What is the Most Effective Performance Management Approach?

In an evolving workplace, there is a growing trend suggesting end-of-year performance reviews are no longer effective. To remedy this, some companies have decided to utilize software to improve their process. Other companies have elected to eliminate reviews altogether.

What is the most effective performance management approach?

Sarah Haynes

Performance reviews are often the subject of much scorn and mockery in the corporate world.  In my 15 years of consulting with dozens of clients, I’ve only encountered ONE that actually considered their performance management process to be integral to employee development, and truly valuable to their company.  For the rest, it was a forced exercise that did not appear to be linked to results, aside from bitterness and regret. According to a Deloitte Insights survey, 58% of the companies polled reported that they view their current performance management process as not being an effective use of time and only 8% reported that their process drives high levels of value. Why is this?

Performance reviews are almost always linked to compensation.

Reviewees are motivated to score themselves as highly as possible in order to secure the best possible raise for themselves.  Reviewers (the managers) are pushed by the company to average out the performance rating across all individuals in a given cost center. So, for every employee considered “exceptional”, there must be one considered “underperforming”.  It’s a terrible trade-off, and one that often pits managers against staff. I’ve actually had a boss ask me if I’d be OK with a sub-par rating, because he really needed to give a large raise to my co-worker in order to keep him from quitting.

In order to make performance reviews effective, the direct link between reviews and compensation must be broken.  This is the only way to create an environment for an honest conversation, where employees do not have to feel like they’re fighting for dollars and cents.  Secondly, managers should be coached on how to provide effective feedback to employees.  It’s not easy, and many managers will do anything to avoid an awkward conversation.  Lastly, performance feedback should be provided on a regular basis, at least once per quarter.  If you wait until the end of year to provide feedback on annual objectives, it’s way too late to correct course.

Only one of my bosses throughout my career actually cared enough to provide me with constructive feedback, during performance reviews, that I could use to improve my performance.  I truly valued the insightful feedback he provided. Of the others, some were not involved enough with my work to be able to provide feedback, and the rest – well, I guess they just didn’t want to get into it.  I know I would have appreciated it and felt more valued as an employee, if they had.

James Lawther

Fortunately, I am a deeply experienced manager with a track record of motivating and developing difficult employees.  I know exactly how to create a team of world-class employees with outstanding engagement scores. So learning from the workplace I have put in place an annual performance review at home.

I love my wife very much, she is funny, clever, tolerant and — if I say so myself — very pretty.  But when it comes down to domestic chores there are a few things she really could do better at, things that would dramatically improve her output and also increase her sense of work life balance.

It was important that I did this properly, I spent many hours researching my wife’s performance and crafting a review.  My relationship is important to me, so I have done it by the book, I:

  • Sought out 360 degree feedback, consulting neighbours and children
  • Made sure the evidence I used was specific and to the point
  • Catalogued her strengths (of which there are many) first
  • Captured a few clear weaknesses development areas for her to work on

Her review reads like this:

Annual Performance Appraisal 
Manager: James Lawther 
Employee: Christine Lawther 
Role: Wife

Key Skills and Competencies

1. Focus on Results: Below Average

Strength – Action focus: Proven capability to cook amazing meals during visits from your parents. B. this strength could be leveraged by cooking amazing meals when your parents are not visiting.

Development – Attention to Detail: On 3 separate occasions in the last week I have had to empty the washing machine and load the tumble dryer. This is a task for which I am not responsible as it is contained within your job description (wife).

Development – Completing and Finishing: Constantly distracted by fighting children whilst trying to complete simple jobs e.g. ironing. You need to develop your multitasking ability.

2. Influencing Ability: Good

Strength – Presentation: Very good at assuring me of the business case behind an investment in an expensive skiing holiday

Development – Influencing Junior Staff: Repeatedly have to shout at children in an effort to get them out of the house in time to get to school. This is a particular problem with the 15-year-old daughter.

3. Communication Skills: Below Average

Strength – Feedback: Ability to provide strong and timely feedback to me about my personal habits, specifically in relation to nocturnal activity and time keeping. N.B. there is a risk that this strength could become overplayed.

Development – Instruction: Your map reading ability is less than perfect. We have repeatedly found ourselves lost in large cities because of your inability to communicate clearly and concisely.  Unfortunately last year’s investment in satellite navigation technology this has not improved performance.

Overall Rating: Below Standard

The Performance Conversation

The meeting I arranged with my wife to discuss her performance didn’t go nearly as well as I had hoped.  My wife was withdrawn and I don’t believe she was really listening.  She was very focused on the overall rating and we didn’t have a value adding

conversation about the developmental feedback I had collated.   My “active listening techniques” fell on deaf ears.  Her demeanor was downright chilly until we discussed her annual pay rise.  Then she warmed up quite dramatically.

Pay for Performance

I’m a big believer in linking performance appraisals to performance pay, nothing focuses attention in quite the same way as money.  As I want my wife to be motivated to improve she needs to understand the consequences of poor performance.  As evidenced in her appraisal her performance was below standard, so I had little choice but to hold her house keeping money at a constant level.  If I had increased it I would have been accused of favoritism.

When I explained this to her, my wife had the audacity to suggest that many of the things I discussed were outside of her control.  She then become quite defensive and told me that I was equally accountable for household performance.

A Waste of Time

I won’t try another appraisal round next year.  My wife wasn’t remotely grateful for all the time and effort I put into it.  Instead I think we might just have a chat every now and then about the children.  It might be more productive.

A Simple Question

If performance appraisals go badly at home, why on earth do we think they will go well at work?

Ted Hessing

The Science of Encouraging High Performance

We humans are funny creatures. We don’t always act in our own best self-interest. And when we get into groups we don’t always make better decisions. Sometimes we build entire organizational practices that are nonsensical, counterproductiveanachronistic, and/or that we ourselves would not want to be subject to. Case in Point; Performance Management.

let’s take a user perspective rather than a managerial perspective. After all, they should be the same thing, right? It’s always a good idea to start with the client in mind and, under this perspective, the contributors we are seeking to encourage to high performance would be our clients. This perspective can be best understood by the concepts of Servant Leadership. Here’s an overview of servant leadership if this term is new to you.

What’s My Motivation?

Most performance management techniques revolve around 2 axis; rewards or penalties. On the rewards side we can call it salary, bonus, compensation, or whatever. But generally people are incentivized to high productivity via rewards. The flip side are penalties which could range from reduction or absence of rewards to reduced or eliminated security, status, and stability.

But is that carrot and stick approach the best system to use? Turns out the science says ‘no.’

Autonomy, Mastery, and Purpose

In Daniel Pinks excellent book Drive: the Surprising Truth About What Motivates Us (and eponymous TED Talks), he reveals that the research say unequivocally no. Rather than re-state Pink’s message (see above 10 min video for a great overview); Rewards don’t work the way you’d expect them to.

It turns out that after a certain amount of compensation, rewards are actually counter-productive in terms of increasing performance in any endeavor requiring a modicum of cognitive skill. After that magic level of compensation, people require other attributes to be present in order to Got that?

In other words, if you want higher performance, you have to pay people enough where they aren’t worried about money but then you have to enable 3 other key attributes; autonomy, mastery, and purpose.

Thus,the overwhelmingly most popular way of incentivizing performance, reward vs penalty, is wrong. if you want to maximize performance, it turns out that you must optimize for motivation.

So, how does one do that? What’s the right way to handle performance management? If rewards are wrong (or at least only part of the story), then it seems we’d best change our performance management process to the other key factors Pink identifies; Autonomy, Mastery, and Purpose.

Let’s take each one step by step.

Purpose

Per Pink, Purpose is each team member being able to say  “I know why I am here and what I contribute with (as an individual or as a team)” How do we maximize a sense of purpose? So, as managers with a strong background in quality and strategic deployment techniques seeking to maximize performance, how do we maximize a sense of purpose?

I like Simon Sinek’s approach of ‘Start with the Why. Again, if you haven’t seen this Ted talk, you’re missing out.

To my mind, conveying Why is all about alignment. Alignment between the strategic direction of the company and the front-line personnel executing the vision. Some techniques quality leaders can use that we can use to achieve, communicate and measure that alignment are:

If we want to maximize performance management, it behooves us to make the alignment of why behind what people are being asked to do explicitly clear.

Often, when we make that alignment clear we find that much of the resources of time, talent, and energy that people are currently expending

are in pursuit of things that don’t matter or don’t matter as much as other goals they could be working towards. And that is clearly a waste.

Mastery

If the next attribute in results is Mastery, then it makes sense to incorporate this into our performance management techniques. How can we best help people pursue and achieve mastery of their professions?

Some tools we can use to monitor and maximize mastery are visual management principles and gauge R&R techniques. Perhaps the two that I like best are Skill Matrix boards – an excellent

visual management of team skill mastery and credibility as described by Ray Dalio in Principles. However, there are countless adaptations of each that we can apply to skill acquisition.

Also, it is helpful to recognize that every member of a company has a profession (what they do) and an industry they perform it in (where they do it.) It makes sense from a performance management standpoint to help contributors to develop a strong understanding of both the skills and context for their role and their industry at large. T shaped employee management is an excellent framework for this/

Autonomy

Now that we’ve addressed how to manage clear alignment and skill acquisition – the why’s and what’s of a role – let’s move on the how’s.

Again Pink helped us by illustrating how autonomy and empowerment are crucial pieces of the performance management puzzle. And we helped ourselves by showing the alignment of the highest strategic goals of the company

Now, autonomy is scary for many managers. To overcome this hurdle we could use a ‘trust but verify’ model of cascading dashboards and assigning responsible parties for work streams. And the autocratic manager will be happy with this. But autocratic leadership has it’s limits.

Sources: Business Case Studies and Cleverism

Perhaps the best way to encourage autonomy to meet our desired performance management goals is to favor the empowerment of a Team of Teams model such as the ones favored by General Stanley McChrystal (and others) in his book Team of Teams.

Autonomy is best served by employee empowerment. There is a link between employee desire to participate on autonomous teams and having a significant sense of ownership in team outcomes. Simply put, members of autonomous teams desire the ability to make decisions in an entrepreneurial climate without too much managerial interference. And arguably employee empowerment is best achieved through managers leading by illustrating a clear vision and then getting out of their way.

 Bringing it All Together

As leaders it is important for us to recognize that performance management is itself a process. It’s subject to an equation Y=f(x) where f(x) is often more complex than we think. But fortunately, like any other process, it can be measured, faults found, and hypotheses tried, tested, and improved upon.

Luciana Paulise 

The current performance appraisal methods have been hardly criticized in the last years, especially in the era of agile companies and continuous innovation. In the following article we will share some ideas and tips on how to adapt to your specific company culture.

Performance appraisals are the most common performance measurement strategy. A performance appraisal is a systematic and periodic process that assesses an individual employee’s job performance in relation to certain objectives.

Neverthless, several studies have been showing that the effectiveness of the current methods is not clear, as employee’s habits and company cultures have been changing and need different incentives to work better.
What are the main cons of a performance appraisal?

Frequency: Performance appraisals are usually done annually or quarterly. The frequency of feedback should not be defined by a standard, should be defined based n the specific need of the employee and his/her supervisor. Periodic evaluations usually generate more frustration that satisfaction to the employees because as it’s based on past performance and it’s general, it doesn’t help to actually change behaviors in the future. Millennials expect continuous feedback on each situation that helps them improve performance on the near future.

Specificity: appraisals tend to be general as they are the only opportunity throughout the year to formally discuss how we are doing. Clearly many items cannot be discussed, so supervisors tend to choose only a couple of hot topics, very good or very bad based on the general evaluation. So they really don’t tackle specific strategies for improvement, but simply try to confirm what we already know: we are in the top 10 percent, or just out of it. So 90% of the employees just get frustrated, while the other 10% get anxious about keeping the top for themselves on the next review.

All the employees have the appraisals at the same time, so instead of a real opportunity to improve, it becomes another item on the supervisors To Do lists, which they have to do as quick and neat as possible. While for the employee, it may be the opportunity they have been waiting to showcase their results or received some praise for their work.

A performance appraisal is usually focused on individuals, without considering the system or the team. Agile organizations are more prone to work in teams, so individual measurement may be counterproductive. It may impact team collaboration and promote competition instead, to achieve the individual results agreed in the individual discussion.
Subjectivity: No matter how well defined the dimensions for appraising performance on quantitative goals are, judgments on performance are usually subjective.

There are always winners and losers: When salary increases are allocated on the basis of a curve of normal distribution, which is in turn based on a rating of results rather than on behavior, competent employees may not only be denied increases but may also become demotivated. Performance appraisals turn to be unfair trying to fit everyone in the bell curve.

New strategies to have a successful performance appraisal
As peter Scholtes says in Total Quality or Performance Appraisal: Choose One, “Improvement efforts should focus on systems, processes, and methods, not on individual workers. Those efforts that focus on improving the attentiveness, carefulness, speed, etc., of individual workers — without changing the systems, processes, and methods — constitute a low-yield strategy with negligible short-term results”.

Continuous feedback

Annual performance appraisals are pretty standardized, not very much open to discussion and done only once a year. They are usually time-consuming and generate a stressful situation supervisor-employee, so doing it just once a year “looks great”. But real coaching for behavioral change should be short, continuous and spread throughout the year based on the need. It can be positive or negative, but for sure it should be based on recent situations that allow the employee to take action immediately. Innovative companies should count on that to be able to adapt quickly to the changes in the environment.

Leadership training

Many leaders say they don’t have the time in this high-pressure economy for the tedious work of teaching people and helping them grow. On the opposite, the one main task for leaders should be to facilitate their employee’s growth, and there should be no specific time for it, should be part of their day-to-day. Leaders tend to have a lot of work when they have an over dependent team. become demotivated work should not be done by them even if they can do it better, they should help their people to learn and do it better, that is their job. Leaders should be trained to develop habits that make their team owner of the tasks, autonomous and therefore more engaged. RECOMMENDED COURSE: Leadership

Fact-based

Continuous feedback doesn’t need to be based just on impressions or feelings, it can also be based on facts and data. Depending on the type of operation, leaders can use different tools to help employees ask for help or solve problems on the go, instead of hiding issue to avoid bad appraisals. Manufacturing companies can use run charts and graphics to evaluate trends and identify issues. Charts can show if the issues are systemic (all the lines are having delays due to inadequate maintenance) or individual (an employee is not well trained). In some companies, we suggest to do monthly audits with scores and detail action plans, to provide not only a fact-based measure but also a means to improve.

On demand

The best way to provide feedback is making sure the employee knows it before the supervisor, and before it’s too late. Timely feedback can be done when the information and the performance are online and accessible to everyone involved. Measures can be done by the employee himself, or through IT. For example, online retail agencies can provide to employees with online information about customer satisfaction, delays or errors so that employees can adjust the service accordingly. Many companies have 5 stand-up minutes to talk about issues and potential solutions.

Win-win

Performance measurement should be a tool to improve the team and organizational performance, not to blame employees or justify layoffs. It should help to know why a process is failing and what can we do about it, no matter who. So every measurement should not be used along with a root cause analysis and follow-up method.

Feedback at the gemba

A performance appraisal tends to be so formal that is never done on the work floor but inside an office or meeting room. As it is not the normal workplace for the employee, it can be more stressful. If it is done on the workshop, it allows for a more direct discussion. It allows for a psychological safety for the employee, which promotes more innovation and reduces the sense of failure. You can even find more solutions on the floor than in a meeting room or a cold management report. As Edwards Deming would say, successful companies must also manage what cannot be measured (the data-invisible elements).

A performance appraisal or any type of measurement is not bad per se, what matters is what you do with them. Good luck!!

Robert Mitchell

As a Baldrige Examiner, I like to begin my roundtable discussions with a review of the Baldrige Criteria. Category 5 of the Criteria focuses on the Workforce. The Workforce category asks how the organization assesses Workforce Capability and Capacity needs and builds a workforce environment conducive to Engagement and High Performance. The Baldrige Criteria defines High Performance as ever-higher levels of overall organizational and individual performance, including quality, productivity, innovation rate and cycle time.

High performance results in improved service and value for customers and other stakeholders. High performance stems from and enhances workforce engagement. Some characteristics about workforce high performance:

  • It involves cooperation between management and the workforce; cooperation among work groups and teams; empowerment of employees and building personal accountability.
  • It may involve learning to build individual and organizational skills; creating flexible job design; decentralized decision making and making decisions closest to the front line.

My career experience, and observations of applicants to state and national quality programs using the Baldrige Criteria has revealed six key processes necessary to effectively encourage high performance:

  1. A Formal on-boarding as part of the New Employee Orientation process
  2. Providing immediate, open and honest feedback
  3. Regular, periodic “pulse” surveys to measure employee satisfaction and engagement
  4. Frank, two-way skip-level meetings between management and its people
  5. A Career Pathing process to manage employee progression
  6. A Learning & Development System that supports organizational needs and employee development
  7. Systems & Structures supporting compensation, benefits and policies, rewards, recognition, as well as incentives to encourage continuous improvement, intelligent risk-taking, innovation and customer focus.

For more information about these key business and workforce processes, I highly recommend learning about the Baldrige Excellence Framework and attending Baldrige Evaluator training.

One Thing We Can All Learn from the Auto Industry

By Chris Moustakas, DevonWay Inc.

GettyImages-599249608

 

We all have things that make our jobs challenging, at least some of the time. Personally, I feel like the industry I chose, enterprise software, is pretty hard, but it doesn’t hold a candle to how brutally hard the automotive industry is.

Consider:

They deal with a global, complex supply chain in which any interruption, whether political, natural, or self-inflicted, can have rippling effects with disastrous results. The number of pieces that go into a modern vehicle, and the degree to which their production has to be planned and coordinated, is nothing short of outstanding.

They are heavily regulated because when they mess up, people can die. All the airbags in the world won’t help a company that introduces a software flaw that, say, punches the accelerator when you turn on the wipers (make no mistake, that gas pedal is not connected to anything more than a digital sensor that can get its signals crossed just like anything else).

The product they build is an engineering marvel and therefore at least as complicated as it is impressive. But there’s no technological moat commanding fat margins – due to intense competition from all sides, they pour billions into capital projects and R&D, not to widen their lead, but to survive.

And they’re expected to innovate every year, like clockwork. If Fall comes around and they’re not introducing a new model, something is wrong. That pace of incremental evolution would be brutal enough, but on top of it they’re also dealing with potentially existential threats that could turn their whole business inside out – self-driving cars, electric vehicles, share vs. buy business models… Japan’s now even trying to introduce IRL flying cars!

(As an aside, if the pace of innovation for cars seems natural, compare a car now vs. one in the 90s to an airplane now vs. one in the 90s. Not only does the plane look and feel the same – it probably is the same plane.)

When we look at all these challenges, what is one clear and pervasive lesson we can draw from the auto industry? That in spite of all these obstacles, or probably because of them, they’re still able to maintain an insane focus on quality.

My wife and I bought a new car about a year and a half ago, our first in almost twenty years. Six months into our ownership we realized we were probably overdue for an oil change. We called the dealer to ask if we should bring it in and they practically laughed at us – it turns out that new cars’ engines are such tightly closed-loop systems that they only need their oil changed at most once a year – and you don’t have to remember because the car will let you know on its own.

Pretty much any model you buy that was designed after 2000 will be such a high-quality piece of manufacturing that it’ll last for as long as it takes you to get bored of it.

How do they do it? Although most automotive OEM’s have a lot of built-in inefficiencies, one area in which they excel is through well communicated, industry-wide standards. IATF 16949 (the auto industry’s version of ISO 9001) went into effect this month, September 2018, and it’s a perfect embodiment of that quality-centric spirit.

There’s no magic sauce in the standard – exhibit good leadership, communicate, find and resolve defects, and continually improve. It’s not magic, but it’s exact, explicit, and expected.

Write down what’s important to you and execute on it. Something we could all stand to do more of.

 

Chris Moustakas

President & CEO, DevonWay, Inc.

Quality and the Experience Economy

Over the past two decades consumers have been gravitating towards purchases that are of both high quality and provide an experience. Quality of a product or service alone is no longer a differentiator, quality of experience is. Consumers are buying what will not only satisfy a need, but will illicit an emotion or establish a connection.

How will this new economic structure affect the quality industry?

Babette Ten Haken

The Experience Economy, by Joe Pine and Jim Gilmore (1999, 2011), created the blueprint for how B2C (business-to-consumer) industries created customer experiences to build customer engagement, loyalty and marketshare.

Today, the Age of Mass Production is gone. Customers expect a company’s products and services to do more than remain “as good as the day I bought them.” Instead, customers make purchase decisions, expecting products and services to continuously become better and better over the duration of their life cycles. As a result, customers expect their own emotional experiences, interacting with their purchases, to become better and better.

The Experience Economy principles offer competitive advantages to the B2B (business-to-business) space, especially industry and manufacturing. However, this scenario sets up legacy cultural and methodological plate tectonics. Operations and Quality processes and mindset crash into Business processes and mindset. After all, Operations and Quality traditionally focus on issues and risk. Business traditionally focuses on possibilities and opportunities.

Can the two cultures not only co-exist within The Experience Economy industrial IoT ecosystem? Can they collaborate, cross-functionally, to create extraordinary and enduring customer outcomes and experiences?

Yes! Quality tools like design thinking and qualitative Voice of the Customer (VoC) methodologies have a tremendous impact on delivering product- and service-based designs which deliver remarkable customer experiences and catalyze customer retention. These insights give breadth and depth to periodic, quantitative customer experience survey results, conducted on the business side of the table.

However, to successfully deploy these tools and methodologies, Quality professionals must walk Quality talk across the organization, from the plant floor to the C-Suite. How does the Voice of Operations-based end-users relate to the Voice of Business-based decision makers? That is the Quality Challenge. Because once the dots are connected, organizations create a powerful, customized, experience-based blueprint for growth, expansion and sustainability.

John Hunter

It is very difficult to create great customer experiences if the management system doesn’t provide those interacting with customers the authority, tools, training and support to make decisions and continually improve the systems in place to deliver great customer experiences.

The management system must not only give people the authority to react to specific customer desires individually but must integrate continual improvement of the processes and systems to continually enhance the ability of the organization to delight – even in the face of ever greater customer expectations.

There is not a magic bullet solution to creating the capabilities to delight customers with the overall customer experience. It requires creating a management system that encourages that focus and supports acting based on those principles every day.

Luciana Paulise

Instead of spending a big budget on advertising, some companies decide to bet on free marketing by investing in their customer’s experience instead. For companies Like Johnny Cupcakes, Zappos or Delivering Happiness, their driver for growth has been repeating customers and word of mouth to actually get free advertising . Most of the money they would have spent on paid advertising like regular companies do, they invested it into customer service and the customer experience instead, letting customers do the marketing for them through word of mouth and relationships. They will recommend your brand to their friends, talk about you on their social networks, generate repetitive sales and sometimes even give you ideas for potential new products. Basically, customers become what I call “lovers” of your brand.

So what is a great experience? it is not just regular customer service. It is to take care of every detail in every contact with your customer, face to face, online or even on the phone. Tony Hsieh, founder of Zappo’s says that “If you get a 10 minutes interaction right, the customer remembers the experience for a very long time and tell his or her friends about it. You need to make sure that we use that opportunity to create a lasting memory”. So, the key is to focus on building engagement and trust, seeing every interaction through an experience of a long-life relationship lens instead of an expense-minimization lens.

This shift from buzz marketing to experience marketing can only be possible through a cultural transformation within the company. All the old habits of just minimizing cost need to shift towards customer centered habits.

Edwards Deming, proposed a cultural transformation in his last work, the System of Profound knowledge. This method shifts organization from “Me” to “we”. a “We ” organization means that departments work together, and make decisions considering the interactions they have with each other. As Deming puts it, we need to mind not only about doing “good parts” but also about “the gaps” between the parts. That is, your report can be done correctly, but if it doesn’t fit the needs of your customer, it may not be as good for him. We need the customer or the preparer to raise the voice to make a change in the process.

“We” thinking is crucial in an experience-based marketing, as everybody needs to be involved in getting the right interaction to the customer, everybody needs to be open to see how the company can do better and be part of it.

The cultural change needs to be lead by the head of the organizations by example (top-down) and specific principles, and provide the appropriate training of those principles to the employees to offer bottom-up solutions.

Chris Moustakas

Remember the first time you used Google Maps? Compared to the experience of Mapquest, it looked and felt like magic, and what was state of the art just the day before became obsolete overnight.

A wealth of open resources, plus a step change in what “good” looks like, has reset people’s expectations. At its core, “Quality of Experience” is a holistic definition. It used to be that a company could be judged by specific criteria – a widget’s reliability measures, for example – but those days are over. Today it’s not only that widget’s reliability that matters, but how and from where you source the raw materials, how responsive your support hotline is, even what your employees are saying about you on Glassdoor.

This change makes perfect sense in a world dominated by instant information and social media. It has nothing to do with producing a warm-and-fuzzy feeling, and everything to do with smart business. Your supplier may provide cost-effective, high-quality products, but if those products were developed in repressive environments, you expose yourself to the risk of social backlash (especially if you’re a bigger company). You don’t have to think for long to remember recent examples of this.

How can quality professional contribute positively to this new reality?

  • Use tools like NPS to gauge how your customers feel about you.
  • Apply metrics to qualitative measures (such as your NPS scores), and use those metrics to communicate management expectations.
  • Open your organization to suggestions from employees, who often have the best ideas, and track those with the same attention you would a corrective action.

The techniques are the same. The only thing that’s different is the larger scope – and with that larger scope, the opportunity to effect more meaningful change than ever before.

Luigi Sille

Nowadays customers are much more educated, they know exactly what they want. They read and do research (using internet) about the products they want. In an experience economy an external customer is referred to as a “guest”, and not just a customer.  A guest does not just buy a product, but he or she pays for the experience.

How will this shift to experience economy affect the quality industry, and what quality practices can be applied or adapted to ensure success in this new economic structure? The answer is simple: SERVICE

Companies should invest in training and development of their employees to:

  • Deliver better services
  • Communicate better
  • Handle and help solve complaints/problems… “Service Recovery”
  • Expand their knowledge
  • Work on team-building

Managers should:

  • Be more flexible
  • Brainstorm (with the team) for new ideas and possibilities (Creativity & Innovation are very hot topics in the quality industry)
  • Help / guide / advise the team
  • Quality of work-life is also important
  • Deal with conflicts, and never neglect them

We have to remember that Managers have to guide, control, and motivate employees (team members) so everyone will feel that they are part of the organization. We also have to measure, one way or another, the quality of service we are delivering. But measurement of Service quality is not an easy task. Compared to measuring tangible products, it’s difficult.

Aspects of service quality that can be measured:

  • Reliability: Deliver promised service in a consistent way
  • Tangibles: physical appearance
  • Responsiveness: Willingness to offer a fast service
  • Credibility
  • Access: Easy to do business
  • Customer complaints

Maybe we (Quality professionals) have to do more on this measuring aspect. New and improved measuring methods will have a positive value for both organizations and your customers.

So the experience economy and the quality industry, go hand in hand. Improving the quality of your service will in turn deliver the experience your customers are looking for.

Dr. Suresh Gettala

Joseph Pine and James Gilmore, the two protagonists of the experience economy, argued that the transformation of the economic progress has gone through four-stages of evolution – from agrarian (commodity based) to industrial (goods based) to service (service based) and finally to experience based economy.

Source: B. Joseph Pine II and James H. Gilmore, “A leader’s guide to innovation in the experience economy”, Strategy & Leadership, Vol. 42, Issue: 1, pp.24-29, 2014.

Today, experiences are construed as a distinct construct and economic offering from services just like how services were seen distinctive from goods in the earlier decades. Experiences are perceived to be unique, memorable and sustainable over time that would involve customers’ involvement at multiple levels – physical, emotional, intellectual, behavioral, social and spiritual.

The primary question that arises is: “Can the quality of the experience be measured”? Earlier dimensions of quality, predominantly were explained from a goods/services perspective, quality of the experience transcends such limited thought process and details that experience quality encompasses the “total experience” ranging from the pursuit, procurement, consumption and post-sales phases of the experience.

It has been proven through research studies that customers do construe customer experience quality and therefore able to perceive the relative superiority or inferiority of their experiences. While we can be forgiven for thinking that managing customer experiences is apropos only to the consumer industry, it must be noted that business to business milieu also provides definitive stages for experiences.

Pine and Gilmore postulates five value creating quality approaches that drive progress in the dynamic experience economy that include, customized goods, enhanced services, charging for experiences, fusing digital technology with reality and transformative experiences.

To encapsulate, “Experience” is not an immeasurable, amorphous construct but a concrete economic offering which if carefully designed and staged would result in a lasting impression on the customers. Needless to mention, this would in turn help to carve a niche for the seller organization if they can stage an experience that is going to create some memorabilia in the minds of the players that results in a transformation within the customers.

As more and more focus is being given to the quality of the experience, by both the business and the academia, prudent practitioners have realized that they can command a fee for the experience per se. Consequently, companies enabling such transformational experiences can charge not just for the goods and services or the time spent with the customers but for the transformation resulting from such experiences.

Several research and practitioner oriented articles have dwelled on the dimensions of experience quality and how they positively influence other constructs such as customer satisfaction, loyalty, retention and repeat purchases. There has been substantial proof to illustrate that effective management of experience quality is extremely crucial for achieving sustained financial success.

Influential Voices Reaction to Talking Quality to the C-Suite

November Roundup: The post by Influential Voices blogger Dr. Suresh Gettala, Talking Quality to the C-Suite, looked at how quality professionals, certainly experts in their field, may fall short in selling quality to top management and offered his perspective and advice. Throughout the month of November, ASQ Influential Voices bloggers contributed their ideas on talking to top management about the importance of quality.  This month’s topic certainly generated some very interesting and somewhat diverse opinions.

Pam Schodt responded that any quality discussion with the C-Suite should be tailored for that audience and provided suggestions for accomplishing that in her post Corporate Communication, 5 Keys to Success.

Jennifer Stepniowski agreed that getting the attention of senior executives can be challenging and added even more tips in her blog, C-Suite Speak… “Quality.” She advised that quality professionals remember a call to action which needs to be clearly expressed and not just implied.

Robert Mitchell agreed that quality professionals need to speak the senior executive’s language in his post Talking Quality with the C-Suite.  He wrote that his 34 years of experience in a global manufacturing company echoed and reinforced much of what Dr. Suresh suggested.

Dr. Manu Vora wrote that the easiest way to connect with C-Suites is to use the cost of quality approach which he explains in his post Talking to the C-Suite About Quality.  He says this tool lets executives know where there is waste in the system and how they can reduce the Cost of Quality through continuous process improvements.

Nicole Radziwill wrote that it’s important to let the C-Suite know that you can help them leverage their organization’s talent to achieve their goals, then continually build their trust.  In her blog, If Japan Can, Why Can’t We?  A Retrospective, she added that the key to talking quality with the C-Suite is empathy.

Edwin Garro recalls a fascinating lecture by Deming and his startling answer to an audience member’s question in his college days.  In his blog, Deming and the C-Suite.  A Life Time Lesson for Management and Engineering Students, he writes that Deming’s definition of an effective C-Suite manager was one who understood variation, not one who forgets the voice of the customer, employee and the process itself.

In her response and blog, AUDIT, a tool to talk with the C-Suite, Jimena Calfa agreed that talking to the C-Suite about Quality is a real challenge as senior executives often consider quality to be a waste of money instead of THE tool to increase profit.

Tim McMahon wrote that getting executives in your company to want to support and then adopt Lean Thinking may be difficult but not impossible.  In his blog, 5 Ways to Get Management Buy-in: What’s in it for me?, he shares a list of ideas to help you convince your management to start thinking Lean.

However, John Hunter had a different perspective in his post Making Your Case to Senior Executives.  He believes success will come from concentrating on short term financial measures while also crafting a story to make your case for long term improvements.

Scott Rutherford also shares a different approach in his post You are not selling Quality to C-Suite. You are selling short-term relief.  While changing corporate behavior from below is challenging, he believes there are ways for quality practitioners to have influence.