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September 16, 2005

Justifying Performance - Ambition versus Reality

We often use the term "justified" when what we really mean is "worthy of approval." In casual use, this wouldn't pose any special problem. But when that use goes beyond being casual and gets carelessly built into management systems, the misalignment of Operations and Strategy has exactly the environment it needs. How can this be?

I.

Taken literally, the term "justify" points directly at the idea of alignment. Our issue is to properly identify what is being aligned with what, and what should be.

Much of what we do seeks approval under the heading of "operationalizing strategy". We want to see Operations as being where Strategy is executed, and we think of "performance" as the quality of Operations' execution.

But Operations don't simply "run"... they are driven by management discretion. So what does that discretion really defer to?

Too often we default to the idea that the discretion is justified "by" strategy, when what we really need to know is if it is justified "with" Strategy... Why? Because it could be reasonably justified -- that is, aligned -- with something else, divergent from strategy.

For example: one of the key challenges in managing performance is to control the investment and deployment of Operations' resources by committing to a "performance logic". But a single organization can have more than one such logic -- such as immediate competitive advantage versus capacity conservation; the tortoise and the hare.

Meanwhile, two other different kinds of logic are authority and responsibility. Although strategy has the blessing of carrying very high levels of authority, it must compete with the way responsibilities are distributed, and even with the sources of responsibility -- sources that are often not the strategy itself.

II.

Strategy authorizes action, but it is responsibility that allows it.

Obviously, communicating the strategy gives Operations managers a much better shot at keeping their priorities aligned with the strategy.

But in reality, when managers are caught between what they "should do" and what they "must do", their problem is to drive execution and its supporting resources in a way that matches the concerns that the organization's executives really care about, because -- beyond all lip service otherwise -- those are the terms that will be used to argue that actions should be approved. That is, those concerns will be the virtual "performance criteria"...

So the question is, are the active performance criteria developed directly from the strategy, or not?

In action, procedural effort "reality-checks" the viability and feasibility of the strategy -- assessing whether it is ambitious beyond practical reason.

And if procedural "best effort" doesn't hit strategic targets, the question eventually becomes whether to change procedures or change the strategy.

With either change, the point would be to improve the likelihood of meeting objectives.

And in both cases, starting the resolution of any shortfall in meeting objectives will require reality-checking the current operative assumptions -- such as the practicalities on the Operations side, and the probabilities on the Strategy side.

III.

Assumptions come from a certain view of conditions -- a view that is available at the time the assumption is made. Because of that, they have two big opportunities to change.

For one, later evidence of changed conditions can very well call for revisions to earlier assumptions. Therefore, monitoring those conditions is the basic prerequisite of validating the assumptions.

But two, using two different viewpoints on the same conditions may also bring changes to the surface immediately, in the form of differences from the one take to the other. The simultaneous views or scenarios may compete for primacy and argue which assumptions drawn from them, respectively, are more "valid".

Validating assumptions isn't much help unless there is also a willingness to change them. Managers often hang on tightly to current directions even if the assumptions that originally "justified" them are no longer valid. Why? Although the reasons for that resistance might specifically include political or financial ones, we can count on one general reason being that the expected performance evaluation criteria are not designed to address the strategy's assumptions. In this circumstance, occasions can arise where sticking with the strategy in the face of other risks might not be a compelling idea, or changing a previously approved procedure in order to shift with a strategy might also not be a compelling idea.

The lesson that we take from this is that "strategic" operations, by definition, are not self-justifying. In action, neither are they automatically approved, nor do adjustments to them always follow the same path of guidance.

IV.

A key observation to make here is that we must avoid the peculiar notion that Strategy is not doing anything until Operations gets busy. Strategy is, in effect, a set of evaluation criteria, and in that way we should say that strategy is "applied" moreso than "executed". Meanwhile, Operations is not just activity but instead is the supervising management decisions that define and guide activity.

Therefore, in order to align Operations with Strategy, we need the logical impact of decisions to be consistent with the logic for generating strategic value.

One of the most important things to remember is that the conditions behind the operative assumptions in question are not the effects created by Operations, but instead are the circumstances within which Operations are supposed to work. Operations and Strategy each provide a view on those conditions.

While Strategy's view pertains to value, Operations' view pertains to productivity. Their common ground is "objectives".

Operations' commitments to objectives take their approval from the agreed-upon validity of the assumptions. If this seems on the surface to not be true, just consider what happens when those commitments are tabled or ended: usually it is because they cannot be prioritized highly enough against alternatives -- and that prioritization is defended based on the assumptions.

Meanwhile, assumptions are considered to be important because of the strategy, but a re-examination of their underlying conditions might still invalidate them.

So when monitored conditions present a view of reality that conflicts with the picture subscribed to by the strategy, the importance of the strategic view is at stake, which puts the related commitments of the Operations at stake and even at risk. To protect or restore the commitment, the apparent conflict must be resolved, and the resolution must be communicated as broadly and as quickly as possible.

On that point, see this from the GEAC white paper Strategy Management in the Public Sector:

"High-performing organizations record and monitor assumptions. Organizations usually make a range of business assumptions when they set their high-level targets. These assumptions are monitored. If the business reality is different than the assumptions, the organization
reconsiders the associated targets."

I would add here that reconsidering the targets may not necessarily change them, but it may lead to changes in the way that they are pursued.

Posted by Malcolm Ryder at September 16, 2005 11:07 AM

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