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Measure For Measure
Through Performance Measurement, Merrill Lynch Harkens to the Customer

"Friends, Romans and countrymen - lend me your ears." Shakespeare's famous lines from "Julius Caesar" were Antony's plea for the crowd to really listen to him. Today, many organizations strive to "lend their ears" to their customers - both external and internal. Many companies 'check' that they are listening through the use of performance measurement systems. It sounds uncomplicated enough, but all too often organizations do not focus on what the customers are saying, but instead are bogged down with meeting technical standards and achieving financial outcomes. Although these are measurements of performance, do they actually measure if the customer's needs are being met? An organization at Merrill Lynch asked itself that question, and the answer was 'no.'

Enterprise Technology Services (ETS), Plainsboro, N.J., a 1200 employee technology organization within Merrill Lynch, handles information processing, telecommunications and support services to all personnel worldwide. Through informal interviews, ETS employees were simply asked "how do you know if you're doing a good job" and "how do you know if your department is doing a good job?" Responses such as "good question" and "I don't know" were unsettling, but the fact that few people cited feedback from the customer as a determinant was even more daunting. And though many employees noted "setting their own standards" as a determinant, the most common response was "my boss lets me know."

These interviews were the result of ETS creating a new mission and strategic thrust focusing on world class service delivery. "This came as a revelation to employees," states Jim McCormick, first vice president and line manager, "they don't think of themselves as service delivery - they think of themselves as a technical, data or network organization." The new mission put the focus on the customer - in particular, the internal customer and prompted McCormick, partnered with Marc Spaulding of Change Management Association, Derry, N.H., to take a closer look at their performance measurement systems. When they did, many discoveries made the case for change. For one, there were discrepancies in measurement throughout the organization - i.e., what was actually being measured and rewarded on a daily basis was often very different from what top management had stated would be measured during strategic planning. Secondly, performance measures were not being supported and utilized company-wide. In fact, senior levels often problem-solved by blaming rather than resolving. In addition to low ratings on departmental employee morale surveys, management heard talk of service and client satisfaction problems. Lastly, no data existed on how key internal clients viewed ETS' performance.

With these drivers in mind, an ETS core management team initiated a change effort to design and implement a performance measurement system to focus on the activities, results and behaviors that are most important to internal and external customers. This effort included three phases: awareness, implementation and acceptance.

Awareness: Overcoming Denial
Probably more frustrating than implementing a new system is making people aware that there's a problem with the current one. ETS defined four key challenges in the awareness phase:

1. Developing meaningful measures: Is knowing how many phone calls were processed and how many statements were sent to customers meaningful?
2. Moving from the "silo" mentality: Departments that think of themselves as independent and unconnected from the rest.
3. Defining client focus: Who is the client?
4. Understanding the mission (world-class service delivery) and behaving like a team.

Through internal interviews several client satisfaction drivers were established: client relationship, delivery, capacity,
customization, speed, infrastructure reliability and resource management. Through affinity diagrams, the drivers were grouped under three key variables: quality (meeting client requirements), flexibility (accommodating change) and efficiency (optimizing resources).

These client satisfaction drivers became a key part of the new performance measurement system and provided the framework for an ETS performance survey. The survey results showed that although only eight percent of clients were dissatisfied with ETS' performance, only 20 percent rated ETS' performance as satisfactory or above.
The survey findings were posted at the main entrance of the building. ETS employees were neither happy with the results nor the fact that they were being displayed. Managers in particular were upset - "How dare you accuse us of doing a bad job?" Incidentally, the survey findings actually disappeared a few days after they were posted.
The awareness phase prompted a huge cultural change as the task force tried to help employees understand a completely different way of looking at their business.

Implementation: Making it Work
There were several key challenges to be addressed in this phase:

Understanding the good, the bad, the ugly
Good measures focus on your key constituencies. Bad measures appear to be client focused (i.e. marketing studies, etc.), but really are not. The "ugly" is when people lie and no one knows what's going on.

Achieving a process view
In many places at ETS, customer/supplier focus is a foreign concept. "Unless the performance standards are the same for everyone, we won't make improvements toward world class service," says Spaulding.

Establishing a methodology for problem solving

Developing a continuous improvement process

Using goal formation & policy deployment
A diverse task force was created to tackle these difficult challenges. One of the harsh realities of the implementation phase is, "in the absence of good measurement systems, people will make them up," according to Spaulding. This phase is still continuing and is taking longer than anyone thought.

Acceptance: Addressing Everyone's Needs
Getting buy-in and driving out cynicism are the challenges here. In an effort to make all employees aware of the measurement system and its progress, performance reviews will be conducted often - a step up from the single annual reviews of the past.
To help employees figure out what the "right" kinds of measures are, the task force worked on developing a balanced scorecard. All of the client's needs had to be addressed, which meant the measures had to be expanded to include leadership issues and management system issues. This new key variable was defined as "culture" and was added to the existing variables of quality, flexibility and efficiency.
A balanced scorecard focuses on accomplishments and not behaviors. "Don't focus on activity," says Spaulding. "If you're a salesman, don't focus on how many calls you've made, but on the results. The ratio of calls to closures would be a better measure."

ETS performance measurement system is still a work in progress. The next steps include training, collecting data, setting goals and aligning employee performance around the key check points. Getting buy-in is still the biggest challenge. According to Spaulding, "Unless everybody in the organization from top to bottom lines up around the measures, cynicism will continue to spread and Dilbert comics will be posted outside everybody's cubicle."