Part 1: What PDW Is . . . And Isn’t
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 (more on that in Part 2).
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: a meaningful portion of our Recruitment Partners’ compensation is based on performance metrics, such as hire ratio, days to fill, client satisfaction, candidate satisfaction, number of sourced candidates and others. Those metrics create an index score, and we assign projects based on those scores.
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.
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 backward 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.
In the next post, I’ll explain how to build a performance-based workforce using the five Ps: process, people, performance, profit, and purpose. Check it out.
Authored with Tom Brennan, Senior Writer
Turning Great Strategy into Great Performance by Michael C. Mankins and Richard Steele