Many times when working on an initiative, you aren’t initially given an outcome to shoot for. The natural thing to do in that situation is to find out what problem you’re trying to solve.
So what happens when you do that research and you end up hearing “process efficiency” and when you try to establish an outcome based metric get something along the lines of “reduce FTE’ (Full time equivalents) by 20%”
That’s not a good outcome.
Well it’s certainly not a good outcome for anyone that may fall in that 20%… or maybe it is.
Why staff reductions are not good outcomes
Staff reductions are definitely not good outcomes for the people that are laid off. Although from one perspective you could say it’s good for them because it gives those folks an opportunity and a reason to find a different job in a different organization.
Staff reductions are not a good outcome to use as a target for your efforts because they don’t actually tell you that you’ve solved the real problem. You usually need to cut staff because your expenses are greater than your revenue. Cutting staff may address to some extent your high expenses, but it doesn’t get to the core problem of insufficient revenue.
Staff reductions are not a good outcome because they often aren’t measured. I’ve seen several business cases put together for efficiency projects that claim that a particular project will save the organization a certain number of FTE. And then those savings were never measured, so the organization didn’t really know if their projects were successful or not.
I have run across one exception to the above, which had other issues. In one of the operating units of this organization, the VP would look at all of the project proposals from her staff and note which ones identified cost savings in terms of reduced FTE. In those cases, she would look at the proposer and ask “Ok, what are the names of the people you’re going to let go?” In effect she expected the staff reductions to happen before the project actually took place. As you might expect that had a rather chilling effect on what ideas people brought up, or didn’t bring up.
Somewhat related to that story, staff reductions may just happen without any changes that allow the people that are left around the opportunity to effectively handle their work plus the work of the people that are no longer there. This is usually the result of mandates to cut staff X% across the board with little to no time to figure out where layoffs may have less long term effect. This is also a sign that the organization is headed in the wrong direction. Quickly.
What is a better outcome to use?
So if you don’t want to use staff reduction as your outcome metric, what should you use instead?
Your outcome based metric should something that allows you to directly measure that you’ve solved the underlying problem or have driven a behavior change in your customer.
You may determine that you have an expense/revenue imbalance because you can’t retain customers, so you may set the outcome based metric to target an increase of customer retention from one month to the next.
You may determine that your underlying problem is that your processes are ineffective. You may establish an outcome based metric that targets increased throughput in a key process say claims adjudication. Instead of placing the focus on cutting the number of people who process claims, place the focus on reducing the time required to adjudicate a claim or increasing the number of claims that can be adjudicated in a certain time period. Of course in this particular example, you’re also going to want to make sure you put some solid constraints in regarding accuracy and quality.
The goal here is to place the focus on the actual problem your organization is trying to solve which is leading to the perceived need to cut staff. You may find by addressing that problem, you don’t need to cut staff at all, you don’t need to cut as much staff, or that you’re able to make much more informed decisions about which people you need to help find other opportunities. And if you tackle the right problem in the right way, instead of letting staff go, you find you need to keep them around to tackle additional business.
How have you dealt with mandated outcomes?
Arbitrary staff reduction targets are just one example of mandated targets that don’t get to helping you see if you’re attacking the right problems. What other sorts of mandated goals have you come across and how did you handle them. Share your experiences in the comments below.