Why is this? What is so magical about the number – 10%? Here are some examples that can be found in many organizations today.
The Ten Percent Solution
- Increase sales by 10%
- Reduce the accident rate by 10%
- In crease market share by 10%
- Remove the bottom 10% performers
- Address and explain all budget variances in excessive of 10%
- Improve profits by 10%
- Reduce labor costs by 10%
When examined in this fashion, questions surface like: “Why not 11%”? or “Why not 15%? 25%” If the number of 10% is arbitrary in that it has no basis in facts about the history of performance, why not go for a bigger number? Wouldn’t that be better?
This is the problem with the use of numbers like this in setting goals and measuring performance. Rather than serving as a goal or benchmark, it is an indication that the management group is out of touch with the key performance levers of the organization. Management is not looking at performance from a systems point of view and that limited perspective can often lead to a punishing result.
The bottom line here is all performance can be measured so the measurement is not the issue, the goal is. The problem with an arbitrary number like 10% is just that, it’s arbitrary. A closer examination will often reveal that it is either significantly too high or too low, depending upon the circumstances.
Getting to the Basics of Meaningful Performance Measurement
Getting to a more fundamentally sound goal requires a systems outlook. Getting started by going back and looking at the measurements themselves can do this. As with any measurement in nature, there will be variation in what is being observed and measured. Some of that variation will be normal and there lies the problem with an arbitrarily chosen 10% goal. It could very well lie in the domain of what can be considered normal performance.
The solution from a management point of view is to apply some statistical thinking to the measures to separate what can be expected to occur normally from what is unusual, not normal, and hopefully better. With this process it is less likely that “lucky” performance which is normal but over that 10% hurdle will get rewarded and more likely that only significant improvements to performance will get this attention and the rewards.
A simple example of how this works is consider a monthly market share analysis report. Plot at least 20 months of past history and then look forward. A simple signal for significant and real performance improvement will now be 7 points in a row above the average for the first 20 months.
Challenging groups for improvement under this type of measurement process typically stimulates the serious group problem analysis and solving work that leads to the necessary significant improvements. These are smart people and they know when a goal is real and challenging and when it is just arbitrary.