There is an old saying that you measure the success of a manager with dollars sold, saved, and earned. Leaders are measured by the number of people they develop. Because managers are often concerned with dollars, they lack the sense required to deal with the people who are in the best position to sell, save, and earn the dollars required for the organization’s success. Understanding different measures of success helps leaders teach their followers ways to measure success other than through monetary value. Such measures can be broken down into two categories: performance and effectiveness. When you teach others how to measure performance and effectiveness well, they will understand how they contribute to the organization and require less direct supervision.

There are two broad categories of measures: performance and effectiveness. Use performance measures to determine if you are executing the steps of your tasks appropriately. Measuring the process helps determine how well you are executing the tasks you identified when setting the goal as the most likely to achieve your goal. If your analysis was correct, these measures predict your success. In some disciplines of execution, they call such measures leading indicators.

Performance measures

Performance measures are those things that measure the processes and task steps selected to achieve the goal. These measures look at how well an operation, process, procedure, or other action is being performed against an established standard. These measures should be part of task step statements developed in the goal and refined as the person working towards the goal approaches that step. Performance measures help leaders determine if selected tasks are being performed correctly. Performance measures are leading indicators of effectiveness.

Examples of performance measures include:

• Value of goods sold
• Hours of billable time worked
• Number of widgets produced in a period of time
• Number of miles completed
• Number of people contacted
• Rate of data entry errors
• Times an activity was completed correctly

This is not a comprehensive list. Notice how many examples in this list, however, deal with numbers—all of them. If one cannot understand how to measure performance when one reaches a particular task step, the person does not yet fully understand the problem and the task.

Let’s say you are leading a number of people who interview crime victims and there is a standard that each attends a peer review two times per year. Your big goal is to have an effective crime victim interviewing section. One of your selected task steps is to conduct four peer review sessions each year. In order to demonstrate successful completion of the task step, you have two measures. The first measure is to ensure each person you supervise attends two peer reviews each year. If someone has only attended one, or even none, you and they fail. Second, you chose to offer a peer review each each quarter to allow all interviews to attend at least two. It would be reasonable to assume that when October rolls around, you would have completed three peer reviews, once each quarter. These are two examples of comparing observed behaviors to required measures.

Learning to measure tasks and processes is important because this activity is how an organization accomplishes its what. For example, as a leader of a nonprofit, you need to raise $100,000 to execute a project. The $100K is what you need to do. How does a nonprofit raise $100,000? Those are the tasks and processes you, as the leader, establish. Those activities need to be measured to ensure you are doing them to achieve your what.

Effectiveness measures

Effectiveness measures demonstrate that your task steps and activities are making a difference, creating the change your organization seeks. The sum of all of your activities should equal that change. The first step in measuring effectiveness is to precisely measure your performance of tasks, activities, and processes. Next, identify the measures for your effectiveness. Like performance measures, if you do not know how to measure your effectiveness, you lack an understanding of the problem and solution. Effectiveness measures are trailing indicators that you are doing the right things.

Let us look back at the example of the nonprofit seeking to raise $100,000 for programming. This is a pretty simple effectiveness measure: how close to $100,000 are your activities getting you? If you engaged in a number of fundraisers and failed to meet the goals for those activities, you will not likely reach your goal. This shows your activities are not effective, and why you need to determine if your processes are being accomplished to your defined expectations.

Here is a short example of going through the process. You are the General Manager of a supermarket who wants to increase profitability. You meet with the bakery department manager to set goals that enable you to achieve your goal. The manager sets a goal to improve profits of his department by 3% through reduced waste from unsold inventory, and increasing the variety of products desired by customers over the next three months. This statement identifies the following in the SMART model:

• Specific: Increase profitability of the bakery department
• Measureability: Increased profits of 3%,
  • Less waste from unsold inventory,
  • Increased product variety.
• Attainability: is partially answered by identification of two task steps listed in the above measureability statement above. These task steps require additional analysis to determine ways to accomplish those activities.
• Relevant: The manager’s goals are relevant to your goal. If you can increase profitability in every department, you will increase the profitability of your store.
• Time-bound: The manager set a three-month limit to accomplish this goal.

As you work through the process with the bakery manager, create a goal worksheet for both reducing waste and increasing product variety. Those are the two processes required to have the effect of increasing profitability. On the surface, both seem like they are easy to measure; you know how much unsold product there is at any given time and what your current product line is. As you diversify your product line, though, you may find an increase in unsold inventory because your attempts to find desirable products may result in unwanted items and therefore increase waste temporarily.

Think about what additional measures exist to identify reducing inventory waste. Are there products that sell out every day? What products only seem to sell at certain times of the year, or days of the week? Do you have feedback from customers about products they would like to see the bakery carry? What is the dollar value of each of the undersold products? You may find you lose more money with only two unsold cakes than you do from two dozen unsold cookies.

Once you think you help your workers identify the right processes, they are in place, and meeting your metrics; measure if they are having the desired effect. If we continue with the bakery example, your baker produces three fewer cakes per day. As a result, you find that profits have not increased and total sales have decreased. There is an old saying that you cannot sell what you do not have on the shelves. If people come into the bakery near the end of the day to buy a cake and find the display case empty, and they do this two or three times, they may start to buy all their products elsewhere. Work with your employees to identify other processes that impact profitability other than unsold products. Reducing product waste is not improving your profitability.

The reason the process of reducing product did not improve profitability was from several causes. This demonstrates that either you or your employee does not fully understand all the variables that drive your sales and expenses. Step back and evaluate again ways you can improve your profitability.

When you sit down with those you lead to help them establish goals, use this information about performance and effectiveness. Do more than explain the theory; ask them to provide examples in their goal setting about how they will measure both performance and effectiveness. Write down the metrics for both. This documentation accomplishes two things. The first is preserving the content of your discussion and mutual agreement. Second, each of you can use the document to determine progress on the goal in both terms of performance and effectiveness.

Remember that performance measures indicate you are doing things right. Effectiveness measures show you are doing the right things. Performance should be leading indicators to effectiveness. Effectiveness measures are trailing indicators, showing success because you selected and executed the correct tasks.

Spending time with those you lead to establish goals helps the organization accomplish its goals. The only way to know if individuals and the organization are moving towards their desired goals is by establishing measures of success. When a goal is set, task steps are established to move along. These are the processes to be performed at given intervals. These metrics are called performance measures because they measure how well a process is followed. Performance measures should be leading indicators to the effectiveness of a process. If the tasks and processes are being followed, leaders should expect to see movement toward the desired goal by both the individual and the organization. These metrics are called effectiveness measures. Effectiveness measures are trailing indicators because the change sought to accomplish goals is underway by the time these show positive results. Performance and effectiveness measures show you are doing things right and doing the right things. When you are doing the right things the right way, you will accomplish your goals.