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November 15, 2005

How to Recognize Performance

A generic definition of performance would be a concept that works across all types of situations. Example: performance is the measured level of achievement from execution versus a given target level.

And if performance can be managed, then there is a management process that can be improved to ensure its greater intended affect on performance.

But incorporating a definition of performance in business is not a one-size-fits all practice, because business achievement means different things to different organizations. For the given organization, the definition is usually most understandable when (a.) it is accompanied by a set of "drivers" that are critically consequential to what the organization wants to produce from its capabilities -- and (b.) the organization must respond to the influence of these drivers with what we would identify (for the organization) to be necessary and sufficient execution.

That is, typically, the organization's internal idea of performance is rooted in and controlled by its idea of what is most necessary to accomplish in order to succeed versus its constraints. The importance of that idea is that it is clearly different from defining performance in terms of the expectations of third parties. Managing performance is specifically not the same practice as managing expectations.

This also emphasizes a key distinction to note between drivers and goals. In managing performance, the execution is not necessarily about responding directy to the drivers, but instead about executing towards the performance target in certain ways, because of the drivers.

In the discussion below, we explore some of the ways that organizations elaborate and configure their current activities into performance management, particularly including the hierarchy of issues shown in this following illustration .

I.

Under the general umbrella of management, both Authority and Responsibility make the same assumption: that performance can be scientifically improved. This leads to the use of a management model to represent the approach for satisfying the goals as interpreted by Authority and Responsibility. Where the management model is goal-oriented, we see it as a strategic model -- or in other words, we understand the logic of asking, "what is our strategy for improving performance?" This is exactly how we arrive at the chance to say that we have a management strategy to address the business strategy that Authority and Responsibiity defend.

Assuming that there is a strategic approach to managing something, management information has a small number of essential and different purposes. We know the purposes well, but in the process of simply calling them all out to take their attendance, we often drift through numerous different membership rosters -- differing points of view and vocabularies that leave it finally unclear whether we've identified all (and only) necessary parties... Inconsistency in the vocabulary thus leads to unnecessary complexity and misdirection, causing errors of reasoning and planning that undermine the actual capability to manage strategically.

Since the use of available information is the primary differentiating labor that management brings to production, understanding the information itself is the first fundamental requirement for adding value through management and thereby improving performance.

The two main ways that management's difference adds value are:
- processing information most effectively, to drive production itself; and,
- producing the most relevant information, continuously, to address the organization's definition of performance.

These identify the two general concepts of strategy that are in play: a production approach, and a critical outcome (goal). But differently, as we'll further see, the one issue is about decisions, while the other is about content (ideas). Performance management cannot be organized around only one of the two, although depending on the organization, one or the other concept may be successfully adopted first.

II.

From the perspective of using information to produce decisions consistent with the strategic approach, the key purposes support activities needed to meet the standards and requirements of the approach. Those purposes, and the underlying supportive activities of their own, are:

Assessment -- Discovery, Measurement, Interpretation

Development -- Design, Proposition, Negotiation, Demonstration

Implementation -- Instruction, Scheduling, Monitoring

In the overall decisioning system, Assessment issues requirements for Development, and Development issues resources for Implementation. Then, since implementations are assessed just as initial circumstances are (largely for risk), this provides a closed-loop performance management lifecycle.

These purposes and their activities rely for their realization on "information tasks".
-Inspection
-Definition
-Description
-Categorization
-Validation
-Communication

The conduct of each task is extremely sensitive to three things: levels of experience; dependence on tools; and cultural norms. As a result, the tasks all have high potential variability. This can greatly predetermine the character, relevance and maturity of the (earlier above) activities that support the three key purposes of management's decision information. While not fully detailed here, the following image quickly suggests to most of us how (and why) such common and widespread variation is likely to be found if the organization were to be surveyed. This is the ground-level where we pragmatically struggle for alignment on a day-to-day basis, seeking to actually support higher-level decisioning...

The above view is quite simply different from the perspective and challenge of being consistent with the strategic goal in front of the management. Assuming that management is goal-oriented, and that the goal is an outcome objective of the management process impact, we here think about management information in terms of what it contributes to the substantiation of the outcome - or in other words, we think about the value of the information as "content". Creating valuable content is a possible result or intent of a management process, but clearly it is different from the issue of using information specifically to drive the process of management.

The importance of the difference is that decisions often get evaluated based on content criteria rather than on whether they were more effective towards the management process strategy. Companies get caught in churning or in paralysis when they can't keep up with changes in what kind of content is currently deemed valuable, after literally organizing themselves around earlier but now obsolete content. The role of decisions is to assure that the production strategy is capable of addressing goals; the role of content is to be a resource to the production stakeholders and to the customers amongst the business goal's various beneficiaries.

Some key analysts have indicated needs, requirements and drivers for performance management in lists of recommendations that might be called an "executive agenda for performance management." Typically they highlight the most potentially challenging aspects to the new practitioner. As an example, Ventana Research outlined the following items, which are here very slightly edited and re-presented in a different arrangement, grouped and annotated to explain how they fit into the big picture. (See original here)

Structural issues: establish the target current state of operational efforts
-Process Improvement
-Assessment

Productivity issues: maximize the functional throughput of investments
-Cost Management
-Profitability Management

Opportunity issues: navigate efficiently to locations of maximum capability leverage
-Compliance Management
-Business Innovation

The discovery in the above regrouping is the three different perspectives it exposes on handling performance. In most organizations they translate into different ways of defining and prioritizing performance management within organizational change -- thus they become different ways of recognizing performance. These perspectives, definitions and priorities underlie the organization's recognition of content that addresses the business performance goals. While content quality should not be the key measure of improvement in the management strategy, it should be relied upon for improving the organization's understanding of the current business goals -- and thereby support the management initiatives.

IV.

One of the most interesting apects of performance management is that the pertinent content primarily expresses ideas, thus making content a resource in the feedback loop that formulates new propositions and, thereafter, new decisions.

By managing the content in the form of instruments -- maps, models, portfolios, schedules and scorecards -- the content can be dedicated to use by the information tasks supporting decisioning. This lays the ground work for specific processes to manage performance.

For example: procedural steps such as communication and categorization already cross the organization in the form of portfolios, schedules and scorecards. The key transformations from their present use to performance management use are:
- dedication to the initiatives in assessment, development and implementation, focused on business goals
- reconciliation of their taxonomies and ontologies within a given management model
- integration of their deployments principally for the purposes of analysis and collaboration

What is it that is important about these transformations? For example: whereas to date such instruments are typically really used for planning and accounting, analysis and collaboration represent the shift from the command-and-control posture to the guide-and-leverage posture that characterizes performance management.

Posted by Malcolm Ryder at November 15, 2005 7:34 AM

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