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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