People Tend To Do What You Inspect Rather Than What You Expect

Expectation sets the height of the bar, but it is regular inspection that resets the height of the bar so as to ensure it is achievable. The common notion is that what gets measured, gets performed. This is why it is useful to have key performance indicators. They serve to inform management which aspects of the business are performing according to its intended objectives or otherwise. They act as a preliminary diagnostic tool that enables management to identify areas for improvement. The roles of the key performance indicators also add meaning to the financial and accounting information as well as to provide a quick overview of the company's performance.

In theory, if you need to inspect, supervise and manage the staff frequently, the chances are you have hired the wrong candidates. In reality, it is difficult to obtain a good fit of the right people and therefore inspection is necessary.

The key performance indicators used by the company may include financial as well as operational parameters. Financial ratios are common yardsticks derived from financial and accounting statements. The operational parameters may include more generalised criteria such as quality goals, reject rates, production targets as well as balanced scorecards, etc.

Most companies use the budgeting process to formulate the key performance indicators. However, the problem is that the key performance indicators in the budget are artificially stretched so that they become 'management' goals. The people who are supposed to deliver those goals on the ground may not be committed to them. This renders the whole budgeting exercise futile and a waste of time. Yet the irony is that companies expended immense resources and months of preparing for the annual budget.

Good companies focus on measurements in many ways. They share the information on the key performance indicators to their staff so that they are aware and can be committed to achieving those targets. These good companies hold their staff accountable to achieve those indicators. Although stretched, they must be achievable. The key performance indicators are regularly tracked and monitored. Strategies are reviewed and changed periodically to ensure alignment with the market dynamics.

Inspection should be followed with carrot and stick programmes to ensure that staff are rewarded or penalised for not achieving certain measurements. If the staff are unable to achieve their goals, one needs to also enquire whether it was a question of lack of proper training or motivation or unrealistic goal. This is why goals need to be inspected as well as measured if possible.

About The Author-- Dr Mike Teng (DBA, MBA, BEng) is the author of best-selling book, "Corporate Turnaround: Nursing a Sick Company back to Health." He is known as the "Turnaround CEO in Asia" by the media. http://www.corporateturnaroundexpert.com; http://www.corporateturnaroundcentre.com

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