Can you prove how well your organisation is performing?

Our world needs more courageous leaders who will accept the price of transparency and accountability and pursue high performance. Stacey Barr explains how performance measures can benefit your business.

In our digitally connected age, transparency of information is quickly growing beyond the control of organisational leaders. Think of the power of WikiLeaks to reveal what many don’t want revealed, and the power of social media over the credibility of any business.

The world is demanding more transparency from organisational leaders — to see the truth about how organisations are performing. And that’s because organisational transparency has an important role in freeing society of corruption, and holding organisations accountable for their impact in the world. But throwing a light on the measures of company performance also has a dark side.

Judgment is why we fear transparency.

Short-sighted judgment is what often follows greater transparency of organisational performance. So it’s no surprise that many leaders are panicked by what it might reveal and how they might be held accountable. They attempt to avoid this unfair judgement, but that distracts them from fundamentally improving organisational performance.

Leaders will then steer by gut feel, hearsay, anecdote, and biased ‘good news’ data. But what these leaders don’t realise is that the price of transparency and accountability is much lower than the price of ignorance. Organisations led by leaders who fear transparency rarely perform well. And if they perform well in something, it’s usually short-lived and at the expense of more important longer-term results.

Fear of transparency drives ‘gaming’ behaviours.

We hear stories of this all the time. Hospitals that are judged on patient mortality rates refuse to accept patients with more complex health issues, or send patients home too early, to keep the mortality rates lower. Schools that are judged on examination pass rates only accept new students with the ability to absorb and regurgitate knowledge (i.e. to pass exams). This ‘gaming’, to avoid the judgment that comes from transparency, stands directly in the way of organisational performance improving, because it shuts down the production of truthful performance measures for informed decision-making.

But performance can’t be improved without transparency.

The price for informed decision-making is transparency and accountability. Measuring performance is a double-edged sword. Performance measures are both a tool in our hand and a rod for our back. But we cannot have informed decision making without transparency. This puts organisational leaders in a very challenging position. Authors Jeffrey Pfeffer and Robert Sutton say it this way:

“The implication is that leaders need to make a fundamental decision: do they want to be told they are always right, or do they want to lead organizations that actually perform well?”

Leaders must decide: transparency or impotence.

When Lesley, a safety manager for a transport company, invited the author to improve safety performance reporting, she assumed it was to show how performance changed over time and track the impact of improvement initiatives. She was wrong. The new report showed that nothing had improved under his leadership. But he wanted it to show that things had improved. The safety manager had taken Pfeffer and Sutton’s first decision: to be told he was always right. And the price he paid was impotence: the lack of any effect at all on safety performance.

In contrast, Jon, the CEO of a timber products company, took Pfeffer and Sutton’s second decision: to lead his organisation to actually perform well. He was frustrated that he couldn’t see any bottom-line impact from all the investments the company was making in improving processes. Rather than hiding this from his board, making excuses or looking for data that would paint a positive picture, Jon took his leadership team through the steps of clarifying their goals, creating meaningful measures to evidence them. They then cascaded this approach operationally, so the right measures were used to improve performance.

Our world needs more courageous leaders who will accept the price of transparency and accountability and pursue high performance. Because that’s really the only way that things get better. Which decision have you made?