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January 14, 2006

"Effectiveness" -- the essence of Operational Performance

As with so many "enterprise" issues, whether you're an executive or a manager, sorting out the messiness of your performance management options probably means first checking to see if you're sure they are solving the right problem.

Executives and Managers don't see things the same way. But they do look for the same thing: "high performance".

Sadly, too much of the time they don't know when they're seeing the same thing until it's after-the-fact, so it's difficult to coordinate their decisions along the way.

This obscurity of view can be resolved, but today the solutions themselves are often confused about what parts of the problem to solve -- because the stakeholders aren't sure themselves.

At the heart of the uncertainty is a lack of understanding, or agreement, about where one stakeholder's authority of (which establishes a scope of influence) should exploit another stakeholder's responsibility (a degree of accountability). "I have a right to protect my accountability, no matter what you order!"

Research departments of consulting firms discuss this difficult situation, such as in Booz Allen Hamilton's take regarding a need for determining "decision rights" -- but there is also a more basic cultural aspect to consider: what everyone refers to as "being on the same page". This unanimity is not just about naming a common goal, but instead about whether everyone understands, to some reliable level of generality, the logic of how to make things work. In action, the key complication here is the variety of practical and political predispositions found within the organization, despite decision-making rules. Predispositions generate expectations that give "reality" its appearance and thus present what looks like moments needing decisions. Different realities offer different moments...

A pretty good way to start resolving the confusion is therefore with a globally coherent picture of what the decisions ought to be made about.

I.

The underlying logic of what gets called "high performance" aims for advantageous on-demand results, which calls for alignment of three key elements:
- clarity of intent
- realtime responsiveness
- agile navigation of capacity

Linking those three things allows for "executing" (as it is usually called) with the right thing at the right time for the right reason. But what must also happen is to have all three things simultaneously.

Clarity about "reasons" is the most important challenge. Setting aside the specifics of any given business, two major classes of reasons usually steer the management of the execution.

- One class focuses on the worth of the designated objective. (This is about the kind of advantage that the achieved objective offers. )

- The other focuses on the value of the execution. (This is about the importance of the difference made by the execution.)

Often the difference between this pair is referred to as the "gap" between strategy and execution -- implying a causal but dysfunctional relationship that somehow has escaped management's influence. That clearly oversimplifies the matter, except by assuming that management has to be "fixed", which is not a simple matter. Popular cited examples of management's problems include this: so many definitions of strategy are presented that strategy becomes a moving target; meanwhile a culture of short-term gains increases skepticism about whether strategy is pragmatically important anyway.

Yet stepping away from that suspicion begins with a related observation: the direction [verb] provided to execution by management is precisely where the accountability for "performance" lies. Most decisions about execution are made under the pressure of accountability.

When we're worrying about management accountability, we'll call our real subject something other than "performance".

II.

In practice, the highest-level concerns of accountability are two expectations.
- One is that the designated objective should be logically critical to creating the conditions necessary for business functions to matter.
- The other is that execution should be logically critical to creating states at which the objective is achieved.

These "functional-conditions" and "objective-states" are thresholds. The chemistry of what occurs when the thresholds have finally been reached or crossed is described in the business model (of conditions) and the business plan (of objectives).

Given that, the essential significance of execution seen is its role as an enabler (of hitting the thresholds).

However, both executives and managers persistently but incorrectly treat execution as a cause. Correctly seen, execution dwells on necessity but it is production that dwells on the ability that gets the job done.

Nearly all parties acknowledge the reliance on programmed production. Production is a designed activity, the place for which is set as follows:
- execution, meaning the decision to act and the followup, should itself be "caused by" explicit intent to reach thresholds; and...
- the activity-design of the followup focuses exclusively on realizing the intent.

This clarification of the notion of "execution" versus "production" is complemented by similarly distinguishing the idea of operation (the chemistry beyond the threshold). All together, they describe the functional depths of the organization:

Operation refers to an intentional activity that distinguishes the purpose of the organization in a situation. Here, the key concerns are quality issues, about targeted "impacts and reach".

Execution refers to the explicit and controlled pursuit of meeting requirements for successful operations. Here the key quality issues are about "options and decisions".

Production refers to the mechanism used to realize and sustain execution from current circumstances. Here the key quality issues are about "cause and effect".

Executives and Managers must have a common (shared) way to see and understand the alignment of these three layers of organizational functionality. The key is to grasp the systemic nature of production's influence on execution, and likewise execution's on operations. Optimizing this systemic influence is the management goal called effectiveness.

When executives and managers agree about "effectiveness":
- They more rationally exercise the "throttles" that change the levels of throughput and output that they interpret as "performance".
- Their efforts, even independently of each other, are then truly more akin to driving, in which they both use the same logic of inputs for moving the vehicle in the right direction at the right speed at the right time. The specific point of any moment's maneuver may be quite different from another moment's, but the overall navigation weds all the real-time changes to the purpose of crossing the terrain.
- Most of all, the participants' recognition of when it is important to change an input is based on the same (shared) ideas about alignment.

The support of this alignment is two-fold: it must span attention to issues that are peculiar to each element, and to issues that determine the success of their linkage.

III.

In understanding and maintaining effectiveness, correctly addressing its specific elements involves using the right mindsets for staging and conducting their evaluations.

These mindsets -- which show up in their semantics -- prescribe the basic types of awareness needed to communicate whether a given element needs to be changed.
- Measurement uses the most granular set of standards, to specify the difference between fixed requirements and current reality. (Correct vs. Incorrect)
- Rating uses a less granular scale of difference to compare a current position against a range of possible positions. (Better vs. Worse)
- Confirmation uses a definition to test for the actual existence of something versus a plan (Yes vs. No)

But the full description of the mindsets includes sensitivity of another kind: an organizational effort meets its purpose with competency built on capabilities. This awareness overlays the layers of functionality from production up to operation.

The table below illustrates this overlay. For example, in representing the high-level top-down view from the perspective of purposein an organization's effort :
- Operations are best "measured", while...
- Execution is "rated" and ...
- Production is "confirmed"

This describes the immediate "surface" visibility needed for an evaluation in terms of purpose, and it de-emphasizes other background levels of elemental visibility unless the immediate visibility is unclear. This means that to understand efforts against purpose, "measurement" of execution is not automatically necessary, but we want it to be possible if execution's ratings are unclear.

IV.

Further support of alignment includes the design and maintenance of linkage mechanisms for the layers of functionality. Both static (preconfigured) and dynamic (ad hoc) linkage must be arranged.

Executives and Managers often try to do this symbolically, by defining and then "rolling up" or "cascading" measurements across the functional depths of the organizational effort. This typically involves translations from one depth to the other, and it has been historically maddening and insecure. The chosen problem has usually been to determine what the measurements at one depth mean "at another depth".

Sometimes in the hoped-for translation of measures, the semantics involved are "codified" by process designs that link (i.e., integrate) events at one depth to events at another. The hope is that the process design is valid, so that measuring just the integrity of the active process can provide a suitable proxy for a much larger set of discrete observations. This approach of "automating alignment" is not unimportant, but it confuses the "systematic" for the "systemic" -- that is, it risks that executives and managers will mistake the description of the process for a description of the current conditions. The problem with that, as has been historically borne out, is that improving process may not cause conditions to improve, even if it allows the conditions to improve -- and processes continuously proliferate their complexity and variety. (This is why process management is not the same as performance management but instead is only an aspect of it. Process, although likely necessary, cannot be a sufficient translator.)

Instead of all that, as the table above suggests, measurements at one depth establish facts that are likely important to the next depth only as they relate through the virtue of commitments made (i.e., assignments) and through the likelihood of positions established (ratings). Thus, with much more generic linkage involved, as we move up from production to operations we see the subject of "measurement" moving from capabilities to purposes, telling just a part of the story.

For example: let's say that we're driving, and as an execution matter we've decided to "go left".
- We produce this turn by assigning (committing) a selected turning radius and selected velocity. We may find out only later, through measurement, whether those specific selections should have been allowed. The results of our production effort leave us more or less satisfactorily turned to the left; that is, we retrospectively evaluate the production with a rating.
- But how useful is the turn that we produced? Is the precise "leftwardness" of our resulting achieved position suitable for the need at hand? Does it matter which lane we have gone into, and how far we are from other vehicles, at our post-turn speed? Did we hit anything during the turn? Are we about to, afterwards? All of these issues carry potential requirements that we address throughmeasures reflecting our competency with the turn (i.e., our execution).
- Our demonstrated production capability will strongly suggest whether in the future we should consider a decision to turn left to be a "good" decision -- but meanwhile a recurring need to turn left may insist on efforts to improve our production capability for the future.

V.

The bigger message from this situation is that "measurement" per se is an incomplete understanding of conditions, which needs to be supplemented by additional means of understanding. We cannot manage what we don't understand.

When we look at achievements against targets, the matter is about "performance". But sustained or recurring achievement is the whole point of management, and awareness doesn't cause that.

So, more to the point, when we have a supervisory understanding of functionality against goals, we work on managing their alignment as a matter of managing "effectiveness".

The next table below again elaborates the "effectiveness mindsets" -- except in more colloquial or "ordinary" language. This set of semantics illustrates how terms of alignment range in a general progression of influence from "optional" to "critical" as we go from (bottom left) production capability to (top right) operational purpose. For each intersection of functional depth or change level in the table, the provided term points at the notion of "in what sense does this matter?"... For example, an assessment of Capability is important, but it is important in different ways depending on what functional depth is being considered. In this version of the table, each term represents a distinctive expectation that executives and managers can always initially share as the default question of interest or comparison about each issue.

Overall, a baseline is established for discussing the "role" of each functional depth (row) or change level (column) in terms of effectiveness. It's not difficult to envision a series of conversations that explore progress and effectiveness, consistently using the language presented here, in mixed audiences, without confusion about how things are expected to influence each other.

VI.

The semantic resolution doesn't stop there, but since management tends to institutionalize its solutions, our various expectations of the management effort should be conceptually distinguished -- in a general way that clearly indicates what their evaluations will really care about and how they relate.

The conversation with our mixed audience should be able to cover the two broad reasons that usually steer the management of execution. Most organizations bring their concerns about achievement to the table in two flavors: financial and operational. If we cross-reference those against the worth of designated objectives and the value of execution, then we get guidance as in the table below.

Financial and operational concerns represent the two main ways that the organization keeps track of why any other party would want to have a relationship with the organization. Generally, the assets and trust that an organization has to offer are its main attractors. Management looks for, and distinguishes, related outcomes from its activity as follows:

Posted by Malcolm Ryder at January 14, 2006 7:04 AM

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