Jack Welch was one of the most successful CEOs in history. He managed to raise GE’s market value from $14 billion to $410 billion, or around 30 times! One of the tools he used was the so-called Performance Values Matrix. He applied it to rate values and behavior.
Successful teams have one main thing in common: an impressive number of high-value, high-performing players.
Check your team’s performance
It’s easy to find out how your team measures up using the Jack Welch matrix. The leaders use a scale of 1 to 10 to rate their direct subordinates’ values and performance and post the numbers on the matrix. There are two dimensions: performance, plotted on the y-axis, and values, plotted on the x-axis.
The impact of employees’ performance on the organization determines the score on the first dimension. The extent of their behavior’s alignment with the organization’s core values determines the score on the second.
How to interpret the results
There are four possible result combinations:
|1. High performance and high values||3. High performance and low values|
|2. Low performance and low values||4. Low performance and high values|
People in group 1 are definitely worth keeping. Their values are on par with the organization’s standards, and they perform well to boot. You keep promoting them and helping them develop their skill sets, and give rewards as encouragement.
Those in group 2 are at the other end of the specter. Their values are misaligned, and they perform poorly. Again, it’s an easy decision to make.
The people in 4, i.e., high values but low performance, are worth keeping. You just need to invest a little to help them improve their performance.
The most difficult group is 3. They don’t uphold your values, but they do well regardless. There are two approaches here. Some have argued that employees who don’t fully live up to the organization’s standards should be let go, as not even a successful performance will make up for the devastation they can cause. At the same time, it’s hard to remove a well-performing employee.
The better approach is contingent upon the actual score and whether they can improve it.
VBM: The second values matrix for management
Literature offers a second popular management model as a methodology to improve organization and management performance – the VBM or Values-Based Management Model. According to this model, company values placed in action should have a positive effect on performance, which facilitates more effective processes and makes achieving results more likely.
A study by Bradley University analyzed the Values-Based Model (VBM) and Performance-Values Matrix Model (PVM), drawing a comparison between the two. Researchers examined a total of 125 executives’ performance at a leading production facility. They set out to check for a connection between performance and behavior.
Researchers found a correlation between the two, but it wasn’t strong enough to confirm the extent to which the VBM was effective. Based on study data, the Performance-Values Matrix emerged as the more suitable tool to gauge staff performance.
What accounted for these results? To answer this question, one must explore the differences between the PVM and the VBM and the actual course of the study.
According to the Values-Based Model, manager performance quality is directly proportional to their commitment to their company’s values. The VBM is based on the idea of a direct correlation between performance and behaviors. Managers who behave accordingly will perform well.
The model suggests that one shouldn’t make management decisions without first talking about the impact of values on those decisions.
PVM and VBM: comparison and contrast
One major difference between the two models is that the PVM measures performance and core values as two distinct leadership focus areas.
To gain deeper insight into what the two models are measuring, one must differentiate between values enactment and values match. Values enactment is behavior that corresponds to company values, while a match indicates performance that aligns with the company’s core values. The VBM model emphasizes values enactment, while the PVM sees core values as a values match. This refers to the extent to which an employee’s actions align with the company’s core values.
It’s reasonable to assume that measuring core values and performance separately is the better way to view overall employee performance. This makes it possible to differentiate between how results were achieved and the actual results.
Researchers at Bradley University carried out a study to test this model live and establish whether core values and performance were different constructs of management activity.
They did the study on a company that had recently undergone the process of identifying its core values. These were established as Commitment, Integrity, Teamwork, Customer Satisfaction, and Mutual Respect. The managers had undergone training to understand the essence of their organization’s core values.
Measuring core values
Researchers from the university and the company’s HR department cooperated to develop an assessment of core values, which aimed to evaluate values enactment. The end product was the so-called Behavioral Observation Scale (BOS). It was comprised of 19 items, which gauged the core values selected.
Then, the authors of the study requested 360-degree feedback, an employee review method that allows each employee to get feedback on their performance from a number of parties. Those include the manager or supervisor, coworkers, reporting staff members, four to eight peers, and clients, in some cases. For the study, the feedback was from direct reports, the managers’ supervisor, and five peers.
Researchers used a 5-point scale to determine how often the manager demonstrated the core values.
The scale from 1 to 5 corresponded to 20%, 40%, 60%, 80%, resp. 100% of the time. If the manager demonstrated the value 100% of the time, he’d get a 5.
The team then got the results showing the average of each item.
Measuring job performance
The team took data from the managers’ latest annual performance review to measure job performance. They were assessed on 17 criteria considered to be critical to their jobs in this review.
Each manager was rated based on a 5-point scale corresponding to the following:
- Doesn’t meet expectations
- Below expectations
- Meets expectations
- Above expectations
- Well above expectations
To analyze performance and behavior, researchers used data from the Core Values BOS assessment and the managers’ latest performance review. The managers’ superiors completed the performance reviews, and another group of people completed the core values. This arrangement was set up to minimize bias.
Statistical analysis yielded three distinct correlation measures:
- Annual performance review
- Core values assessment
- Comparison of the above two
Findings in favor of the PVM as the better matrix
The team found more than 300 potential correlations when comparing performance and values enactment, but just 12 were statistically significant. According to the researchers, these could be purely coincidental as there was a confidence interval of 95%.
In lay terms, this means no direct connection exists between performance and value attainment. The two must be assessed separately, and the PVM model would be an effective tool to achieve this.
The Performance-Values Matrix is a more effective and precise tool for measuring manager and staff performance. The Values-Based Model does not appear to be a fully accurate performance measurement. It could be a remnant of archaic organizational processes.
Decision matrices for businesses
A decision matrix can be an invaluable aid in problem-solving, task prioritization, and building arguments in favor of any decisions you’ve made. It can also help you choose the best approach for your business’s operations.
A decision matrix is a set of values in rows and columns, which make it possible to compare possible solutions by assessing variables according to their significance. Businesspersons and business owners are advised to use a decision matrix when they need to evaluate a situation from a logical standpoint, and the number of variables is enough. This will make the decision-making process easier.
University professor Stuart Pugh created the decision matrix method to facilitate the selection of alternatives in the field of design. The tool has become a general aid in decision-making since then, above all in business. It’s also known as grid analysis, the Pugh method, or the multi-attribute utility concept and limits subjectivity.
The Pugh method can draw attention to factors that can affect the outcome of a decision and do away with confusion. This is quite helpful for people in a situation with multiple variables and choices. It is a quantitative method that can eliminate emotion. It lets you assign a value to each variable and weigh it accurately, unlike a simple list of pluses and minuses.
A decision matrix can help you solve complicated issues, prioritize tasks, and craft arguments to defend a decision that’s already been made.
As a purely rational tool, a decision matrix works best when making an unemotional decision. It is not suitable when the choice is a matter of personal preference or taste. It helps by removing emotion as a factor.
Example of a Pugh Matrix
|Concept A||Concept B||Concept C|
Above is a completed Pugh Matrix for three concepts called A, B, and C, which you can see at the top of the matrix. You evaluate these against five criteria. The baseline is Concept A. The S stands for “same,” indicating the baseline. Concepts B and C are compared to Concept A based on each criterion. If B or C is better than A, you enter a “+” where appropriate. If it’s worse or the same, you enter a “-” or an “S,” respectively.
The process of building a Pugh Matrix
The process of building a Pugh Matrix transpires in four stages, assuming one has defined alternative design or decision options.
You start by identifying and defining selection criteria. You can generally apply design requirements in part or in whole when using a Pugh Matrix to choose the best design option. The requirements should take the user and other key stakeholders into account, including internal ones. The validity and reliability of the selection mainly depend on a suitable set of requirements or criteria.
It might be tempting to rush this stage, but that can lead to an unreliable or unsustainable selection and a subsequent unsatisfactory outcome.
Set one design option as the baseline and label all requirements and criteria as “S.” If possible, you can use the previous design for the baseline as you should be reasonably familiar with its performance already.
It’s also possible to use a 1 to 5 scale where the “S” (baseline) is a 3. A 1 is much worse, and a 2 is worse than the baseline. Correspondingly, a 4 is better, and a 5 is much better than the baseline.
You calculate the total score by adding the number of pluses and minuses for each alternative. The option with the most points is the “winner.” Still, it’s a judgment call in some cases. You shouldn’t choose the “highest” ranked concept without at least some consideration.
This stage is optional, but it’s a good idea to go through it if you have a lot of alternatives. In such cases, there’s rarely just one best option. You should consider hybrids, where you can have the best from each alternative. Below is a table illustrating this:
|Concept A||Concept B||Concept C||Concept AB||Concept BC|
Here, we can see that Concept AB has the same score as C, but BC emerges as the best option with the highest total score.
Example of decision-making using a Pugh matrix
In this example, an entrepreneur is considering three locations to set up his business premises. He makes a list of important factors and assigns a weight to each one based on its significance. The factors are rent, location, and the potential to find quality employees.
He decides that market share is the most critical component because it determines how likely he is to get customers. He also wants a location near his home so that if there are any issues, he can get to the premises quickly. He wants to be in an area where he’s most likely to find reliable staff.
When he makes a Pugh matric, the location turns out to be the front-runner. It offers the best opportunity to attract clients and find qualified employees. It justifies the higher rent apart from getting the best overall score.
A decision matrix can elucidate the best decision where multiple features and options are available.