A Caution on Using Traffic Lights for Performance

If you’ve attended one of my performance management workshops, you know I caution against using the traditional traffic light metaphor to represent performance. Yes, the visual is nearly universally understood (green = good, red = not good) and simple communication is indeed a key to improving performance. However, in many business situations, three states are not sufficient to distinguish between levels of performance.

Link to Hongrui Technology

Consider what happens when a driver approaches an intersection in a car. There are only two potential outcomes – proceed or stop – represented by green and red. The extra state, yellow, indicates the light is about to turn red but it doesn’t actually add another potential outcome: the choices are still proceed or stop.

Officially, when drivers see a yellow light, the should slow down and stop when they get to the intersection. In practice (at least in my home state of California), most drivers proceed through the intersection — presumably with a little more caution than if the light was green. The traffic light has three states but only two outcomes.

In business, our decisions are usually significantly more complicated which makes the traffic light metaphor challenging. A sales region might target selling 100 units of a product every month. If it sold 50 units one month, its poor performance would be represented by red. Similarly, 80 units might yield a yellow to show caution while 90 units would produce a green for good performance. However, what color should it use if it exceeds the target value by selling 150 units?  

In sales, as in many other areas, it would be demotivational not to differentiate between exceeding and almost reaching the target. The most natural solution would be to include an additional color. Perhaps dark green could represent exceeding the target. If that happens, you might as well add a fifth color for balance; dark red represents very poor performance.

Including additional states is also a way to handle an issue that can happen when you’re using qualitative KPIs based on surveys. Because people naturally tend to avoid outliers, they bias their answers such that many KPIs end up as yellow. As such, I recommend adding both a dark red and a dark green to the traffic light, which yields five potential states. With five states, even if people avoid outliers, there are still three potential results: light green, yellow, and light red.

For those of you that remember the difference between nominal, ordinal, interval and ratio measurements (statistics, anyone?), there’s also a mathematical reason to prefer five states over three. The short argument is that red/green/yellow are nominal labels that – through convention – have become ordinal rankings with green as best and red as worst. The limitation with ordinal ranks is that, while they show that one result is better than another, they don’t show how much better one result is than another. 

For example, if I finish first in a race, no one knows if I won by one second or by one minute. Interval measurements like thermometers (the differences between 80, 81, and 82 degrees are the same) and ratio measurements like age (40 is twice as old as 20 which is twice as old as 10) solve this problem but can’t be represented by a small number of states. The more states you have in an ordinal ranking the more it approximates an interval one. So, 5 is better than 3. Statistics class dismissed.

For some organizations, using a red traffic light to indicate poor performance might send the wrong cultural message. If red is your corporate color, you may not want to associate it with poor performance. These organizations could instead consider the emoticons used in instant messaging tools (smiling face, frowning face) or thumbs up/down images (gladiator style).

All images, including traffic lights, suffer from the fact that end users don’t intuitively understand the grading scales. At what value does a KPI change from red to yellow? How much better is dark green than light green? At the risk of pulling out the statistics book again, we have an ordinal ranking problem. To solve this communication problem, I often recommend that organizations use letter grades (A/B/C/D/F), which are widely understood and self-documenting (90% and above is an “A”). And, for those keeping track, these are interval measurements.

Some of my colleagues have suggested we go one step further and use thermometers. After all, you can often deduce close to the exact value from the height of the mercury. Therein lies my concern with thermometers; they track the actual value rather than the gap between the actual and target. There are times when getting close to the target is ok (fundraising) and other times when it’s not good enough (zero defects in an airplane). I’ll expand on this idea in a later post.

I’m a big fan of visual clues but sometimes it may be better to use words rather than colors, images, or letter grades. A scoring system with intervals like “Best In Class,” “Exceeds Performance,” “On Target,” “Needs Work,” and “Unacceptable” is instantly understandable and therefore may be more likely to be accepted. Acceptance leads to adoption.

In short, there is not a single correct answer. Instead, consider this a caution for automatically using traffic lights to indicate performance.

This has been rummaging around in my brain for some time now and I've tried all sorts of weird and wonderful names but I think this one sounds the most descriptive. Previously known as the Idea Box and Brain Dump Sheet - although descriptive they weren't really accurate. So let me explain how this concept works and how it can be effective to start a framework for your strategy.

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Goals, Ideas and their Priorities

Whether you're a StartUp, ScaleUp, individual or team manager - this is extremely useful plan of action for you. When thinking of what to work on over the next quarter it helps that you build a firm understanding of all the moving parts necessary to get things done.

Needs / Wants / Demands

First up, if you're on your own, set aside some time and a large plain A4 sheet of paper or heck a whole pile if you're really busy. If you're a team manager then make sure you bring everyone into a room to get this done. Now literally brain fart everything that hasn't got done, planning to do and what you would like to do. Now you may have noticed that paragraph title is Needs, Wants and Demands. This is meant to remind you of the three factors to think of as you do this exercise.

> What do you need to get done to match your current goals?

> What would you like / want to get done if you could?

> What does your audience expect you to have in place?

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Fill out these sheets of paper and really let go, think of everything you have ever considered and unleash on these sheets.

Now come's the important part. Let me give you an example. If you said I want to get or update a website as one of the parts on the sheet, now break that down to exactly what's needed to make that possible. If you want a brand new website you'll need to create a website map, create wording (copy), find images, write blogs perhaps add things to the background like Calendly if you want people to contact you. Each of these things need to be written down as well. Now let's say you want to update the website, first of all why?  Is it because of its speed, poor SEO, maybe you have "heavy" images?  Each of these things need extra work to make your plan a possibility. With all this taken into consideration, now update your sheet of A4 and put all the little and big activities you need to do to make what you want possible.

Time to Outsource

Some of the things you would like to do will need to be outsourced. Using the website idea again, you may need to get someone else to do that or maybe parts of it. Make sure what you put on the sheet includes looking for quotes and time for updates on the progress of work. Other things you may want to outsource might be accountants. You'll need to get quotes for them too.

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Time to Train

Another thing to consider is you may want to make time to upskill and build on your knowledge. Sometimes all you need is a one day course, others might be over months or even over a year or so.

Want more information on Traffic Light Pole? Feel free to contact us.

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Time to Fundraise

Consider the money side of things. You may (back to this again) want a website but good ones don't come cheap. Do you have to set aside several months to pay a deposit and then go on a payment plan? If so, this needs to be an element of your priorities as well. Maybe you have to complete a whole financial projection for the year or more to make your plan feasible.

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Once you have written all of these things down AND the steps to make them possible you need to look at the amount of steps for each one. Here's another example:

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I need to create posts for the next month

To do this I need to see what's relevant in my niche, post thinking about what's in it for my audience and add a call to action to motivate them towards my goals.

I may need to create images to help my post stand out for each platform

Once my audience has followed my call to action - I have to follow up, how do I do that?

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I need to create a stand for my business at an event happening in 3 months time

I need to understand my stand placement and size, who are my competitors going to be at the event and what can I offer different to entice my audience? Who can I approach to make and provide my stand? How much will it cost? What is the anticipated delivery dates?  Do I have to get specially made up signs to fit the venue?  How many people can be onsite at the stand?  When should I start advertising?  

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Can you see, as we think of each of the steps involved it helps you build an understanding of the time and financial investment. You'll also understand that you need to allow time to hear back from others and this time needs to then be built into your Strategy.

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Colour Code with Traffic Lights

Now get that very filled out sheet(s) of A4 and start colouring in as follows:

> You can do this yourself in the next 2 weeks with little or no assistance = Green

> You can do this yourself but you need to do something to make it possible = Amber

> You can't do this yourself, you need to bring someone else in to make it possible = Red

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With these colours in mind, now set about diarying everything - either in your hardback diary or online diary. I personally use Google Calendar because its free and updates easily on the laptop or on the and I can even add the colours to see visually what's coming up. I also tend to not misplace my diary by using a digital one!

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Now you need to update your diary every 1 to 2 weeks and you'll be changing your reds to amber and then to green as stuff gets done.

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The further out something is, the likely more individual steps you'll need to take to make it happen, all of these steps need to be taken into account and added to your strategy. Remember on top of all of this is your "everyday" stuff too. You may want to also add holidays, doctors appointments and childrens commitments.

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I have been using this system for over 2 years now and have found it so much easier to reach my planned for goals and even goal setting has become easier because I can now look at it at a holistic level.

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