What SAAS Performance Management Can Learn from Six Sigma

October 27, 2014

Borrowing from the basics of Six Sigma, keep the following in mind as you define and manage your SAAS performance management and benchmarking:

1. Define the metrics

All metrics should be clearly defined so that an organization can benchmark its success. One way to keep metrics understandable is to use the SMART (specific, measurable, achievable, relevant, time-based) model. The Achievable step in this model is particularly important. There’s no point setting targets that cannot be achieved, as people will feel defeated even before they begin.

A word of warning: Set metrics carefully, or they could damage the business. For instance, a bus company with a metric based on how many buses complete routes on time could result in bus drivers speeding, jumping traffic lights, taking short cuts or missing skipping bus stops to make better time. Metrics should not encourage employees to take negative actions.  This is particularly important when incenting behaviors of sales people!

2. Secure buy-in from senior management and employees

The successful implementation of any new metric requires the approval and interest of senior managers. They have to lead the culture change from the top. Using a new set of metrics to measure performance management is a change that may well attract resistance from across the company, so high-level endorsement and open communication is needed to get everyone on board.

Also, linking bonus payments to metrics can be an effective way of achieving buy-in. But the payments must reflect the priority of the metric. For example, if the company has stated that customer success is its number one priority and then only apportions 10 percent of the total individual bonus to customer success targets,  that sends a contradictory message to employees.

3. Understand what data is needed and how to collect it

It’s not unusual for companies to set a metric, only to discover that either their processes or tools (or both) cannot generate the data they need. It could mean some investment is required.  Metrics need to be reliable and give out the same answer no matter who calculates it. They also need to be standardized, with data being collected in exactly the same way across single or multiple departments, facilities and offices, nationally or internationally.

Fudging metrics benefits no one. To deliver real progress, everyone involved with the metric needs to be completely honest. This may be a difficult pill to swallow because it can raise questions about why the business is not performing as well as had been thought. But understanding the company’s true position is the first step toward improving it.

4. Measure and share the results

It may seem a little obvious, but a large number of companies go to the trouble of designing metrics and buying tools, and then do not actually do very much with the results.  

Use metrics to learn from others and promote collaboration. Never hesitate to share data, as appropriate.  Sometimes, another department already has an idea for solving a problem which you’ve identified in the data, but didn’t have the proof to support making a change.

5. Do not forget the “continual” part of improvement

When implementing metrics, don’t forget that the organization will need to revise its metrics from time to time. The process is needed because businesses evolve and changes will surface as time goes by. Make sure the metrics still measure what they intended to measure and the targets are still relevant.

The aim of a setting metrics is to improve the business, so set targets that challenge the company. It will provide more value than focusing on something that is easily achievable or is already being achieved.

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