Our company was presenting a program about improving the performance level of what we call “B” managers to more closely mirror the behavior of Top performing “A” managers to 7 different CEOs representing companies with multi-unit locations ranging from less than 10 to over 100. What resulted was a lively discussion as to how you evaluate who your “A”, “B”, and “C” managers are.
What we heard varied from, “You know when you see them,” to “We measure them on a lot of different factors.” We discussed that good managers follow the systems in place, while the managers doing their own thing were not as successful. We also heard that you may have an “A” manager in a “C” location. A story was told about a location that was about to go out of business until they brought in a seasoned “A” manager. It became one of their highest profit stores. Unfortunately we did not reach a conclusion on how to best grade managers.
This discussion made me think that maybe companies are struggling with management performance because they refuse to set simple and objective measurement criteria. Jack Welch at GE was famous for setting up a 10-80-10 system where the bottom 10% got cut every year and top 10% would get special attention. Nowhere in this system were there excuses or rationalizations about the manager. If they performed they stayed, if they didn’t they were gone. Very simple, very objective and, some would say, very harsh. The question is, did it work? Many people would say that it worked well.
So what measurement(s) should a multi-unit location company use to determine the performance level of a manager? Each location has a multitude of variables to consider from demographics, footprint, facility condition, and competition, just to name a few. Many believe that due to these variables there is no valid objective measurement. Are these just excuses or rationalizations to not grade performance on an individual level?
Next, do managers who have a single simple objective measurement do better than managers who have a very complex system that allows for numerous variables? Studies have shown that simple ,easy-to-understand measurement systems work the best as long as they are fair. Can you select a single measurement system that is fair to everyone? Jack Welch seemed to believe so and his businesses were in many different industries. For a multi-unit operator, all your locations are basically the same and therefore, it seems that creating a fair measurement system would be inherently easier.
If you believe that this makes sense, there are many different measurements from return on sales, EBITDAR, return on invested capital, or 3-5 key metrics. At Red Book Solutions we found that a focused scorecard which measures 3-5 key metrics allows us to rate our employees and management team as “A”, “B”, and “C” performers. We then provide the appropriate resources to close the performance gap between the “B” and “A” players—thus increasing our field of top performers.
Once again the key is to make it simple, objective and to the greatest extent possible, make it fair. You might find it easier to evaluate your managers and, just as importantly, your managers can easily evaluate themselves; both for the sake of heightening your overall company’s performance around your core standards and initiatives.
Greg Thiesen, CEO, Red Book Solutions