Tom Olivo - You Can't Measure What You Can't See

Zak

Hello, and welcome to People Performance Radio, sponsored by SuccessFactors, the global leader in performance and talent management software solutions. Now, let's get to the show.

Jim

Welcome back to People Performance Radio, you're here with Jim Matheson …

Steve

… and Steve Hunt.

Jim

Steve, are you ready?—we're about to start season two of People Performance Radio

Steve

I am ready Jim, in this new episode we're going to be talking to Thought Leaders from SF Research about different areas of talent management, and some really interesting and innovative things these different companies and people are doing to really advance the field of talent management, and today we're going to talk to Tom Olivo from Success Profiles, and Success Profiles is really focusing on one of the critical central and really one of the more challenging areas of talent management, which is how do you effectively measure performance of people in the organization? - and from the interview, a couple of things I'd really encourage you to listen to, one, Tom talking about how they think about performance in terms of the importance of measuring performance using different sources of data, not just relying on a single source of information; the importance of clearly defining what performance means, and I think one of the most interesting things that was really unique is how they display this information, and the use of visual tools to create a very compelling way to turn that data from a bunch of numbers on a spreadsheet into actual information you can make effective organizational decision around, so that being said, let's hear from Tom.

Jim

Let's do it!

Steve

Hi, this is Steve Hunt with People Performance Radio. Today I'm talking with Tom Olivo from Success Profiles, and I'm going to let Tom introduce himself, but today, just a little preview, we're going to be hearing a lot about performance measurement, and and some really interesting things that Success Profiles do around performance measurement, so with that being said, Tom, could you please introduce yourself?—say what your role is? Tell us a little bit about what Success Profiles does and why it's cool?

Tom

Sure, I'd be happy to Steve, we're based in Bozeman in Montana, it's a pretty spectacular part of the country. For 17 years we've done performance measurement work, not just in the US, but in other countries, and we have developed about the most comprehensive database on measuring business practices, which are kind of universal to virtually every organization. We've easily measured over 10,000 individual business units, and specifically in the healthcare industry we've developed the most comprehensive database that includes over 500 healthcare organizations, so that's been our focus, is to come back to provide valuable, comparative information, to help organizations evaluate where they are and what they need to do to get to the best practice level of performance.

Steve

So when it comes to measuring performance, and I assume we're talking about employee and leadership performance, what is it that a company who's working with Success Profiles gets access to about their workforce that a company that maybe doesn't do performance measurement in such a sophisticated manner does not?—what do you provide that really differentiates companies?

Tom

Well, what you're trying to do is inexpensively use all the information that they have to give them the most accurate picture of what's going on, and the concept we used is one of almost GPS navigation, so Steve, if you were to go outside your building, and try to figure out exactly where you're located, your GPS device would lock on the three co-ordinates: longitude, latitude, and of course elevation. It would also use a number of satellites, because you just can't get all three by just one perspective, so with that, and you're thinking about measures of an organization, or even down to an individual department, you need softer feedback type measures about the performance of the leader, and that may come from the staff; you need the same type of measures coming from the top down, and that may come from the executives; and then you have to combine that with some other harder measures that would be recognized by finance, and those could be budget numbers, it could be productivity, it could be turnover or replacement costs, it could be customer satisfaction or loyalty metrics—when you bring all of those together, you now have an accurate picture of performance, and we say you're taking that from the realm of data to that of actionable knowledge, which is understanding cause and effect relationships between what you do and the outcomes that you get, to business intelligence, which is what senior executives need to make the best decisions with predictable outcomes.

So if an organization has that kind of information, they move from a subjective environment of performance measurement to an objective environment of performance measurement, and you can tie every aspect of performance to those measures, because you can take them to the bank.

Steve

Can you give me an example of what would differentiate an objective from a subjective environment, so exactly what sort of data or analysis do companies do that gets them to that objective level, since historically performance management has been a subjective thing, it's been based off supervisor ratings or 360 input, which is inherently subjective data. What do you do with clients to take them from that subjective level to the objective level?

Tom

Well, specifically in healthcare, the issue that they face is one of grade creep, and if you were to go to the performance review scores, you would find in the average healthcare system that 98.7% of employees get a passing grade, and that's impossible, especially in organizations that are failing, so that system is broken, so you have to come in and say, "We need a more objective way to evaluate people, because with the performance management system, we see that it's not accurate", so the objective would take a combination of how the staff perceive their front line leader, or manager, director, you would take how the senior-most executives viewed that person, and you would also bring in these other outcome indicators, and then there you're going to get a ranking where differentiation in performance across the board that is far more accurate than just the performance review, which is typically what is very inaccurate.

Steve

So really what you're sort of implying is, classical measurement theory, which is if you want to measure something accurately, don't just measure it from one place and one source, but look for different measures that all come at it from different angles, like your GPS location if you want, if you want to know where you're located, you can't just look at latitude, you've got to look at longitude and elevation too.

And you mentioned how you bring that together, because you could end up with just a whole lot of numbers—how do you actually bring together data on maybe productivity, quality, as well as ratings of performance—how do you bring all that together in a way so somebody can look at it, and it makes sense to them?

Tom

Well, in the healthcare industry, I'll just give you an example, and we can get into a case study is, they're very tuned into measures, and if you were to say to someone, "Hey, if you were to break your leg, if you go into a radiologist, how many different views of an x-ray did they take?—and if they only take it from one direction, they may miss the fracture, so they'll take it from three angles, so that they can see exactly what's happened", so then what you say is, "Hey, if we want to look at hard measures we use in x-ray machine, if we want to use it, look at softer measures, we use an MRI machine", and so we actually have a way to visually display all of the results, and we refer to it as an eye chart, because it's very right brain oriented to show the rank order, or relative position of performance, one organization or one department at a time, and one leader at a time, so when you use these tools that are highly visual, rather than tabular or metrics-oriented, the senior leadership can instantly see where there's a fracture, where there's departments or leaders that are failing, and it allows them to move to a much quicker path of doing something about it, so I think it's the way we display the information that no-one else has, that is extremely powerful to drive the executives to make change.

Steve

Is there a place on the web that people could go see those displays?—because I'm sure that what everyone's immediately wondering now—what's this actually look like?

Tom

They can either contact us, and we send out these charts that literally are two feet high by in many times six feet long, that we refer to as eye charts, because you can stand back 15 feet and instantly see which leaders and which departments are succeeding, failing, and you even can find the coaching element that are needed, so most organizations get these lengthy reports, but we at one glance in one view can present the entire organization, and not only the senior leaders love this, but the boards love this, because it can connect performance management to talent management, so they can contact us and pick this up, and we can send them demos, or they can go on the website to view these at www.successprofiles.com.

Steve

Wow, that's awesome, I think there's actually a lot of research on, that people can do much more powerful analytic studies from looking at graphical displays of data, this is a whole area, and it sounds like you've really leveraged the fact that we can do very complex mathematical calculations with our eyes that we couldn't really do with our head, so we see patterns with our eyes that we wouldn't see if we just stared at the numbers.

Tom

h, Daniel Pink, in his book entitled "A Whole New Mind", really is exploring that, as you move up in leadership, in terms of the span of control you have and responsibility, very little of what your skill set has to do with is the technical skill set, and you move up to your ability to bring out the performance in others, and you move from left brain, kind of calculating, technical or tasks-oriented, to the right brain, spatial and making decisions based on information and trends, and judgement, so what we're trying to do is appeal to those leaders by displaying information in that way, and then they tend to act on it more, so there's a lot of psychology around, how do you take statistical information, which no-one likes to spend time with, and distill that down into the mother of all messages that not only everybody can instantly get, but it motivates them to act.

Steve

Yeah, I agree, I'm one of those people that does like statistical stuff, but totally get your point. I guess one thing is, can you provide a case study you talked about that really shows how a company has come in, taken this approach, what sort of data they put into the display, and what they learned from it—how it actually changed the way they ran their business?

Tom

Sure, one of the best examples in any industry, and certainly in healthcare, is the Scripps Health Institute or Center in San Diego, and the Scripps health system is not only challenged because they're in southern California, so you have serious labor issues, you have very high housing costs, so it's difficult to recruit people from other parts of the country, but they realized that, a key competitive advantage for them going forward is to really develop their own leaders.

Now healthcare, since it has really a lack of resources to be able to put into the development of people, they have focused on leadership appointment practices, rather than development, and it's classic Jim Collins' thinking, "Well, how do we get the right people on the bus and in the right seats, and the wrong people off the bus", and can we actually quantify the performance of all of our leaders, get the right people in the right roles, and the analysis that we've done shows that, when they do that, they're significantly above the healthcare industry, so how many times does the healthcare industry get the right talent in the right role, managing complexity that's not over their head, and the average is 55% of the time, so without a structured approach, you're slightly better than a coin toss. But Scripps, for their whole system, is at about 70% of the time they get it right, and they actually have a few campuses that get the right people in the right roles, upwards to 80% of the time.

So we've done some analysis to show, well what does that equate into bottom line results?—the average top quartile leader has a higher patient satisfaction rating of 28 percentile points. There is, in the bottom quartile compared to the top, there's 300% more voluntary turnover, and on the budget side, we find that the bottom quartile leaders miss their budgets by 8.7%, as opposed to the top quartile leaders that hit their budgets. Now they're starting to connect this to the economics, and they're driving results, one lead at a time, one department at a time, versus some over-arching organizational approach that doesn't work.

Steve

OK, yes I think it basically comes back to say that leadership really makes a big difference in terms of people's engagement and retention. One question you mentioned, first quartiles and percentile ratings—is that based on a database that Scripps has?—or is that one of the things you provide to clients as you provide them with a normative database of, we have performance management data on all leaders in healthcare, and here's a comparison of where you stand?—or is that something that's done company by company?

Tom

It's the latter, in healthcare we actually have quantified the leadership performance as perceived from the bottom up and the top down, so we can say, "Here's not only how your leaders compare on your campus, here's how your leaders compare to the whole Scripps system", and we can also say, "Here's how your leaders compare to all, say, front line managers in healthcare", and even more specifically, we can say, "Here's how your leaders compare to their peer group", so that if they're a manager, in say a radiology function, we actually have a large enough database to show how they compare to their peer group of managers in radiology. So you get down to that degree of specificity, it allows them to get the most accurate picture of how their leaders are performing compared to the industry.

Steve

Cool, so what you really bring to an organization is a really clear picture of, one: better collection of data that says, "This is what the people in your company are doing", and then some comparisons, so they can get a sense of "All right, this person was rated a five—well what does a five mean?—is a five good or is a five bad?", and then putting it into a really nice, compelling visual display, so that it's easy to look across the organization and interpret what's going on—have I captured what you're doing with clients in that description?

Tom

You've just sold it nicely, and this fuzzy world of talent management really is defined quite simply as, you've got to define what talent is, within your organization and within the industry; you've got to discover it, meaning, there are a whole bunch of people that are pretty talented, they may or may not be in the right roles, and on average, in a leadership or manager position, the average healthcare organization has approximately 25% ‘A' players, about 52% ‘B' players, 15% ‘C', and in that 3—5% range of ‘D's, and then you've got to look at, OK, instead of spreading our money around and trying to coach everybody, let's invest in the people that are going to give us the greatest return on investment, or our best future leaders, and then deploying them laterally to go turn around departments, so this vertical migration upwards as a career path is not going to happen any more in healthcare, because you're going to see people playing chess instead of checkers, where people are moved around the board, based upon where the talent is needed, to either raise the performance of the department, or to deal with spans of control, and spans of control in healthcare is a serious issue, because of the declining top line revenue stream.

Steve

Right, so really you're seeing this in healthcare, which is on the forefront—I always like to say, if you want to see some of the really innovative stuff being around dealing with the labor shortage, go to healthcare, because they've been dealing with it a lot longer than other industries have, so I think a lot of these things that probably all industries will have to be dealing with very soon have been foreshadowed already in healthcare.

You did say one thing that I have a question on …

Tom

Let me make a quick comment on that—for some things, healthcare is very far behind—if you just take process improvement efforts and those types of measures, there's no universally accepted measures of productivity in healthcare, so that's a problem, but in other areas you'll find that healthcare is further along, because they've had to deal with the demographic pressures of the ageing population, shortage of skilled workers, and so there are some things that other industries can learn from healthcare, but for the most part healthcare's very far behind where manufacturing and other hi tech industries are.

Steve

Yeah, I would agree on the supply chain side, but I would say, they've been dealing with a lot of these issues longer than people, they haven't necessarily solved them, but they've definitely been thinking about it, so that's a good observation.

I have one last quick question, just because you said a word that I always, when you talk about really defining what you mean by performance, the term that you say you used, ‘A' player and ‘B' player, and a lot of companies use that—I've always said, what exactly do people mean by an ‘A' player?—is an ‘A' player in one organization necessarily going to be an ‘A' player in another organization?—is there some knighted status you achieve?—"I'm an ‘A' player and will always be one"—how exactly do you tell ‘A' players from ‘B' players, and does it vary from company to company?

Tom

Well, the definition, if you're looking at here is, you're looking at some type of top-level performance, and when it comes to leadership, you can actually go out and look at a playground at an elementary school, and within five minutes determine who the leaders are, and so a lot of people—are leaders born, or are they developed?—and it's actually a combination of both, but at age 30, if they don't have it now, you're not going to insert it, so you can take a look at people when they're, say, after the age of 30, and whatever leadership that they've either been more innately born with, or what they've developed, it's either going to be there or not, and then you have to come up with a way to just measure what that is, and I don't like to measure competencies, this isn't like taking a test and saying, "Here's what I know", you have to measure based on their demonstrated ability, how do they show up as a leader?—so if your questions that you're evaluating them on, the criteria, is actually on their demonstrated leadership ability, then you can see this person either does it or they don't do it, because it's kind of like a person, most people know they should exercise, and most people know they should eat well, but they don't do it, and what you don't want to do here is to say, well how competent are they in taking the test about what they should do, you want to look at actually, do they show up and demonstrate these leadership abilities? So that's what our measures look at is, not so much competency, it's demonstrated ability.

Steve

So it's mainly, coming from asking the people they're leading, what does this person actually do on the job?

Tom

Exactly, so do they have great emotional intelligence and people skills? Do they handle stress well? You look at "The Seven Habits of Highly Effective People", by Stephen Covey, that's a great concept, but there was never any measurement behind that. Now, the observations are probably pretty accurate—do leaders do these things? But when you quantify those things, you actually can get a differentiation throughout the organization to show, who does this best? Who are our top ten best leaders in the organization? So then when you have difficult assignments, you go to the depth chart, and say, "Who do we want to deploy here to potentially turn around a function or department?"

Steve

OK, well I think really, I'm sensitive to the time, Tom, and I appreciate you taking time to talk with us, and I think just to summarize, you guys, it sounds like you're doing some fantastic things, particularly in healthcare, but you mentioned also a lot of other organizations around really helping companies define what exemplifies effective leadership, putting in a system in place to get good triangulated measures around that, and I think one of the really important things is that you have a tool for displaying this information, so you can actually make intelligent decisions off of it, which is really cool.

So, I guess the last question I'd like to ask is, obviously we would encourage people who are interested in measurement to reach out to Tom and his information's on our website, he's also one of the Thought Leaders with SF Research, so you can learn more about him at SuccessFactors' website, but Tom, just one last thing for our listeners, if somebody is not able to contact you directly, or you don't have a chance to chat with them, what would you say is the most important thing somebody should be doing around the area of performance measurement to say, if there's one piece of advice that I would give a business leader around performance measurement, it's to do this—what would that be?

Tom

I think the key, as I tell people is, that you're looking to get people who will come into work every day, and this word "engagement" is a little over-used, but they're really, they're passionate about what they do, and they'll contribute to a level of what I call, of discretionary effort, and so when they get in alignment, the fact that they happen to love what they do professionally in their job, they love who they work for as their boss, they like the organization who they work for, and then they like the profession that they've selected—when you get that perfect alignment, people will come in and they may, from a productivity standpoint, out-produce people two to 400%, and so everybody has something that they do well, and where they can make a great contribution. Maybe less than 25% of people have got that perfect alignment, I feel fortunately that I have it, not just with what I do professionally, but where I live, and you can't tell where Tom either leaves off and Success Profiles begins, because I've got this perfect alignment with the profession.

I think if we start to think about the people we coach, and looking to get them in the right role with that alignment, not only are they going to feel really good going home at night with what they do, but productivity's going to soar, and ultimately that's the name of the game in every industry, is productivity.

Steve

Awesome, I totally agree, and I think that gets to our ultimate goal of increasing the roles of workforce by 50%, and the productivity I think has a lot to do with getting people in jobs where they can just really excel.

Well, thank you very much, Tom, and again you can learn more about Tom Olivo and Success Profiles at their website, as well as information about Tom and some of the books he's written, which looks, some pretty interesting titles, but that would probably be whole other conversation, at SuccessFactors' website, at the SF Research Thought Leader network. Thank you very much.

Tom

Steve, thank you.

Jim

Thanks Steve, for that interview. For those looking for more information about the Thought Leader network, you can find it at the SuccessFactors' website in a few different places. The first place to go is always www.successfactors.com/podcast, where you can get all your show notes for the individual episodes. There's also a whole section on SuccessFactors' research and the SuccessFactors' Thought Leader network, which is available at www.successfactors.com/research, and one other item is that we have a SuccessFactors' Thought Leader bookstore, which is available at www.successfactors.com/bookstore, where you can get a lot of great books and information written the folks in the Thought Leader network. See you all next week.

Speaker

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