« The Nature of Management | Main | Strategy, Architecture, and Performance »

March 21, 2005

Policy-driven Performance

In common language, "performance" represents the degree of correspondence achieved between actual execution and planned execution. Managing performance means managing this correspondence, from its inception to its realization. Too often, that is interpreted merely as "command and control" -- with the result being that both the business motivation and the business impact of the execution can get lost in the shuffle. Among other problems, this disconnects competencies from strategy, and it disconnects investments (resources,costs) from value.

Whereas control often relies on a prescription of procedures, what is needed to ensure that motivation and impact are kept in the picture is a prescription of priorities -- or in other words, policy.

Embedding policy into the organizational structure allows operations to be driven on the basis of motivation and impact. This embedding takes place in several steps.

First, companies need to base planning on a picture of the future, and that picture must be predicted from facts (i.e., conditions having a persistent predictability of occurence).

But how does the planning use the picture? Normally, plans describe activities that are goal-oriented, and the role of the future picture is to describe those goals.

Through analysis, Business Intelligence (BI) helps to discover goals that are both plausible and valuable. For that reason, BI continues to stake and even expand its claims in performance management. BI is usually thought of as decision-support, but here it is more precisely selection support. Goals discovered through BI are plausible because, as BI analyses show, they are likely circumstances. And they are valuable because they represent a circumstance that, as evidence has shown, relates to benefits for the company.

Thus armed with expectations that are backed by analysis, plans describe a model of the future in terms of a proactive organization.

But once those plans are in place, the effort begins to translate them into reality. This translation has two key aspects: authorizations, and operations.

Historically, authorization has meant executives granting permissions to operations, giving operations approval and responsibility for certain actions. But today's business finds that capturing value from the marketplace increasingly calls for allowing wisely chosen customers and partners to set requirements that represent defacto permissions.

To translate these requirements into real and enabling approval and responsibility, the business must categorize, prioritize and rationally delegate the requirements, stating and communicating them to activity centers throughout the organization.

Each center of activity must be able to interpret a requirement as a combination of a goal and a priority.

Meanwhile, to make the delegation of the requirement rational for the given activity center, a cause-effect relationship must be known or established, between:
- (on the one hand) the center's activity and the goal, and
- (on the other) between the center's opportunity and the priority.

The scope and scale of the activity center usually define its breadth of activity and opportunity but usually cannot drive its performance; whereas the goal-priority package of a requirement determines what the center will actually try to do.

Overall, in making requirements the direct catalyst of operational decisions, the responsiveness of the organization becomes oriented towards policy whereas previously it had been oriented towards command. Managers then harness that responsiveness as the essential resource and capacity for realizing plans.

Posted by Malcolm Ryder at March 21, 2005 1:29 AM

Trackback Pings

TrackBack URL for this entry:
http://www.malcolmryder.com/cgi-bin/mt-tb.cgi/19

Comments

Post a comment