Five Must-Have Manager Effectiveness Metrics

How to Link Workforce Metrics With Business Outcomes, Part Two

The second in a four-part series on linking workforce metrics to business outcomes, this post looks at five key metrics for manager effectiveness that will help your organization motivate talented people.

In the tech industry, competitive threats loom large.Marcus-Buckingham-quote-about-multiplier

With the exponential increase in processing power, the race to “be first” has become increasingly daunting. Behind the scenes, competitors are continually working on new advances that may offer performance or cost advantages.

But staying ahead of the competition need not be a thankless, grueling task. There is a way to encourage your high performers to go above and beyond, while energizing them at the same time.

Measuring Manager Effectiveness to Drive Engagement and Performance

Highly motivated people (those who will drive the most results for your business) are drawn to the mastery of new challenges. This can produce flow, a term coined by psychologist Mihály Csíkszentmihályi and defined in this TIME article as “optimal states of consciousness, those peak moments of total absorption where self vanishes, time flies, and all aspects of performance go through the roof.”

To achieve this, your people need strong guidance and development: A high challenge level but low skill level will produce anxiety, while a high challenge level and high skill level is likely to produce flow.

Aside from learning and development programs, you need managers who help people learn and can coach them through stretch projects — key to innovation and staying ahead of the competition. In the long run, this is not just good for engagement, but also for retention. The old adage is true: “people quit their bosses, not their jobs.” And, conversely, people tend to stay with people who help them improve their skills.

So it’s important to use metrics that will help you answer questions like: Which managers retain the most top performers? Which managers grow the best employees? From there, you can look to groom more managers like them, have conversations with those who need improvement, and make sure your best managers are managing your most critical teams.

Here are five must-have manager effectiveness metrics that will help you stay ahead of the competition — while minimizing burnout:

Must-have manager effectiveness metric #1: Engagement score

Why you need it:
Supervisors are the key link between the organization and the employee. They are not the only factor influencing employee engagement, however they are pivotal because of their opportunity to understand and support employee engagement at an individual level. Most engagement survey processes have a specific series of questions that look at how employees view their supervisor. Understanding and using this score to build a complete view of manager effectiveness is important.

How to get it:
The most common way this score is generated is by calculating the mean scores for a series of survey items related to the supervisor relationship.

Red flags to act on:
When a manager’s engagement score is significantly lower than similar work groups in the organization, this is an indication that the manager is falling short. Analyzing this score alongside high performer turnover or absence rates will give you a good idea of how big an impact the manager is having on the team. Low engagement coupled with high resignation and/or high absence rates means that action is required to improve the dynamics of that work group. It is also worth doing some investigation based solely on low engagement, as this may be the first sign that resignations and absences will follow.

Must-have manager effectiveness metric #2: High performer resignation rate

Why you need it:
A general turnover metric — which also incorporates the turnover of poor performing employees — is too broad to support good quality decisions about management skills. Instead, examine the resignation rate of high performers to see if specific managers or work units are losing more high performers than others.

How to get it:

  1. Chose a time frame (e.g. previous 12 months).
  2. Count all the high performing employees who resigned.
  3. Calculate the average headcount for high performing employees.
  4. Divide the number of high performers who resigned by the average high performer headcount.

high-performer-res

Red flags to act on:
Whenever the high performer resignation rate is greater than the overall resignation rate, it signals a problem that needs to be addressed. If you are losing high performers more quickly than your general employee base, this means your overall talent quality is reducing, which is likely to lead to productivity and quality challenges some time in the future.

If the rates for certain managers are substantially higher than other managers, this is an indication that all is not well in that work group. Although it would be too simplistic to assume the manager is the sole cause, it is an indicator that further investigation and insight is needed.

resignation-rate

Must-have manager effectiveness metric #3: Promotions actioned

Why you need it:
Classic promotion metrics simply look at how many people in a group have received a promotion. This does nothing to indicate whether or not they were promoted within the group or came to the group from somewhere else.  When trying to understand whether a manager is good at growing talent or not, you need to understand how many of their people were promoted  — both within their team and externally to another team.

For this purpose, look at your promotions actioned, which calculates the number of people who were promoted from a specific work group and gives a true picture of the manager’s ability to develop promotable staff.

By looking at promotions actioned across your organization, you can see from which work units and managers more people than average are being promoted. This indicates which managers are more effective at growing talent.

How to get it:

  1. Chose a time frame.
  2. Identify all of the people who had a promotion within that timeframe.
  3. Allocate that promotion event to their location / work unit at the start of the time frame – (where they were promoted from, not where they were promoted to).
  4. Divide the number of promotions by the average headcount in the workgroup to create a rate.

promotions-actioned

Red flags to act on:
Managers who consistently have a low or zero promotions actioned rate may be talent hogs. These people hold back team members to make sure their results get delivered, at the expense of the employee and the organization overall. A rate that is low compared to others, or zero, should be a reason to investigate further and clearly identify why this manager is not able to build staff who can progress through the organization.

promotion-actionedMust-have manager effectiveness metric #4: Direct compensation variance from plan

Why you need it:
The amount that an organization spends on people in professional services or technology companies ranges from 60 to 80 cents of every dollar. Even with the best financial controls in place, managers play a key role in managing the ad-hoc, off-cycle increases to base pay, as well as the use of variable or supplemental pay to incentivise employees or cover peaks in demand.

The primary job of a manager is to get the work done with the resources provided — whether these are financial resources or human resources. Understanding how closely the people costs of a work unit match the plan provides insight into how well a manager is doing at stewarding resources.

How to get it:
This analysis requires the ability to integrate and align your planning and analytics work. Here is how to calculate the direct compensation variance from plan:

  1. Align your planning and analytics to use the same basis for modelling people costs (e.g. direct compensation for both includes base pay, variable pay, supplemental pay, etc.).
  2. Publish your planned direct compensation for each work unit.
  3. Calculate your actual direct compensation from pay data.
  4. Subtract your actuals from your plan.
  5. Convert the sum of the difference into a percentage variance (e.g $10 over a $100 plan costs is 10% variance).

direct-compRed flags to act on:
Managers should not be expected to constantly hit their plan targets precisely.  This level of accuracy suggests too high a focus on costs. However, if there is a variance above plan for several months, or if the variance is higher than 2-3%, then it indicates the need to do some more detailed analysis into what is causing the variance (for example, is the variance due to big increases in base pay due to new hires, or is it due to high supplemental pay payouts as the result of increased work volumes?). A variance does not always indicate a negative situation, but it does indicate the need for investigation.

workforce-costsMust-have manager effectiveness metric #5: Absence days per full-time equivalent (FTE)

Why you need it:
Absenteeism is often a “sleeper” issue that, when monitored, can provide great insight into which managers are demanding too much of their people or have an engagement problem. There is a level of absence which is “normal”  — everyone gets sick sometime. Monitoring this metric is about identifying patterns that do not fit with what is expected and understanding what is causing this abnormal behavior.

How to get it:

  1. Chose a time frame.
  2. Count the number of days absent during the time frame.
  3. Calculate the number of Full Time Equivalents working in for each work group.
  4. Divide the number of days absent by the number of FTEs.*

*This gives you a “normalized” or common score that can be compared across work groups.

absence-fteRed flags to act on:
There are two clear indicators that the behavior of a work group is not effective and that further investigation is required. The first is a consistent level of absence above the average for similar work groups. Absence rates do increase with age, so you need to check if one group is substantially older than another. But in general, absence patterns should be consistent across groups doing similar work with similar demographic make ups.

The second red flag is an increase in absence. Month-to-month there are likely to be fluctuations, however, a steadily rising trend is an indicator of a work group that may be over-worked or may be disengaged, looking to leave the organization. (The most common way to get time for an interview is to fake a day of sickness.)

Bringing It All Together

The role that managers play inside technology organizations is crucial to the output of the organization. More often than not, technology companies rely heavily on the knowledge and commitment of their staff. As the person with the closest relationship to employees, the manager plays a pivotal role in bringing out the best in their team.

Monitoring the effectiveness of the management population is an important part of the overall process of managing productivity and ensuring organizational success. However, it is also one of the trickier questions to answer. A high resignation rate is a bad sign, but it is not automatic that it is the fault of the manager — maybe bonuses were cut from this group due for financial reasons.

Whenever you perform an analysis of manager effectiveness, it is important to use metrics to narrow down areas of focus and potential issues. At the same time, remember the metric is not the answer, it is the guide towards a deeper understanding of how the human dynamics in your organization either drive or hinder organizational success.

By monitoring and analyzing manager effectiveness, you will be in a good position to identify where your management team is strong and where further insight is required. When this is combined with recruitment optimization, you can drive strategy and better business outcomes through talented, engaged people.

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Ian Cook |

Curious about the differences between gaussian and pareto distribution? Ask Ian. Want to know what it’s like to kite ski North of the Arctic Circle? Ask Ian. Not only is he an expert in statistical analysis and HR metrics, he’s also an avid cyclist, skier and runner. At Visier, Ian helps customers drive organizational change through linking workforce analysis to business outcomes. He is responsible for the workforce domain expertise within the Visier solutions.

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