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Outside-in performance management

OUTSIDE-IN performance management is a powerful strategic human resources (HR) practice. It is very different from traditional performance management approaches in that it is firmly a part of a business strategy and not its mere supporter.

Report by Brett Chulu

We are fortunate to have applied the principles of outside-in performance management in the real business field here in Zimbabwe. In this article we share some of the outside-in performance management insights garnered from our consultancy experiences working with Zimbabwean organisations.

Begin with the customer
Outside-in performance management begins with establishing what triggers purchase in a company’s chosen markets. The purpose of purchase-trigger research is to determine exactly what drives targeted customers to buy your company’s products or services instead of other competing offers (including substitutes).

Here is one business war story to illustrate the importance of establishing purchase triggers as the first step in crafting outside-in performance management.

We worked with one company operating in an overcrowded industry to uncover customers’ purchase-trigger insights. The exercise was in three parts. First, we sought the views from the CEO and all employees on what they thought drove customers to place business with their company.

Second, we surveyed current customers on a number of wide-ranging dimensions in order to develop a comprehensive picture of the profile of the company’s customers. Third, we contrasted what the customers said were purchase triggers with what internal stakeholders viewed as triggers.

The outcome of this exercise was very interesting in three respects.

Firstly, the things that impressed the customers the most about the company were different from what triggered them to do business with the organisation. For instance, customers were thoroughly impressed with the friendliness and listening attitude of the company’s employees.

However, when asked what really triggered them to part with their money and what would make them continue doing business with the company, friendliness and deep listening did not feature at all. Simply put, the company brand etched into the minds of current customers had no direct link with the customer’s purchase criteria.

Secondly, only two purchase-triggers were established. Unfortunately, we will not be able to divulge what these purchase-triggers are, the reason being the need to safeguard the company’s competitive position. What is of paramount importance is to understand the underlying principles.

A lesson to cherish here is that in the minds of customers what separates your company from others are just a few things. As we were musing over the implications of the findings, it became clear to the CEO that any performance management system we would introduce would have to deliver on the two purchase-triggers identified by the customers. It also became very clear to the CEO that the financial goals in his performance scorecard would have to be tested against the capacity of the business to deliver on these two purchase-triggers. More importantly, the CEO came to realise that informed choices had to be made on how to restructure work processes, information systems and the internal culture of the organisation.

What also became very clear is that every employee had to be informed and educated on what the customers were saying. By supplying hard facts and discussing the implications for the company’s growth, we hoped to connect employees’ day-to-day behaviours to what drove customers to pour money into the company.

As a result, we embarked on an education campaign where we shared the findings of our research with virtually every employee. When we contrasted what they had thought were the customer’s purchase-triggers and how well they thought they were currently performing on these purchase-triggers  and what customers were saying, it became very clear that there was a disconnect, and in cases where they converged with customers’ views, they tended to overstate their internal performance. As we debated with employees, it became very clear that internal changes had to be effected in order to deliver on what triggered purchase.

Thirdly, the findings fully established that price was not a purchase-trigger for the majority of customers’ buying criteria. Operating in an overcrowded industry, this finding came as a bit of a pleasant surprise.

Armed with this unanticipated finding, it became very clear that under-cutting competitors was out of the question. What the company needed to do was to align internal management systems, including people, to deliver on the customer brand that mattered as derived from the two purchase-triggers identified by research.

Other stakeholder
We then considered other key external stakeholders and what had to be delivered to them. We were very clear that stakeholders could not be treated the same. For instance, we identified that regulators were the second most important external stakeholder after customers. It became clear that internal systems and people had to be adjusted to perform towards building an excellent reputation with regulatory authorities.

CEO performance map
We then identified a few key changes for the entire organisation that were necessary to drive towards the delivery of the desired customer brand, reputation with regulators and other key stakeholders. We came up with a summary performance map for the entire organisation. This became the CEO’s performance map. It became the basis for communicating with his board of directors.

From this CEO performance map, the CEO delegated performance responsibilities to his team through direct reports. In essence, the CEO’s direct reports’ performance plans had to move the CEO’s performance objectives as captured in the CEO’s performance map.

For instance, growth objectives on the CEO’s performance map were assigned to a particular executive and this included performance metrics and targets. We also made sure that the other objectives supporting growth objectives were assigned to relevant executives.

Key takeaways
We have learnt that how we go about establishing a performance management system is more important than the actual performance management system. In other words, the dynamics are far more important than the mechanics. For instance, the CEO had to co-develop his direct reports’ performance maps through debate and education.

Nothing was imposed. A healthy discussion between the CEO and his direct reports was always the basis for coming up with performance maps.

By working to establish a shared mindset between the customers and the employees through evidence-based discussions, employees were able to see on their own how their day-to-day work, attitudes, skills and behaviours had to adjust accordingly.

By sharing customer insights that matter with employees, the CEO was sharing a story of how the business would grow. Each employee’s performance map became an exciting script of the role each employee would play in that exciting story. That built a strong emotional bond with the strategy of the organisation at all levels.

Outside-in strategic performance management turns what key outsiders expect into what is inspected internally.

Reflect on it
You do not get what you expect, but what you inspect.

Chulu is a strategic HR consultant who is pioneering innovative strategic HR practices in both listed and unlisted companies. — brettchulu@consultant.com

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