Performance management: the new triple bottom line
Measuring the success of modern leaders is about more than just productivity scores. Here’s a guide to the new KPIs.
Over the last few years I’ve met many leaders and managers who have questioned their own measurement and understanding of success. How do you know if you’re a good manager in today’s ever-changing working environment?
A customer recently asked me to explain the term ‘white collar productivity’, but this immediately raised two further questions: first, is ‘productivity’ the right measurement for success today? Second, how do you measure the success of a company or leader?
Today’s assessments are about more than just the classic financial measurements – although these are still relevant. The new ‘triple bottom line’ also contains two more human-oriented descriptions of success. The triple bottom line encompasses the following measurements:
- Social capital: Our relationship and network, and the dynamics herein
- Value creation: The functional and emotional value we deliver
- Economic health: The top and bottom line, and how we manage the financials
This article will analyse why this approach has been adopted and how managers can embrace this new triple bottom line into daily work.
Forget about measuring outcomes
Today’s performance management is about so much more than measuring outcomes, as this quote illustrates:
“I believe you need to focus on the two or three things that you are not good at today, that are absolutely essential in order for you to be good at achieving your dream. Forget about measuring outcomes. Measure your ability on those two or three things. If those abilities improve, the results will come, and you’ll achieve your dream.”
Modern leaders are increasingly evaluating their success and achievement on more than just financial results alone.
This bold and provocative statement was made by Jim Hagemann Snabe, Chairman for the board of directors at A. P. Møller-Mærsk. (A four-minute excerpt of his speech is available on YouTube) It’s very much in line with Simon Sineck’s assertion that “profit is always the result and not the goal or dream of a modern company”.
The challenge is how to make this operational in the real world. Existing norms, behaviour and mechanisms cannot be replaced overnight. The shift towards this modern form of leadership is about understanding what the parameters are, how to use them and when.
This includes how we redefine and measure success. Yes, we should measure the outcome (i.e. what we do), but it has to be balanced equally with measuring our ability (i.e. how we do it). Both elements are important, but the sequence is crucial. Understanding of cause-and-effect has to be taken into account.
Measuring ability of your leadership
When addressing an individual’s ability to either fulfill the company’s purpose or to reach new maturity levels, the conversation quickly crystallizes into a handful of personal and interpersonal skills and behaviours.
These can be transcribed into a key indices, i.e. a redefinition and reapplication of KPI-led thinking, but one that includes new measurement methods and – most importantly – new platforms for debate. These include:
- Key behaviour indicator – what behaviour do you nurture, and why?
- Key learning indicator – how often do you learn, and what?
- Key value indicator – what functional, emotional, and societal value do you create?
- Key relationship indicator – who do you have relationships with, and why?
I’ve seen each of these implemented with success in large organisations, where they’ve provided a breath of fresh air into the debate about how to measure growth and success.
However, it only works if the dialogue is focused on the reflection, and not on the nominal measurement alone. Qualitative dialogue is the goal here, not the quantitative number. Aim for gathering words, not numbers.
Mutually agreed measurement
When setting up these mechanisms, it’s crucial to define where the evaluation and reflection is initiated. Are you evaluating your own ability, or are you being evaluated? Think of it in these directions:
- I want to measure my own ability to …
- I want to be measured on …
- I am being measured on …
Measurements like this must be mutually defined and mutually agreed. Forcing measurements on employees or managers will backfire and only lead to short-term achievement, rather than long-lasting engagement and abilities.
The modern triple-bottom-line
Modern leaders are increasingly evaluating their success and achievement on more than just financial results alone. Of course, money, profit and revenue are still very important elements, but they always come third when debating success.
The two elements that come before it are people and value creation. Interestingly, by embracing this approach wholeheartedly, some companies have generated as much as 60% more revenue – thus illustrating the point that “profit is the result”, rather than the goal. Clearly, there is money in this mechanism.
The success of today’s leaders is defined not just by productivity (i.e. what they produce and how much of it). It must be balanced and augmented with an understanding of how they create it and how well they can master the required abilities of a modern, future-oriented organisation.
Erik Korsvik Østergaard (b. 1973) is partner in Bloch&Østergaard, which he founded in 2013. He holds a degree as Master of Science (M.Sc.) from the Technical University of Copenhagen with a thesis in chaos mathematics, and has an EBA in cross-cultural project management.
Erik has worked with leadership, digitization, strategy, change...