Incenting Proper Behaviors Through Effective Measures

Measures are used for many things and are originally put in place for a variety of reasons:

• To highlight a particular function or issue
• To address or meet a regulatory requirement
• Industry tradition (i.e., that’s what we have always measured)
• Departmental or functional incentive(s)

Although all of these may be legitimate reasons for initiating a specific measurement, organizations quickly realize that employee behavior will adapt to whatever is being measured (…you will see that this is a good thing). As a result, current measures may
be creating behaviors in your organization, intentionally or unintentionally, that are inconsistent with the current strategic or tactical mission and may not be aligned throughout the value chain producing inconsistent results throughout the process.

Here are some specific examples of how to eliminate this misalignment of measures and update your current measures to ensure alignment with current strategies:

• Gain clarity on the current organizational or departmental strategies or tactical directions. Regardless of your current role, there is a direction that is being executed to, whether intentional or accidental. Understanding this and, if not written down, writing it down is a very critical first step in this process.

Example: Claims department has a tactical direction to improve its customer satisfaction rating by x points over the next 1 year as measured by the annual customer service survey.

• Identify behaviors that are required to achieve this outcome. Depending on the history of the organization or evolution of measures within the organization, current measurements may reflect a historical direction that has already served its purpose or is a left-over from a management team long displaced. After reviewing the strategic or tactical direction, list at least one behavior that will help achieve the stated outcome. It is most important to get specific about the exact behaviors that are relevant and required to achieve that specific, desired outcome.

Example: One key behavior for improved “satisfaction” is to ensure that Customer problems are resolved in as few interactions with the company as possible, zero being the ideal (i.e., proactive problem resolution)

• Identify supporting measures that will motivate these desired behaviors and determine where in the process these measures can be implemented to accurately capture proper activity.

Example: Depending on how your organization is measuring “satisfaction”, examples of key measures could include:

1. Increased usage of online support features
2. Number of issues resolved during first interaction with customer service (i.e., First Call Resolution (vs. the traditional measure of Avg. Handle Time)
3. Increase/decrease in claims backlog

• Understand the potential side-effects of implementing these measures because you know that behavior will change to improve the metrics supporting these measures. Implementing a specific measurement in your department may impact other parts of the organization due to changes in behavior. Recognizing these potential impacts and mitigating any negative outcomes will be key to the success of your overall measurement initiative.
• Implement these measures as part of a departmental plan or as part of a more holistic measurement model to begin modifying behaviors. Including the implementation of these measurements into the Manager performance plan is always a good way to ensure the new measurement program gets implemented.
• Evaluate the impact these (and all) measurements are having on overall service delivery and customer satisfaction. Measuring overall improvements needs to take into account the departmental and corporate value proposition (i.e., Product Innovators, Operationally Efficient or Customer Intimate1). Keeping the overall value proposition in the forefront will ensure that your measurement effort will take into account the long-term focus of the company and will reinforce the overall strategic mission and functional direction.

As part of an overall, holistic measurement strategy, this process should be completed for every function in the value chain and then again at the strategic level making sure that departmental measurements complement other department/functional measures as well as the overall strategic direction before being implemented.

Keep these tips in mind to help improve your probability for success in your optimization initiatives.

1 The Discipline of Market Leaders: Choose Your Customers, Narrow Your Focus, Dominate Your Market Michael Treacy and Fred Wiersma