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April 20, 2005

The Performance Analysis Framework Pt. 2

"Performance Drivers" are the conditions that usually obtain for value to emerge from the interactions of the organization's operations, locations and relations with other parties. Drivers may be causes or they may be prerequisites. Typically, when managers translate a leader's mandate into actions, the step initially considered is to decide how to configure resources and methods to leverage environmental conditions that "drive" progress.

Management's job is not just to orchestrate the interactions but also to cultivate those conditions and, through designing the co-operation of conditions and interactions, to prescribe when the emergence of value is most likely supported or inhibited.

For performance management, an organization needs to comprehensively manage information that is used to:
- develop a performance logic model (a theory of progress)
- develop the supporting plan for organizationally implementing the model
- initialize and prioritize action
- monitor status
- confirm underlying or correlated events, and
- reconcile significant differences.

Those actions will primarily involve information that describes operational conditions in terms of value, including:
goals,
assumptions,
relevance, and
priority as well as
variance and
status.

In emphasizing the value-perspective on the operating conditions, performance analysis has two needs: one, for the first four of the six types of information to be logically interrelated; and second, for that logic to be continually applied as a major influencer on business operations.

The real-time decisions for directing activity then matter because, as evidenced in variance and status, they emphasize how follow-up activity is succeeding in turning "plans" into "actuals".

This follow-up activity constantly confronts opportunities, restrictions and expectations that surround the ability to use procedures, tools and people for getting things done.

The practical intelligence about those constraints is distributed throughout the organization. To allow discovery of how to optimize resource utilization for the plan, that intelligence must be coordinated and integrated. Then, refined activity can realize the plan, and drivers can be supported, to produce desired outcomes, which will be observed as good performance.

With the Archestra framework for performance analysis, the identification of goals, assumptions, relevance and priorities is subjected to a reality-check. Opportunities, restrictions and expectations that mitigate them are excavated and grouped in two dimensions:

- reasons (typically dynamic)pertain to the "why, what, and when" decisions that drive resource deployment, while...
- requirements (typically structural) pertain to the "who, where, and how" decisions that establish the organization's position regarding its relations with other parties, locations and operations.

The most important influence of the framework is to illustrate that progress cannot occur unless business reasons are articulated as organizational requirements-- and that if reasons change, then requirements must adapt through change or realignment with the reasons.

As shown in the following example, the framework elicits and accounts for another set of defined progress drivers to be managed, beyond the typical basic level of operational "components" such as designated procedures and resources. The overall value articulated in this example is "sustained superior fulfillment".

-------------------------REASONS versus REQUIREMENTS:-------------------------
WHY versus:
- Who: A director must ensure that an on-time deliverable occurs
- Where: Responsibility for fulfillment will be with the department that directly supports the customer
- How: A process for controlling the production schedule must be used

WHAT versus:
- Who: A workgroup must be authorized to manage an activity or condition that ensures an on-time deliverable
- Where: Production must take place in both a primary and secondary (backup) location
- How: New facilities, instead of prior ones, will pilot the production

WHEN versus:
-Who: The deliverable is on-time when it meets with the recipient's agreed expectation
- Where: Adequate lead time for fulfillment should be built into the delivery, including contingencies
- How: Start-up of production should be supported by a contractual arrangement

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Staged by the framework, this "plane" of requirements specification is the arena of the direct performance analysis, addressing the underpinnings of progress above the component level and instead on the policy level.

Posted by Malcolm Ryder at April 20, 2005 6:07 AM

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