Do Your Leaders Know the Score?

If your leaders don’t know how they’re measured, you can’t expect consistent performance or real ownership.

Frustrated with inconsistent performance from your managers or senior team members? The issue may not be motivation, it may be measurement.

In this episode, Henry Lopez breaks down why leadership performance problems often stem from a lack of role clarity, measurable outcomes, and transparent KPIs.

Without clearly defined metrics, even highly motivated leaders drift. Expectations become subjective. Feedback becomes emotional. And performance becomes inconsistent.

Henry explains the difference between expectations and KPIs and why outcomes, not activity, must be measured.

He walks through:

• How to define company-level KPIs first
• How employee KPIs must roll up to business goals
• Why 2 to 5 KPIs per leader is the right number
• The importance of transparency in formulas and data sources
• Why ownership requires control
• How KPIs improve engagement, fairness, and accountability

As Henry says, “If employees don’t know how you measure their performance, you can’t expect them to win.”

If you want stronger leadership, clearer accountability, and more consistent results in your small business, this episode provides a practical framework you can implement immediately.

Do Your Leaders Know the Score? – FAQ:

Question: Why do small business leaders underperform?
Answer: Often it’s not motivation it’s a lack of clear, measurable KPIs and role clarity.

Question: How many KPIs should a manager have?
Answer: Ideally 2 to 5 measurable KPIs that directly roll up to company-level goals.

Question: What’s the first step in setting employee KPIs?
Answer: Define your company-level KPIs first and then employee metrics must align with business goals.

Henry Lopez 00:12
Welcome to the how of business podcast. This is Henry Lopez, do the leaders on your team, your managers, or senior members of your staff, do they know exactly how you measure their performance? Or are they guessing? Or are they desperately trying to read your mind? If your managers or senior leaders don’t know the score, then you can’t expect them to win, and if they’re not clear on the score, then you will continue to get inconsistent performance at best. So on this episode, I want to talk about, do your leaders know the score. Are they clear on how they will be measured and what your expectations are for them in their role in your business? You can find all of the how well business resources, including the show notes page for this episode, and learn more about my one on one and group coaching programs at the Howard business.com I also invite you to join the Howard business community on Patreon, and please subscribe wherever you might be listening so you don’t miss any new episodes. I often find that business owners are frustrated with their team leaders or their senior employees, the performance that they’re getting from those people, or maybe it’s just a lack of consistency or follow through. You might feel like they’re just not stepping up. Or a common phrase I hear is they don’t take ownership. But when we dig a little deeper, what I usually find, and this includes in in my case, where I’ve had these challenges in my businesses, is that perhaps some of the issues, the root causes, are a lack of role clarity. There are no measurable outcomes. There are no employee level KPIs, key performance indicators, or the measures, the metrics of performance, and there’s no formal review process or feedback process. If any of those may be ring true for you or in your environment, then this is a common challenge, but there’s something you can do about it, and the problem often isn’t motivation or capability. I actually have found that if you hire the right people, most people want to do the right thing. They want to do a good job, but what they often lack is clarity and measurement. So if your employees don’t know how you measure their performance, if they’re not clear on that, then you can’t expect them to consistently perform to your standards. So let’s clarify the difference between expectations and KPIs. You know, expectations are what we say we want. Maybe we’ve had these discussions. Maybe we talk about it in meetings. Other ways that expectations are communicated other than what’s actually measurable. A KPI is how we measure whether that’s happening, whether that expectation is being met, is our standard being met. That’s how KPIs come in. That’s the measurable component that’s so critical to this, especially in leadership or senior position roles on your staff, leaders must be accountable for outcomes, not just effort and performance. Measurement provides focus, it provides alignment, objectivity and fairness. All of those things can be true if an employee is clear on what the expectations are. And most critical part of it, the KPIs, the measures how we’re going to measure what actually gets delivered the results. And that brings us that focus on what’s most important in the organization or within that department, how that aligns with our higher level focus and goals for the company, for the business, it makes it for an objective measure of their performance, instead of just a feeling or based on one incident or one situation. It’s fair, because everybody understands, especially your team leaders, how we’re going to keep score on our performance. On episode 476 titled employee performance management, I go into a deeper dive on how to measure and provide performance feedback, and there’s a couple of downloads available for that episode that I’ll have on the show notes page for this episode at the Howard business comm. But performance management is not just an annual event, although that should be at a minimum, you should have formal reviews, in my opinion, in small businesses, I like to see at least an annual formal review, a written review, and ideally maybe even twice a year. Now that might be too much, so once a year is fine, but what I talk about in episode 476, that I want to touch on here is that really that’s only part of performance management that formal review. It is critical, it is important. You must have it in place, and if you don’t, now, this is the time to implement it. But also what you need to have is an ongoing system that provides clarity, measurement and ongoing feedback or coaching. That’s the ideal environment you want to have. An employee should not be surprised at their annual review by the feedback that you’re giving them, right? It should be something they’re they’ve been made well aware of, or that you’ve discussed already, both the good and the areas that require improvement. If you don’t measure it, you can’t manage it. And it certainly applies here to getting the performance that you need and expect from your employees, in particular, your lead. Team leaders in your staff. I’ve talked about on previous episodes, including episode 393, about the motivation, motivating workers, motivating our staff, and what I have found, and I talk about on previous episodes that I want to highlight here are people want clarity and feedback and without measurable outcomes, even highly motivated leaders or senior people on our staff, they will drift and they will be confused, and that, at a minimum, leads to frustration. And what I have found is that your talented people don’t like working in those kinds of environments, and so they’ll probably leave you for an environment where it is clear as to how they’re measured, but you might end up keeping the people who aren’t as talented, but they like hiding behind that lack of clarity. So feedback without measurement is subjective. That’s the point I made. A moment to go about objectivity and fairness. Even highly motivated leaders need that feedback, that objective feedback and objective means that it’s not just your emotions, it’s not just anecdotal, but we’re actually tying it to a KPI, some sort of metric you can’t coach what you haven’t defined, and that’s the key takeaway here on this point.

Henry Lopez 07:51
so how do you set meaningful KPIs for your team leaders, for your senior team members or staff? Here is the core thing most small businesses commonly struggle with KPIs. So if you don’t have any KPIs for your staff, I suspect it could be that you may not have any KPIs for yourself or at the company level, at the business level, and that’s where you need to start. What are your company level KPIs? And These might include things like revenue target or revenue growth year over year, profit margin, customer retention, or maybe user or membership counts, operational efficiency metrics like turnaround time, for example, or error rates, quality metrics, it could be customer service metrics like a particular survey score or review scores. All of those things are examples of what might be on your company level KPI dashboard. If the business itself isn’t measured at a high level, at your level, as the owner or CEO, then employees are not gonna be able to align to that. You’re not gonna be able to clearly identify what metrics make sense at the next level down employee KPIs must roll up to your higher level company, KPIs. That’s the point about alignment, and so it’s got to start with the business level, your level KPIs. Now keep in mind with KPIs, this rule applies to your high level KPIs as well as it does to staff member KPIs. Don’t get carried away with these. If you have 20 KPIs, I’m going to suspect that’s too many, typically, especially to start with, it should be three to five KPIs, something in that range. You might argue you have a few more, but it can’t be too many more than that. Otherwise, I’m going to argue that you’re not really using those or measuring them or looking at them to make any significant business decisions. So step one is company level, your business level. KPIs, the dashboard that you look at to help you make business decisions. Step two to defining KPIs, meaningful KPIs, is to define the outcomes, not the activity, but the outcomes. We’re not measuring effort here. Although effort, of course, is important, we’re measuring results. So instead. Of saying, like, Okay, you are responsible for managing the team well. Instead, make it more measurable. Of course, they need to manage the team well. But what about team retention percentage as a KPI, or on time completion rate if that team is responsible for that, or gross margin by department if they’re responsible for a particular department, and you can measure the financial aspects of that or client satisfaction score. Maybe they are the ones that deliver to that client, and they’re the ones that are going to most directly impact customer satisfaction. So what you’ll find as to how other businesses do this, especially larger business successful businesses, is they have performance scorecards that align with the strategy for where we’re going for the year, not only do they align to the company KPIs, but to the strategy that the business is taking. KPIs must be measurable and actionable, and that must be tied, or must be in alignment with your business level KPIs. So that’s step number two, define the outcomes and that are measurable wherever possible, and not activity. Step three, I’ve mentioned already, but it’s worth repeating. Less is more. Two to five, KPIs is a good practice. It drives clarity, it reduces overwhelm, and it makes the whole review and measurement process simpler and more objective. Step four, related to KPIs that you’re creating for your team leaders or senior members of your staff. And again, when I say that it could be an individual that has a team or someone that just is responsible for an area or a department of your business, but step four is full transparency. Three KPI transparency requirements here the KPI formula must be clear, in other words, how we calculate that number, that metric, that measure, if I’m the employee that’s being held accountable to that KPI, then I need to clearly understand how we’re calculating that number. Now that might be obvious in some cases where it’s a simple number, but if it’s a little bit more complex, like retention, for example, can be a tricky one as to how we calculate retention. So be clear and the employee, the team member, must be clear on the formula. The source of the data must be clear and transparent as well. If I’m your team leader and I’m responsible for customer satisfaction, and the KPI is a particular number or range of Google reviews, for example, that we need to maintain, then that’s an easy one. I know that that data is going to come from Google, but if it’s some other source of data, I as the employee, need to know where that data is coming from. Now, I may not necessarily have access to that source system, but I need to understand where that data is coming from. Where is the input coming from? That needs to be clear, and then I have to have some level of access to the data. I need to understand. What is it that we’re using to measure it can’t be that I find out about the KPI when you when we have our review, it’s got to be something that I can do the math myself to see where I’m at. If you want an employee to buy into it and use that KPI to really measure results, then it’s got to be something that they can impact and that they can measure. A lot of the research on this shows that clear expectations are one of the strongest predictors of employee engagement. If team leaders, if senior staff, can’t see their numbers, then they can’t own them, and if you expect them to behave like, quote, unquote, an owner, then you’ve got to give them the data. You’ve got to give them the transparency as appropriate, so that they can, in fact, own that measure of outcomes. Step Five to creating meaningful KPIs to measure results is to measure what they can directly impact. You don’t want to assign a KPI based on influence on something, assign it based on control. So, for example, a team leader shouldn’t own total company revenue. They can own team production or team conversion rates or project margin in their department. What is the piece of that higher level company goal like increase revenue by 15% this year. What’s the part that they have control over themselves or their team that rolls up to achieving that higher level KPI of increasing revenues for the company? So the principle to think about is that ownership requires control if they can’t materially move or impact the number the KPI becomes unfair and demotivating, which is almost just as bad, by the way, if you’re listening on Spotify, I invite you to scroll down on this episode page and answer the quick poll question, which is, do your leaders have clearly defined KPIs? It’s just one tap. And I look at the results of those polls to help me shape future episode topics and other information to help you start, run and grow your small business. So let’s talk a little bit more about why owners avoid setting KPIs for their team leaders, for their senior staff members, and some of the reasons I’ve heard that maybe these resonate with you is I fear the uncomfortable conversation that. Going to have about this now that I’m holding that person directly or measurably accountable where they’ve never been held to that standard before, I don’t have or know how to calculate the metrics. So hopefully, as I’ve given you some examples, you get a better idea on how to put these KPIs together. And by the way, one good strategy, if this is the first time you’ve done KPIs, or even if you’re adding to your current KPIs, is enlist that team member, that team leader, to help you define these because, as with anything else, if they’re involved with defining the score how we’re going to measure, that’s going to increase buy in from the start, because they’re going to give you input, and they’re going to hopefully confirm for you that they feel like that’s a fair measure of their results. Remember, don’t confuse activity with productivity. And it could be that part of the challenge is you don’t have the systems in place that would allow that person, that team member, or that department, to execute consistently. So maybe you need to address that as well, or before you implement a KPI from an HR perspective. You know, I’ve had Claudia St John on a couple times, most recently on episode 549 talking about HR. And one of the things that she says related to this is, quote, If your people don’t know how they’re evaluated, you’re asking them to read minds. End, quote, I think Claudia is spot on on that. And so how do we avoid that? Well, the KPIs is certainly part of that. What we’ve been talking about here, but included also is clear job descriptions or job outlines, whatever it is you call them. Do your especially your leaders, do they have clearly defined roles and responsibilities? And if they don’t, you’ve got to start there. This isn’t a very complicated document, and I have a sample download that you can get from the show notes page for this episode, a sample job description, if you need a place to start. Then on top of that, you’re going to layer the KPIs, those three to five numbers, metrics that you’re going to use to measure the results of them performing their job. Then also you’re going to have consistent and regular feedback, ongoing coaching and formal reviews. I also will have a download on performance reviews. And I have a new download for you that is on how to create KPIs. So if you’re if it’s a challenge for you, if it’s the first time you’ve created KPIs. Download this worksheet, and it’ll walk you through how to create these KPIs for yourself at a highest level, but also, more importantly, here in the topic of this episode, for your team leaders, this download also has some examples that you can refer to as you’re trying to figure out what might be a good KPI. So go to the show notes page for this episode at the Howard business Comm, and you’ll have all of those download tools available for you there. I want to encourage you to implement the parts of this that you don’t have in place today. Start with making sure that you have KPIs at the highest level, at your level, at the business level. Then for each leadership role in your business, each of them should have two to five measurable outcomes, measurable KPIs, document those formulas and how you come up with the KPIs, make sure that that’s transparent and that it is something that that leader, that team leader, can actually directly impact. And then make sure that you keep that measure, that you review them at least monthly, if not quarterly, depending on the measure of the KPI. But you’ve got to now manage through those KPIs, lead through those KPIs. If you go through this exercise, and then you put those away and you don’t look at them for a year, it’s not going to do you much good. It’s got to be one of those things that you use to keep score as to how we are performing. And that clarity will drive performance. It will include a sense of ownership, and it will measure what matters, and that will show you also Where are you motivating people correctly, and is it the right things that we’re measuring? Because nothing says that these KPIs are set in stone. You’re going to review the effectiveness, and then you’re going to look at it periodically, at least once a year, to determine if they need to be adjusted. To summarize here, if employees, especially your key employees, your team leaders, if they don’t know how you measure performance, their performance, they’re going to continue to feel frustrated. They’ll feel confusion, and your business will continue to be inconsistent. You’ll continue to get inconsistent performance from those people. What this also allows you to do? It allows you to separate the people who can perform and who want to perform, but they just haven’t been given the right clarity from the people who despite that clarity, they are not able to perform. They’re not a fit. But if you don’t have that clear distinction, that clear measure, then it’s very hard to determine, is it the employee or is it the environment? So this clarity that comes from job descriptions that are clear, KPIs that measure the outcome of their efforts, their performance and those things being in alignment with the overall goals of the business, the clarity and transparent. Frequency of those measures, what they’re supposed to be doing, and how we measure their outcome, that’s what leads to consistent performance in your organization. When KPIs are clear, performance becomes objective, feedback becomes easier, and leadership becomes so much more accountable. This is Henry Lopez, and thanks for joining me on this episode of the how of business. I wish you the best as you start and grow your successful and profitable small business, I release new episodes every Monday morning. You can find a show anywhere you listen to podcasts, including the how of business, YouTube channel and at my website, thehowof.com thanks for listening.