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November 2, 2005

Performance Management? Say as I Do, not Do as I Say

When something becomes all things to all people, it loses its meaning. what becomes necessary as a remedy is a restating of the reason why anyone should care at all. Such is the case with Performance Management.

To go after what performance management means, let's say we ask the question, "What causes revenue growth?"... The search for the answer will take us to an analysis of operational causes and economic effects. But it will also take us to an analysis of environmental causes and economic effects. There will then be discussions about how much the environment can be characterised as the impacts of operations, and how much the remaining characteristics are affected by operations. Or, another issue might be how much the environment affects operations.

All of these angles of attack eventually wind up with different names, but all are obviously related. With o many interconnected issues, the problem before us is to pick the right problem to work on, at the right time to produce necessary results.

I.

Distinguishing the "right" problem means describing it correctly, so we must start with language.

Although there is no distinctive idea of "performance" unless goals or objectives have first been set, understanding performance is often stymied by evaluations built on a language of expectations. This wouldn't be a problem if expectations were self-fulfiling; but since they aren't, performance must be understood in terms of the path to the goal.

In thinking about performance, we intend to study "effects" as presented and represented by objectives.

Then, when we ask, "How are Operations performing", we are invoking a set of organizational responsibilities that we want to study as "causes". The issues of Productivity and ROI have a natural home here and wind up being dealt with in performance management planning.

But there is a different take on the idea of operations. Here, we can ask "How is 'performance' on the 'operational' level?" We are invoking a certain mode of realization (of objectives) which is best described not as organizational responsibilities but instead as execution decisions that we want to study as "causes". In that, we are also distinguishing operations from tactics and strategies. If strategy specifies, and tactics implement, then operations conduct. The issue of Competency has a natural home here, and winds up being talked about in performance management planning.

II.

In that second sense, an important observation to make is about whether or not operations are conducting the realization of objectives in a way that influences functions to cause desired outcomes. What's tricky to see is that operations don't "use functions" to realize objectives, but rather that operations encourage or discourage functions to do so.

Restated as a key principle: operations associate functions with objectives. This respects the fact that both functions and objectives can (and do) change independently of operations and of each other.

As managers, what we want to understand is how that association is working out. If, according to given measures of success, it is working out well, we want to know if it is something we can produce and sustain at will going forward.

In fact, we want to understand the psychology of operations - whether it has and follows guiding principles, habits and practices for how it associates functions and objectives -- and where these guides come from if they are present. Again, this is not about functions but instead about decision-making.

We also want to understand tactics and strategy, but for operations we are looking to determine that the "guides to success" are agreed and adopted everywhere that matters for the objective. This becomes, under the banner of "alignment", the goal of management practice at the operational level.

III.

"Operational alignment" -- that is, managed alignment at the operational level -- might be a prerequisite for good business operations performance. As such it would be an area getting close attention from business performance management. But on its own it might not roll up to prove that an organizational function caused the desired business outcomes. Arguably, that is beyond its scope.

What is within its scope is a concentration on having decisions of all kinds be consistent with each other in terms of the expected impact on the effort to meet an objective. Like coaching, operational alignment makes different players, doing different things, work together.

This brings us to a clearer recognition of the phrase "Operational Performance Management" (OPM). OPM is really a contraction of two things:
- the quality and progress of operational-level alignment; and,
- the evident correlation of that alignment with successful outcomes that are believed to be causally linked to organizational (business) functions.

In many instances, OPM helps to clarify whether a business function that was involved with a business success was critical, supportive, or just coincidental to the success. With OPM, management decisions are more readily exposed as the element that makes the most difference in the function's role in the success.

Most organizations will experience the realities of operational performance management (OPM) in the following way:
- OPM does not cause increased business performance.
- But, a lack of OPM inhibits or even prevents increased business performance.

In sum, the net effect of OPM is to release the part of the organization's potential performance that is currently bottlenecked behind confusion and inconsistency in management decision-making.

IV.

To make the best use of OPM's possibiities, it is necessary to maintain a resolve to describe things as they actually occurred, rather than to describe them mainly as we want to see them.

This means that when we are setting expectations, it should be done in terms of things that are known to be actionable. And in evaluating progress, we need to be analyzing effects as opposed to analyzing expectations. What matters in managing performance is the value of the effects, not the value of the expectations.

In many organizations, this can be a quite different way of describing "performance" and therefore of managing it. For management to adopt this mode, managers must appreciate the risks (namely, lost and forfeited business potential) of not doing so, as well as the prevailing politics that will surround the necessary degrees and locations of the mode's accompanying changes to the organization.

Posted by Malcolm Ryder at November 2, 2005 7:43 PM

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