolbox (DT) implemented a performance-driven workforce (PDW) model. It has been wildly successful for us, so I want to share some of the insights we’ve gained in making it work. In my opinion, PDW could become the Total Quality Management model for the 21st century. (I address that in part two of this series next week.)
Not As Squishy As You Think
The PDW represents a cultural shift, and a lot of executives think culture is squishy. A lot of savvy business leaders, though, are recognizing that squishy things like culture and retention are actually tied to the numbers. The PDW model is living proof.
In a PDW, employees are rewarded on performance. People often contrast PDWs with profit-driven models, but there’s more to it. DT is profit-driven, believe me. But profit isn’t a model, it’s an outcome of . . . wait for it . . . performance! So we monitor profit, but we monitor performance even more closely. With non-squishy tools and numbers.
Making the Invisible Visible
Don’t just take my word for it. Strategy consultants Michael Mankins and Richard Steele looked at the gap between strategy and performance. They concluded that companies realize, on average, about 63% of the returns promised by their great strategy. Maybe more importantly, they state that the causes of this gap are “all but invisible to top management.”
The PDW addresses almost all the causes of the gap identified by Mankins and Steele: poorly defined execution steps, unclear accountability, culture that actually blocks execution, inadequate performance monitoring, inadequate rewards/consequences for performance, and others.
Choosy Companies Choose PDW
When the economy tanked after 9/11, DT didn’t have to go virtual, and we didn’t have to implement the PDW model. But they both made sense, and they made sense together. Going virtual saved us money, but we wanted to be virtual and awesome. Some believe “virtual” equals “soft,” but think about it: in a virtual model you need to monitor performance even more closely than in a sticks-and-brick office.
A perfect example: every work group has its own set of measurements. Recruiters are scored based on time to fill, client satisfaction survey scores, candidate satisfaction survey scores, sourcing difficulty, and other metrics. These separate metrics combine to create an overall score, which helps us assess individual and group performance, and assign future projects to the highest performers.
There are three positive results:
- First, our recruiters are motivated to perform at a high level, so they can get more work — and more income.
- Second, any recruiter with consistently low scores will find the going rough and move on.
- Third, but not last, high-performing recruiters mean highly satisfied clients and repeat business.
Tying Compensation to Performance
In most external recruitment scenarios, the recruiter’s compensation is attached to a percentage of the earned fee, based on a percentage of the employee’s annual compensation. To me, that is bad math and incentivizes the wrong things. We are not a contingency firm and my recruiters do not sell, so they are assigned projects and must perform on every one.
What I want is excellent performance and an incredible customer experience. To drive that, our recruiters are measured on key performance indicators (KPIs) that drive the work they do; days to present, attraction of passive candidates, etc. The second measurement is how well they do the work they do from the customer’s point of view. Every project is closed with a customer satisfaction report. The higher the score, the higher their compensation.
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So, rather than incentivizing on the amount of the new employee’s salary, their compensation is effected by the customer’s overall satisfaction with their work.
Making the Metrics Work
At Decision Toolbox, measuring the metrics and tabulating an index score is essential to the work we do.
Imagine that 60 recruiters are in a sort of food chain based on their individual KPI scores, and they have attached SIC codes indicating their field of expertise. On their personal dashboards, they indicate how many additional assignments they would like to have. Let’s say six new engineering positions come in. Our system automatically looks for the highest ranking recruiter with engineering experience and assigns them the maximum amount they can handle. If they can’t take them all, the process searches down the food chain until all six are assigned. There are variances, however, based on previous experience with a particular client. If a customer only wants to work with a particular recruiter, that would trump this process.
This model works for us at DT, as both an accurate measure of performance and a way to distribute assignments effectively to satisfy client and employee needs.
No Secrets, No Surprises
Here’s the big takeaway (pencils ready?): You have to define and communicate the performance metrics clearly to your team. Everyone, team members and leadership alike, have to understand the system, the things you measure, the rewards, and the consequences. In a virtual model you need people who are independent and self-motivated, and the PDW encourages that. It’s true that collecting all that data is micromanaging, but our people use those numbers to micro-manage themselves. DT’s philosophy is to micro-train but macro-manage.
It’s cut and dry and do or die, but because it’s all out on the table, leadership can’t be manipulative and there’s no backstabbing. There can’t be — the numbers don’t lie. In fact, our leadership team bends over backwards to help people succeed, and our recruiters are very collaborative and supportive of one another. Mostly they compete against themselves, against their performance numbers from last week or last month.
Next week, I’ll explain how to build a performance-based workforce using the five Ps: process, people, performance, profit and purpose.
Tom Brennan, Decision Toolbox senior writer, contributed to this article.