In this context, “the X-Factor” means a hard-to-describe force, influence or quality that has a positive impact on an organization’s performance. I believe that when an organization possesses and promotes the concept of accountability appropriately, the effect can be the X-Factor for the organization, and thus, result in a key competitive advantage.
Going From Accounting to Creating the X-Factor
True, the root of accountability is accounting but, in the truest sense of the word, it includes so much more beyond just the numbers. By accountability, I don’t mean the old school practice of autocratic, policing by the “quants” who are so worried about the flow of too much information they create confusion, a void of understanding and mistrust with key constituents (those closest to them – middle management team and employees). Rest assured that I write this from a position of experience (I have the scar tissue and grey hair to prove it) but luckily, it hasn’t been my recent experience. These are the kind of senior level people who are constantly looking for opportunities for a surprise attack and take delight in embarrassing or humiliating people within the organization with their tenacious pursuit for what they call “the truth”. If you have ever encountered this old school element then you understand, like I do, that these counterproductive methods can have a debilitating effect on morale, hurt productivity and create an environment of fear, uncertainty and doubt (aka “F.U.D.”). To counter this element, some companies, like Google, Barklays Capital, Jet Blue and Capital One, have a “No A-Holes” recruitment standard so people like this are identified during the pre-employment screening process and NOT hired to join the ranks of their work force.
Instead, I am referring here to the much more meaningful effort of fostering of the spirit of a fully committed team. Such a fully committed team in this context is working together towards the pursuit of lofty ambitions (i.e. achieving an industry leadership position) based upon a common set of performance goals (quantitative and qualitative) and clear-cut metrics that have real meaning – to them. To be effective, the goals are necessarily supported by rewards and recognition programs and a well-conceived communication plan to ensure the team is constantly motivated to achieve continuous improvements in performance. Peter Drucker so eloquently made the point towards a definition of accountability that goes far beyond just financial accounting:
“Financial Accounting, balance sheets, profit-and-loss statements, allocating costs, etc. are an x-ray of the enterprise’s skeleton. But much as the diseases we most commonly die from – heart disease, cancer, Parkinson’s – do not show up in a skeletal x-ray, a loss of market standing or, a failure to innovate, do not register in the accountant’s figures until the damage is done.”
An Accountability Success Story
As a case in point, before becoming a Strategic Marketing Consultant, I ran a direct marketing life insurance business for a few years. Early on, the management team and I agreed on a set of 6 key metrics and goals for each that we tracked on a weekly and monthly basis. While we had a dashboard of more than 50 available metrics to review, we put much more emphasis on these six critical ones. These goals and metrics were agreed to, signed off by and fully supported by the senior leadership (CEO and CFO) of our parent company. Using a simple sensitivity analysis spreadsheet, everyone in the company knew what the baseline metrics were, how they were calculated and the relative impact that each had on our top line performance. With this tool we were able to create “what if” scenarios to demonstrate first hand that “not all metrics are created equal” so, for scoring purposes, each metric had a relative weighting based upon the potential impact it could have on achieving our goals and driving top line revenues. Incentives were tied to performance levels that exceeded plan. All front line employees could see how they contributed to the performance metrics, some directly and others indirectly, but there was a prevailing a sense amongst the team that they all had a role in accomplishing goals and were an integral part in the day-to-day achievement of the overall strategy. In the agent call center, each agent had an individual scorecard tied to these metrics which was compared to the agency averages overall and the variances to the average were denoted by a simple color coded system: plus variance (green), minus or negative variance (red) or no variance – equal to the average (yellow). A meritocracy of sorts was created that rewarded the best performing agents with proportionately higher amount of the best performing leads. One-on-one meetings were held quarterly with each agent and were designed to be informative, prescriptive and helpful (as opposed to punitive). The poorest performing agents were placed on a performance management track and coached on a weekly basis until improvements were made – or not. With our employees and agents we met in a lively but relaxed environment; and when we exceeded our metrics, we met over pizza.
Accountability Applies Equally to External Stakeholders
Meanwhile, outside the company, we met with the paramedical companies, third party suppliers and the insurance companies to explain our goals and metrics. We compared common performance metrics and the goals we shared with them and examined any discrepancies between our results and theirs.
Once we had our external partners on board, the accountability cycle was complete – where results were shared openly with the key stakeholders in the form of a Monthly Progress Report.
Accountability worked. Once we had everyone in alignment – where we were all on the same page and focused on the improvement goals we created for each metric, we achieved a dramatic improvement in our performance, across-the-board. In some of our metric categories (like conversion rate), our external partners (insurance companies and paramedical firms) confirmed that our performance levels went from mediocre to industry leading.
The 4 Key Elements to Accountability
There are 4 key elements to accountability. In the book “Counting What Counts”, the authors have painstakingly chronicled hundreds of surveys and case studies that support 4 main areas of accountability common across all organizations:
- Governance – corporate rules and policies to guide and govern employee behavior.
- Measurement – measures that aid in decisions, reveal quality and customer satisfaction levels and ultimately, drive long term value.
- Management Systems – a holistic, balanced view of the company performance that goes beyond financial measures alone and encompasses the customer perspective, social aspects, internal perspective (i.e. operations) and learning and growth. The Norton Kaplan Balanced Scorecard (BSC) approach is an example of such a management system. See the CIGNA P&C BSC example that follows.
- Reporting – this is the age of transparency, both inside and outside of the organization.
In taking this concept one step further, they suggest creating a matrix called the Corporate Family of Measures, by key constituency. Here is a sample Matrix for the aforementioned life insurance direct marketing agency:
Source: “Counting What Counts” by Marc J. Epstein and Bill Birchard, page 150.
To fill in the Matrix and make it meaningful, you need to determine how each stakeholder contributes toward the achievement of the overall performance goals and metrics then state it in concise terms.
Example: CIGNA Property & Casualty Balanced Scorecard
- Net Operating Income
- Combined Ratio
- Premium Growth by business
- Premium mix by business
- Loss ratio by producer (agent/broker)
- Expense ratio by producer
- Producer triangle
- Premium run-off rate
- Performance against producer plans
- Average policy size
- Loss Ratio
- Expense ratio
- Price monitors
- Underwriting quality survey
- Claims Frequency
- Claims Severity
- Severity-control monitors
- Loss-control utilization
Learning and Growth Perspective
- Premiums per salary dollar
- Net operating income per salary dollar
- Competency development plan status
- Key staff turnover
- Key staff acquisition
 Robert I. Sutton, The No Asshole Rule: Building a Civilized Workplace and Surviving One That Isn’t, Warner Business Books, New York, 2007.
 Peter F. Drucker, “We need to Measure, not count.” The Wall Street Journal, April13, 1993.
 The 6 key metrics were: 1) response rate 2) application rate 3) medical completion rate 4) policies in force 5) average annual premium and 6) average premium per lead.
 Conversion Rate in this instance was the same as application rate = applications written/gross leads.
 Marc J. Epstein and Bill Birchard, “Counting What Counts”, Perseus Books, NY,NY, 2000. Page 7
 Source: Adapted from Robert L Nolan and Donna B. Stoddard, CIGNA Property and Casualty Reengineering (A)” (Boston: Harvard Business School, Case No. 9-196-059, 1995 and appears on Page 87 of “Counting What Counts”
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Excellent article Bill. Accountability is everything in the business world. The message must be very clear to everyone, and the team goals and purpose for achieving them.
Love the comment, “Google, Barklays Capital, Jet Blue and Capital One, have a ‘No A-Holes’ recruitment standard…” Brilliant.
REWORK – new business book along these lines from the creators of Basecamp, the project management system. Seth Godin, an incredibly bright light in the Web2.0 sphere, said, “IGNORE THIS BOOK AT YOUR OWN PERIL.”
IMHO, a big factor is the dollars and cents. That is, after all, WHY WE WORK, isn’t it? …unless we’re financially independent I suppose.
So don’t executives interested in fostering accountability and innovation have to put their money where their mouth is? Pizza’s great, but kinda bad for you if that’s all you eat. Don’t they have to spread around the wealth the group is creating by focused energy towards the dashboard and company goals? Isn’t there a bottom line in there somewhere? Sure agent compensation is usually pay-for-performance, but what about the others, the support staff, bonuses, etc.?
Great concept on involving the supply and value chain. Brilliant. Was that ‘hard’ for them? How receptive were they at first? Did they have any additional incentives in the contracts for performing above and beyond contractual obligations?
Noticed in the chart the right-most column is “Social Measures” but your Aetna example seems to missing that piece. Probably a good reason for it, but, as my focus is on Social, curious on the Social Measures reference. A possible example that really took the marketplace by storm is the Pepsi Refresh project, where a couple years ago Pepsi took $5m of Super Bowl advertising, built a great site, and ‘gave away’ the rest of the money to Social projects. A couple years later now, and they are committing huge increases to the concept – and for good reason. So curious on that.
Thanks for writing, Bill. Looking forward to seeing others. Subscribing to the follow-up comments….
REWORK – get it.
Thanks Mike, as always great input. I will check out the book. FYI, there were compensation incentives for the staff and agents beyond just the pizza. Great question about the the reference to social measures. It refers to the goals and metrics related to impact of the business on society as a whole, the environment and the local community. Such measures might include: maintain 100% employment, reduce carbon footprint, implement solar strategy for server farm (Google) or “lead the United Way fund drive in Ventura County”, etc..
Accountability is a hard concept for many business people. A common misconception is that accountability means being able to blame someone when a project/deadline goes off-track. Accountability has nothing to do with finger-pointing and everything to do with building a team that can depend on each other, works in concert to acheive a common goal, and everyone takes reponsibility for the success of the team, even if it’s just pizza. Success needs to be it’s own reward, and the organization that fosters that approach will always be ahead of the pack.
Bill, this is a timely article for us as we’re going through the final stages of fine-tuning our budget and action plans for 2011. I wish there was a better word than ‘accountability’ to represent what you described in your success story. I think the a-word has become loaded with negative connotation that means one will be embarrassed, humiliated or terminated when ‘held accountable.’
One struggle I’ve faced is finding the right proxies to measure that 1. the team believes will yield the desired results; 2. that don’t overemphasize activity that’s not tied directly to results; 3. that make sense for senior management who maybe don’t understand the nuances of what goes on in the trenches; and, 4. that don’t require so much secondary work to track and report that you don’t have time to do the things that ring the cash register.
Jim, accountability has been overused and does have negative connotations. In another discussion group, someone suggested a better word is “ownership” as in taking ownership, which takes accountability once step further making it personal.
It is difficult to find the right proxies and you do need to cover all bases. Sometimes it is by trial and error. That is why the management team and I picked the most important ones, then had the parent company executives bless them and last but not least, presented these measures to our clients in terms of the new monthly reporting format – and they were fine with our approach.
I couldn’t help but recognize a few individuals from our past that fit that “old school” mentality you referred to. Your point of measuring accountability thru the evaluation of the team vs the individual is certainly more productive then dissecting each individual’s flaws, mistakes or triumphs.
Ilook forward to catching up to you at the end of the month and discussing further.
PS: Now I understand why I didn’t get that job at Capital One.
Great article! I enjoyed it. Specifically, I love the idea of “the fostering of the spirit of a fully committed team” with the “…lofty ambitions…., clear-cut metrics……..goals are … supported by rewards and recognition programs…… What I have realized that the rewards and recognition programs motivate most individuals more than money. Those rewards and recognition programs and their respective criteria need to be communicated often and the acknowledgement of the rewards and recognition need to be in a public environment for others to view at least twice/year. More important than the reward and recognition program is the level of integrity that is needed to sustain the programs and team. Consistency, fairness and honesty from EVERYONE – the most senior level to the most junior level – is required for any system of accountability to be successful.
Accountability and pride of accomplishment go hand-in-hand, and energize a company positively if the right metrics are selected and they are measured fairly. The technique of involving the entire team in selecting the right metrics, and then going to your clients for input and confirmation is brilliant.
The one thing I would add is to be sure you avoid the worship of the numbers, even if done this way. Sometimes metrics take on a life of their own, as if they are somehow above the real world we live in. If you as the leader see that rigid adherence to the “rules” and “numbers” is creating an inequity due to something the metrics and their authors didn’t comprehend, cut through the unintentional fog created by number worship and acknowledge and reward someone who stepped beyond them to try to answer a current changing challenge.
The Drucker quote is wonderful. Note that he specifically says that “a loss of market standing or, a failure to innovate, do not register in the accountant’s figures until the damage is done.” That can be true of any measuring system when your world changes. Management by metrics is appropriate in a steady-state company and industry, and is very appropriate for a Deming-based continuous improvement or six-sigma mindset. Unfortunately, those metrics can inhibit rapid change when a dramatic market shift happens to a steady-state company.
A Naval officer here in Annapolis recently told me that virtually all of the senior officers in the pre-war US Submarine Service had to be quickly replaced at the beginning of World War II. They were well trained and had been rewarded for their performance by following “the book” during peacetime. However, the German Navy had also read the US “book” and could predict their moves. They were losing every battle. The newly promoted breed of captains and admirals didn’t follow “the book” and attacked so unpredictably that they turned the tide on German underwater warfare. The German Navy could not predict what they would do next.
We must do both. We must continuously improve the steady state portion of our current business using metrics which create accountability and reward the top performers, and at the same time we must chart a course for our future by listening to our clients and innovate even if it goes against the grain of the pre-established metrics. Our reward systems must recognize the innovators, even if they occasionally fail, because ultimately innovation defines the future of any business.
Keep the articles coming!
Great article Bill. I am a big believer in “you get what you measure.” It is nice to see metrics front and center in a business discussion.