ceoforum.com.au: How do you go about setting targets and driving performance in an organisation?
Michel Masson: Targets have two dimensions: their nature and their level. The nature of the target is about whether the target aligns to the overall goals and strategy of the organisation, while the level relates to what performance you should reasonably expect. It’s also important to cascade those targets across the organisation, so each individual has clarity about what they need to do to achieve the overall goals of the organisation.
Goals also need to be specific and measurable – a key cultural value for us is that, if you can’t measure it, you can’t manage it. Some of our operational performance targets, of course, are easy to identify, as they come out of our operating contract with the State government. However, I am equally interested in measures of culture and values, as I believe culture and values are vital to improving our performance as an organisation.
One example of one of our key values, for instance, is ‘Zero Harm’ i.e. we want to create a safe operating environment for both our employees and our passengers. We have put a range of measures in place around that value, as well as a number of specific initiatives to improve our performance around this value.
ceoforum.com.au: What is your view about what works (and what does not work) in terms of motivating people to achieve higher performance on key cultural values like ‘Zero Harm’?
MM: One thing that we have found to be ineffective for cultural change is monetary incentives. Monetary incentives can work quite well for motivating people to achieve very specific things, but for cultural change they are far less effective. For something like ‘Zero Harm’ for instance, you need the ideas of lots of people across the business, and you also need lots of new behaviours and attitudes. You want people to take the value to heart, and make it central to how they operate in a range of different situations.
Another thing you want to avoid is people becoming too focused on a couple of measures, at the expense of the overall performance of the organisation. A good example for us is our performance on punctuality. During the first 10 months of our operation, for instance, Yarra Trams over-performed on punctuality: we had our best results since 2004. At the same time, however, I want to make sure that this is not at the expense of other important measures, like safety.
Two important measures like punctuality and safety need to be kept in balance, even when considering very specific operational behaviours. If, for example, a tram has an accident, punctuality considerations might dictate that we should get the tram back operating as soon as possible. At the same time, however, we want to make sure that we have conducted all the necessary investigations into the accident, which might demand we hold on to the tram a bit longer! It’s very important to hold all the measures in balance, and not let one measure dominate all the others.
Another common mistake with measures is to constantly change the priority and importance of key measures. That creates doubt in the employees – one year employees are being told a measure is vital, yet the next year it is not. You need to keep some consistency in the performance targets, while maintaining the necessary flexibility about what performance levels you want to set and how you are going to achieve them.
ceoforum.com.au: Given that consistency is so important, how do you keep your messages about performance fresh? Many CEOs, for instance, comment that they get a bit tired of repeating themselves, even though they know it is essential to do so.
MM: An important part of being CEO is providing a sense of leadership and direction for the organisation from the top down, and, when you are in the process of doing that, you certainly can get a bit tired of repeating the same things.
However, I believe it is equally important as a CEO to see your role as one in which you are aiming to create an environment in which everyone can contribute their ideas to solve the problems and challenges the organisation faces. This is very more of a ‘bottom up’ approach, in which you are playing more of an enabling role within the organisation, so you can tap into the brains and the energy of your employees.
If you as a CEO take this enabling role on board, you will have a very different approach to some of your leadership tasks. You won’t get exhausted, for example, in trying to instill a particular set of attitudes and ideas in your organisation; instead, you will concentrate on creating an environment within which all the ideas and creativity of your employees can flourish. I firmly believe that, in most organisations, employees usually have a very good idea about what needs to be done to improve the organisation’s performance. What can be lacking, however, is an environment within which those ideas can emerge, and addressing that lack is a key part of the CEO’s job.
As an organisation, we want to identify those ideas our people have, make sure they have an opportunity to express their ideas, and, when we implement them, recognise that person’s contribution.
ceoforum.com.au: Other than creating a positive environment within which ideas are both encouraged and rewarded, what else is important in enabling this kind of creativity?
MM: One important organisational aspect for us has been taking a cross functional approach. That is, from the day we took over the trams franchise, we put together an integrated service delivery team, which included people from our operations, infrastructure and rolling stock functions. This kind of structure is essential if you are going to address broader objectives like ‘how do we enhance the traveling experience?” or “how do we improve our safety?” Otherwise you run the risk you will get individual functions making decisions purely based on the perspective of their own function, which is really too limited for these kind of broader issues.
ceoforum.com.au: What are the most important factors for a CEO to concentrate on to drive performance in the organisation?
MM: As I mentioned above, enabling the organisation is critical. You also need to invest in training and skills, as people need both an environment which encourages them to contribute and the skills to do so.
Timing is also important. Leading an organisation is sometimes like riding a horse – you need to be attuned to the subtle signals and feedback about how hard you can ‘push’ the organisation at any particular time. In my case, for instance, I pay a lot of attention to my one-on-ones with my direct reports, as well as the more general feedback I get from all levels within the organisation. I make a point to travel on the trams several times a day, and, while you want people to feel they are being stretched to reach their performance targets, you don’t want them to feel it is impossible to reach those targets!
Your senior management team is also critical, and here I look for three things. Firstly you want to make sure people are highly competent in their role. Secondly, you want to make sure their role will cohabit with those in the rest of the organisation. Thirdly, personal rapport is essential. My feeling is that as senior managers spend so much time together, this third factor is as important as the other two in assembling the team.
Finally, the power of recognition is enormous. As a CEO, I believe you should always praise in public but criticise in private. Appropriate recognition is one of the most effective tools for driving long-term performance in an organisation.