10 Reasons Results Based Management Matters to Small Business

This article is a reprint of Wise Bread's contribution to OPEN Forum from American Express -- where small business owners can get advice from experts and share tips with each other.

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Perfect attendance was rewarded in grammar school, but that's no way to measure the performance of today's increasingly mobile workforce. That's an issue because it won't be long, if forecasts are correct, before three-quarters of your workforce will be working someplace other than your office.

But how can you manage them if you can't see them? If you focus on product not process, on outcomes not activity, if you establish a results-based method for assessing performance, you'll know when your people are successful. But a results-based management system can give you much more than that.

1. You will really understand your goals.

As the Cheshire Cat put it, it doesn't matter which road you take if you don't know where you're going. Which is another way of saying you can't measure results if you don't know what you're trying to achieve.

Implementing a results-based management approach means you have to start with a clear understanding of what you're trying to do and how you want to do it. Wal-Mart and Nordstrom both sell clothes, Dell and Apple both sell computers, Ford and Ferrari both build engines, United and Southwest both fly airliners. But they all have very different desired results and very different cultures, so they conduct their businesses in very different ways.

2. Your resources will be focused on the right tasks.

Once everyone understands what you're trying to accomplish, determining what it's going to take to do it – time, talent, money, materials – becomes clear. Sure, you need to consider individual differences and the changing business environment. But once your goals are defined, and everyone understands what success means, it's much easier to recognize when you're working harder and harder to do better and better at something you shouldn't be doing at all.

3. Employee morale, engagement, and loyalty will improve.

People have a built-in need to be autonomous, self-determined, and connected. When they're given clear expectations, the necessary tools and information, and when they're trusted, they become more engaged, more productive, and more committed. Trust is easier for managers when they have specific performance goals to measure, and success is easier for employees when they know what they have to do to succeed.

4. Empowers people to be the best they can be.

When people have control over what they do, how they do it, when they do it, who they do it with, and even where they do it, most respond by performing at their highest levels.

When people enjoy their work they're more productive, and they're even eager to work harder because success makes them happy. Brigham Young University (BYU) collected data from almost 25,000 IBM employees working all over the world. They found that people with flexible schedules (which requires performance-based assessment) were willing to work 57 hours a week before they felt work interfered with their personal lives. Those who didn't have the same opportunity were ready to call it quits after 37 hours.

5. Exposes weak links.

When people don't perform, it's obvious in a performance-based environment. Retailer Best Buy implemented what they called a Results Only Work Environment for their non-customer-facing people and found, across departments, a 52-90 percent decrease in voluntary turnover and a 56-100% increase in involuntary turnover. The program helped comin' and goin'.

6. Reduces cross-functional inefficiencies.

A cast iron stove manufacturer's sales team was measured by sales volume. More sales were better. The shipping department was measured by volume, too: crate size. Smaller crates were better because they were cheaper to ship. If the sales team's goals were measured simply on the number of stoves they sold, they'd be in conflict with the shipping division's goals of reducing costs. If the sales team's performance goals cascaded from the top, and the mix of stove models and sizes was figured in so shipping could optimize their truckloads, cross-functional inefficiencies could improve.

7. Democratizes career advancement.

Who hasn't resented the suck-up who was promoted because of political skills rather than work skills? Salespeople spend their time on the road, but they advance because of results, not because they're always visible or the last one to leave the building. Why shouldn't it be that way for someone from tech support or IT or HR or the art department?

8. Helps you attract and retain key talent.

BDO USA is a global accounting and consulting network with 2,700 employees working in 37 locations. As you might guess, they're numbers geeks. So when they implemented a performance-based management program they kept track of their numbers. Here's what they found (among other things):

• 83% felt they were better able to recruit talent;
• 65% felt they were better able to develop talent;
• 82% felt they were better able to retain talent.

9. Saves money.

Besides the obvious advantages of higher productivity and fewer slackers, results-based strategies save money others ways, too. Absenteeism goes down – 78 percent of people who call in sick aren't, for example. But when your people are happier they need fewer 'mental health' days off. Turnover costs including recruiting and training are reduced, too.

10. Increases profitability.

The further you look down the profit and loss statement for goals, the more likely they are to drive the results you want. Gross profit goals are better than revenue goals because they push your people to think about margins. Net profit goals are even better than gross profit goals because it makes them think about overhead, too.

The numbers people at BDO have given us some more numbers to think about. Their program resulted in an 18 percent increase in revenue per full-time employee, and a 250 percent increase in profit per full-time employee.

It really is the results that count.