July 9, 2008

What's In Your Portfolio?

For providers (instead of consumers), Portfolio Management is a robust and widespread discipline that has meaning which crosses industries and departmental functions. In short, it organizes opportunities deemed to be beneficial into suites of categorized commitments that make the opportunity "actionable" . But portfolio management is most often associated with related efforts that represent either the authorizations of the action, the methods of the action, or the customer of the action -- in effect tracing the run from supply to demand. The efforts articulating this run are, respectively, programs, projects and solutions. One confusing aspect of the way these efforts are supported is that portfolios are mistakenly thought to be components (or "children") of programs and supersets (or "parents") of projects. In fact, that is an erroneous association: instead, as illustrated below, a portfolio is a model that relies on the other three efforts to be actualized. Further, it is the interoperations of these efforts that powers and stabilizes the portfolio.

Why is portfolio management often misplaced amongst these efforts? There are two predominant reasons. For one, practitioners of these efforts often mistake scorecards and dashboards for portfolios. And two, portfolios are often pursued under "performance" requirements (i.e., requirements to increase the rate of return on equity), whereas the actual purpose of a portfolio is to provide a model for the commitment to the opportunity, defining how value will be recognized, not how "value will be generated and captured".

The language that helps to understand where portfolios help goes like this: "what is the benefit of the investment model?" Obviously, one model could be modified or even discontinued and replaced, while still addressing the same apparent opportunity. At the least, this simply acknowledges that two competitors may chase the same prize in different ways, with both making progress (without predicting which one will prevail or even whether one necessarily must). But within the model, other key actions are generally positioned as catalysts or governors -- including things like identifying a distinctive market niche and specially producing for it, tracking the cost of scaling up for the demand level in that niche at a given quality benchmark, and exercizing policies to keep decisions and approvals predictable throughout changing circumstances -- all relative to a certain type of enabling stakeholder who is the primary beneficiary.

Posted by Malcolm Ryder at 9:21 PM

July 5, 2008

Beyond the Spin: Measure What You Give

Does your organization really measure what you give, or does it mainly spin what you measure?

Bruce MacEwen's industry-leading website Adam Smith, Esquire offers an opportunity to gaze into the abyss of metrics and walk away without jumping. In the article
"How High Quality Are Your Lawyers? (How Can You Tell?)"
a close reading shows contrasting business models contesting notions of "performance @ cost" and "value @ quality". In the competitive situation covered, one upstart model strategically goes after a chunk of the opponent's business by bringing customers the performance/cost equation, surprisingly leaving the traditionalist competitor to justify how pricing for that same chunk of business could rationally be based on value/quality. What makes this all interesting, notes MacEwen, is the idea that 99% of what the traditionalist does is what the upstart can steal away.

For those of us who fell out of the old hot habit of saying "disruptive innovation" once a month, this looks like news, but not new news. Still, there are some fresh perspectives worth bringing to this contest.

As seen in the diagram below, the different models above are easily distinguished by what they actually offer, making it inappropriate (for managers) and intellectually dishonest (to customers) for either of them to masquerade as the other. Customers buying into cost/performance are investing in the promise of efficiency, while those buying into value/quality are investing in the promise of reliability.

In MacEwen's article, we are sensitized to the problem that high-prestige value/quality law service firms institutionalize a significant unmanaged cost in the form of "available overachievers", against which these firms then build a hedge by charging premium prices beyond rational evidence of economy for the customer. But what is sold as the justification for this pricing? Their quality?

To be sure of avoiding management posturing, "quality" here must mean only one thing: adherence to the promised appropriateness of the deliverable versus the stated need. Consider that meaning against the question of what it takes to get quality: the value/quality firm proposes that by exceptional capability they eliminate the risk of not getting quality. Therefore, the key variable that this firm actually addresses is unpredictability in the customer's need. As an operational tactic, the value/quality firm hoards talent in order to avoid outsourcing and to presume agility.

But the cost/performance firm basically argues (by demonstration) that legal work requires only competency to sufficiently meet most stated needs -- not a matter of being exceptional but instead simply correct for the task, which eliminates unnecessary effort from the equation right off the bat. Of course this presumes a degree of predictability in scope of need -- and agreement on the scope becomes the main feature.

The discussion above intends no effort to offer a wisened critique of law firm strategy. That said, on the surface there are no truly important differences between marketing professional services in law versus other disciplines where subject matter expertise is the raw material and advice is the product.

Idiosyncracies in the legal services industry will of course provoke distinctive problems and solutions there, yet these are probably driven more by the state of mind of the customer - which is the underlying important difference because it is the competitive arena. Oversimplifying MacEwen's article, the difference between the value/quality firm and the cost/performance firm is that the former sells confidence while the latter sells credibility.

Are there spats? One accusing the other of con games, and the other accusing the first of being incredible? MacEwen's article says yes; but what is further interesting (per evidence of the illustration above) is the opportunity that both types of firms can objectively profile themselves on common ground (efficiency, capability, reliability and acceptability) -- and use those profiles to determine how to optimally segment and grow a shared market. When they don't do that, you can bet it isn't because the customers don't care.

Posted by Malcolm Ryder at 9:59 AM

June 27, 2008

Do As I Do, Not As I Say

The McKinsey gang's ongoing interest in behavioral economics leads from time to time to email alerts about articles that lead off like this:
Hidden flaws in strategy

"Why do top managers, steeped in theories of good business strategy, still make bad decisions? While ignorance and hubris sometimes play a role, the brain itself—how we think—is also a culprit. Insights from behavioral economics help explain why we don't always think rationally and how our logical flaws can lead to bad strategic decisions."

On a day like today, when the stock market dropped over 300 points, the catchiness of that intro is in the contrast between the confidence we want to have in logic and the confidence we want to have in our ability to use it.

Getting strict, we might have to say that when strategy is based on logic, strategy is interpretive -- because in different hands, the same logic might lead to different strategy and/or different strategic outcomes.

But why doesn't it make just as much sense to place the first faith in the strategy and then find the logic to execute it? Well, it does; it's just that in this mode, the "strategy" is not a performance; instead it is a proposition that supplies the point of view to be used when managing functions.

McKinsey's discussion seems to be poised to warn us away from the problem of management personalities corrupting objectivity, and further, poised to argue that this should be the right warning because we can assume that there is usually going to be sufficient objectivity to correctly navigate to the correct destination. That is, the most prominent assumption that we can read into the McKinsey caution is that it's not cool to split from the plan. Logic shall bear decisions and decisions shall bear the plan and the plan shall be righteous.

But isn't that still letting the bad boys off the hook? Levity aside, coaches bring the game plan to the players knowing this: that the players actually have to play, which means that the players will improvise their way to the opportunity to comply, if they understand the strategy -- "strategy" which is again essentially a point of view and not a performance prescription.

Strategy is about belief in the value of your position. It is esentially about where you're going to be, and why you're going to be there. Because of that, any position within a hierarchy of operational dependencies can be a strategic position. In effect, a position represents the opportunity, so the most direct way for a leader or manager to damage the potential of a strategy is to make decisions that inhibit or prohibit the players' opportunity to align and coordinate their compliance to the strategy.

Because of that, we want a model of coaching to rely on, not just retraining (or re-straining) of senior staffers to the logic-decision-plan mode. We want an observation-design-motivation mode just as much if not more. We want the sideline clipboard.

Posted by Malcolm Ryder at 11:21 PM

June 18, 2008

When is "value" not valuable?

A wonderful discussion on Bruce MacEwen's website Adam Smith, Esquire included this challenging note from Paul Lippe about what logic is available to explain the connection between quality and value. While he questions "reputation" as an indication of warm fuzzies like "quality", he also kicks off his note citing the less fuzzy implication that better performance presumes to justify higher price:

"I'd be curious if anyone can come forth with any data to show that in fact (as opposed to in repute) more expensive law firms produce better results, e.g. can it be shown that the investment banks who had the largest losses on their mortgage portfolios were served by lower reputation law firms?

Once this conversation settles down, I will start a separate string (and perhaps a wiki to really pull something together) on what I consider to be the core issue: how can we develop a definition of VALUE in legal services that is meaningful and useful, and not simply measuring inputs like hours spent, diligence of lawyers, law school attended or reputation of the firm. With such a definition of value, I think we could expect that some lawyers' reputations and income would go up, but some would not."

Let's dig into that overall observation by making the undercurrents obvious.

1. "Value" is a label for the significant distinctions attributed to something. "Value" in professional services is 3-dimensional, at minimum. A certain method of co-operation with the customer interacts with a certain type of target outcome at a certain level of effective cost to the customer. The method, outcome, and customer cost are variables, each having a range of acceptability, which in turn allows some universe of acceptable overall impact to sprout from their combination. Now, from that dynamic, some professional service providers are great at being predictably consistent within a smaller universe (range of impacts) that the customer prefers. Some are great at being agile enough to cover a larger universe, keeping up with a customer who has more volatile preferences. And there are several other "flavors" of competency that a service provider may have. Ultimately the provider wants to be paid for the competency, and then be paid even more for a competitively greater level of competency. But the customer wants to pay for customer satisfaction, which is something different. And what mediates the balance of the two things is often just culture. I wouldn't choose to drive a perfectly good Tercel to the White House Christmas Ball, but I could; and I wouldn't choose to drive a Bentley to the 7-Eleven, but I could. In fact, I could use either car to get to either destination.



2. That's all well and good in theory, but in practice the realization of the potential value is hugely affected by the ability of the customer to appropriately and effectively align to it. (There is even plenty of historical evidence that customers sometimes buy based on how they wanna be seen, not based on how they really are.) That reality is the "forest". Relentless pursuit of profit is the bulldozer that strips the forest. Atomic metrical inputs like law schools and hours spent risk merely being "trees", where excessive attention obscures the view of the forest and therefore obscures the proper understanding of the value.
Profit and arbitrary metrics actually must not dominate an analysis of value. Instead, value, properly identified, can be correlated with profits and other interesting measures, and the correlations may be revealing or even exciting.


3. The final point from the above is that it is probably important to use rigor in discussing value, because "value" is not a reliable synonym for other things that deserve their own names, such as "competency" and "satisfaction", and "culture". It's important to know what is actually being taken into consideration and not gloss over things for convenience, because otherwise we find out too late that we're actually sitting on some key coordinate that does not allow us to "get there from here" (i.e., to the necessary value) on time. Meanwhile -- if we would like to elevate the discussion of value from the 3-D space of CustomerCost /Outcome/Method to the 3-D space of Competency/CustomerSat/Culture, while remembering to map the current coordinates in both spaces, well that's fine.

Posted by Malcolm Ryder at 12:17 PM

April 29, 2008

Information Overdrive

Profitability through information management gets fresh illumination and color on Page 8 of the March 2008 issue of BPMStrategies, where Tom Dwyer, VP of research for the Brainstorm Group, walks us through a 21st-century operational blueprint in his article, "Using BPM, BDM, and SOA To Create A More Agile Supply Chain".

In the Brainstorm illustration on that page, the title of the Venn diagram (below) suggests that a blank area in the top center intersection would have been labelled "Actionable Insight".

The question we first posed to Dwyer was: shouldn't this intersection be titled "Policy Compliance" and stand as the third factor, instead of "actionable insight"? One can readily argue that a full reckoning of profit and advantage (the very central theme) must include this risk management dimension, and it proves to be so in actual practice but simply has (typically) more influence as a constraint than as a lever.

In a brief offline interview, Dwyer replied, noting how his system works:

"The point that I was making was to identify three elements that contribute to profitability by optimizing the management and execution of a supply chain... The three I chose were all meant to be levers or enablers to achieve higher profit... [Within those three] the combination – or intersection – of intelligent applications built on a responsive infrastructure and accurate, timely data is what enables 'actionable insight'... I would agree that achieving policy compliance at the lowest cost would definitely impact profits... but I would not choose the constraint of policy compliance over the enabler of actionable insight. "

Interpreted with lots of wiggle room, Dwyer's descriptions in the BPMStrategies article strongly suggest that the role of agile technologies is to generate transparency [largely internal] across the heterogeneous organization -- while the role of integrated real-time data is to generate transparency [largely external] across the organization's multichannel embrace of suppliers and customers. Respectively, albeit oversimplified, this amounts to an organization knowing what to do and how to do it, complemented by knowing what it should be acting on and why. In both cases, timeliness of correct information is critical. But to highlight the most important issue, it is the matter of being actionable that makes being insightful worthwhile.

Additional consideration of Dwyer's formula leads to this summarization: knowledge management, business intelligence and performance management may converge to drive sustainable competitive winning, if you know how to make them converge. We view this as a matter of management information systems being deployed strategically rather than just tactically.

Strategically deployed, the information must allow the enterprise to identify and leverage its positioning, capability, and internal alignment, so as to understand whether revised operational mechanics are appropriate to the actual environment of the organization's practice.

To put this back into the proper original context of Dwyer's discussion: the improved mechanics in question are driven by business process management (BPM), business decision management (BDM) and service oriented architecture (SOA). The strategy challenge is to realize and exploit the correspondence of these approaches with the management of information. For example:

Development: SOA : Process efficiency

Production : BPM : Performance Effectiveness

Research : BDM : Actionable Insight

In a follow-on to this discussion, we could consider the recently published arguments in The New Age of Innovation by C. K. Prahalad and M. S. Krishnan on how global resource networks represent the new supply chain mechanics and how the arguments express the information/mechanics correspondence. For example, in the coverage of the book provided by Information Week's Bob Evans, the key idea noted is that Darwinian forces of customer-centricity require transformation of a supply process into a service, causing the B2B (business-to-business) supply chain linkage to operate more in B2C (business-to-consumer) mode -- which changes the kind of information necessary to manage success. Says Evans: "resources must be shifted continually... " and "processes must be shifted from a focus on millions of customers to the individual."

Punchline: for many enterprises, the prospects of future success resemble hitting a moving target from a moving launchpad. To be able to execute that strategy, there will first need to be a strategy for enabling the execution.

Posted by Malcolm Ryder at 7:09 AM

April 19, 2008

The Innovator's Real Dilemma

Jessica Stillman at the new BNET1 blog rounds up research from Accenture, the Conference Board, and Wharton to talk about why Fostering Innovation Stumps Executives ...

This is an interesting situation to ponder: making choices about how much to invest in innovation , versus in knowledge management and, separately, business intelligence as other paths to insight. Overall, what the organization is mainly after -- where the real money rests -- is the insight, whatever the path. But the current thinking about management priorities indicates that insight is pretty hard to come by, so lesser-beaten paths to it are also getting a lot of attention.

One challenge that surfaces, somewhat amusingly, is the presumed need to be innovative about how to foster innovation. For example, given that "innovation" is so easily approached as "creativity", it is not surprising that at places where real urgency comes from competition against either industry rivals or the budget, the idea of stimulating the worker's right brain with art experiences can gain some real traction.

But perhaps everything new is old again... The simplest way to assure that innovation is "fostered" is to provide
(1.) a clear statement of why the company will consider something to be "innovative" and...
(2.) a clear statement about what circumstances will cause the innovation to be rewarded in a way that directly benefits the individual(s) involved.

Generally, if company leadership can't get that much communication together and abide by it, then most other "fostering" efforts are essentially arbitrary.

Furthermore, this effort should not be confused at all with management's concern about how to measure the innovation's impact on the company's performance. The performance impact issue is not something that should be making innovation special. Any management team that rewards "performance impacts" with bonuses should simply add innovations to the mix of things that can be clearly accounted for as contributors to better performance. Meanwhile, innovation is about doing things differently to create opportunity; but execution is about doing things a certain way to hit performance targets.

This is where managers have to get real: if they will not reward innovators for being innovative, as opposed to making the reward conditional upon performance increases, then people will learn that innovation is not worth the effort at this organization. So in step (2.) above, the "circumstances" to be declared must start with something other than performance metrics.

Posted by Malcolm Ryder at 8:42 AM

January 1, 2008

Driving Value from Change with Knowledge

Frank thoughts about why people are important to an organization mainly go down two tracks.
One track examines what is necessary for the organization to be "in the game" it plans to play... The other examines what is necessary for the organization to play the way it wants to play, when already in the game.

Few experienced people still hold on to the simplistic idea that the former track is about line workers with the latter being about the managers. Since the recognition of CRM's dominant influence on the top line of the business, ample evidence establishes that alignment of front and back offices is critical to sustaining wins. Repeatedly getting the right things to the right place at the right time for the right reason means that staff in management and in line production must both attend to operational fundamentals, and both attend to situational performance differentiators.

During the early adoption period for that principle of alignment, "knowledge worker" became a profile arguing for distinction. We identify it as a profile, and not as a role, because it is an optional mode for every role. In organizations where it actually makes sense to discuss "knowledge workers", I.T. has made the greater part of production dependent on information processing and on interpreting the status of the processing outputs. Net: in the procedural life of the organization's activity, analysts now constantly threaten to outnumber mechanics.

The appropriate new idea of worker "productivity" follows quickly on the management of information, where the issue is about what value the worker's information management should provide. In the usual formula, value is expected to result where experience influences the information management.

But there are two tracks involved in applying that experience to the information:

- keeping things the way they were designed to be; and,
- successfully adapting as necessary to changes.

Most practical experience in organizations is role-based. In fact, we must assume that managing experience through roles is the complement to managing information, with their sum being what we recognize as practical knowledge. The question that the information age has added to the foreground of this discussion is how the manager role and the line worker role respectively exercize the knowledge worker profile to provide the value expected from their roles.

Workers with a higher degree of performance recognition in the organization are most frequently those who run the second track -- adapting to change -- in the knowledge worker mode.

To point this out more specifically, it helps to identify what qualifies as "change". The table below identifies, in ordinary language, the key types of change (points where value is generated), and the relevant "valuable behaviors" sought from managers and line workers executing their roles in the knowledge-worker mode.

Aside from confidential facts, the most privileged type of information is ideas. Speaking broadly, we can say that an "idea" is a proposed condition with an expected meaning. Left to its own devices, the "k-worker" (knowledgeworker) profile is about managing ideas for specific circumstances. As shown in the table, that relatively "pure" focus is pulled to different pragmatic effects by the role that uses it (manager or production line worker). That said, for most companies relevant to this discussion, a prescribed business process is the production line of importance that "manufactures" the necessary deliverables from the organization.

Posted by Malcolm Ryder at 12:30 PM | Comments (0) | TrackBack

November 8, 2007

Knowledge Workers : the wisdom of the Crowd?

No great company can expect to compete without a great stockpile of knowledge and, therefore, knowledge workers. Question: the more k-workers, the merrier, right? Answer: it depends.

The concept of the "knowledge-driven organization" is the strategic rallying flag for businesses bred amongst the Information Society. But that enthusiasm doesn't automatically translate from ambition to reality. Faced with the pressure of quarterly earnings reports, many companies can't decide whether the daunting task of becoming knowledge-driven is a "do" or a "die".

Yet most career hierarchies in an organization -- a.k.a., "success" ladders -- are marketed with the idea of "demonstrated expertise." This ought to mean that careers are the channel by which organizations actually apply the knowledge in residence. In turn, that ought to mean that organizations are already inherently knowledge-driven. If that's the case, today's idea of knowledge management being something new must indicate something that has heretofore been missing. So where's the gap, and why?

The reality is, careers are fundamentally about influence, not knowledge; and most careers are promoted on the basis of power; and typically the power is manifest in "productivity", not "skill", and productivity is measured in outputs, not inputs. Just as athleticism gets you on the team but not necessarily off the bench, for most players the primary key is to fit into a prescribed position -- which translates into measurable productivity good or bad. And as the authors of Mass Career Customization (Harvard Business School Press) describe it, the positions that typically matter in an organization's career tracks are management. Net: when it comes to career success in the organization, the way management itself is prescribed or defined will generally trump knowledge. This puts knowledge workers in the position of needing a strategy to make management repeatedly buy into their knowledge.

Cathleen Benko and Anne Weisberg, two executives of Deloitte, hit the issue from two directions in their book. One direction looks right at productivity through the lens of performance results associated with female executives. The distinctively superior results that the authors find there inspire the question of which female qualities are so naturally more productive. The implication is that innate qualities of women produce higher performance in the corporate ladder. But what evidence of these qualities makes the qualities explicit? Why would these same qualities generally drive corporate success, and can men practice them too?

At this point it's worth pointing out that most careers, really, are built on making one's decisions agreeable, not on intellectual athleticism -- but then again only smart women seem to have big corporate careers. The classic dilemma of these smart women has been, how smart is it to have a life outside of the company if we want a strong career inside the company?

Benko and Weisberg's discussion gives some answers to that, but it still leaves us (intentionally) with the idea that even for those workers with these better female qualities (one notable mention is about "multitasking" as a woman's talent) a corporate ladder is hostile territory, whereas a new and trademarked model -- a lattice -- will promote and keep more women (and likewise men) in a profile that drives business performance. Mass Career Customization (MCC) offers a way to make the important "career" qualities explicit and "tunable" like the different ranges of a graphical sound equalizer. The trick is to get the company to accept these tunings, or profiles, and the book is largely an explanation of how and why the company should.

The issue of knowledgeworkers intersecting organizational structure is the very singular topic of the Benko-Weisberg book. The issue amounts to more than one thing, but the most consistent thing it amounts to is a view of organizational structure managing knowledge workers as assets. One major reference used by the authors is (click here if you want it) the Deloitte Enterprise Value Matrix, and the book's major offering -- MCC and an alternative to the corporate ladder -- is given an ROI argument by being presented through a Deloitte-style framework.

A dispassionate reading of the Deloitte matrix reveals it to be an internal pipelining of assets from resource cost to strategic investment. But there is a story broader than the corporate boundary, which is the connection between the information society and the knowledge-driven organization, and the ecosystem that it generates around and through the company.

In this story, one plot-line is the following path of assumptions, which amounts to traversing the bottom, middle and top rungs of the ordinary hierarchical corporate model for workers' value:

But while the MCC framework promoted in the book finds an alternative to that pattern for the employee, there's an even bigger message for the company itself to draw from the book. As knowledgeworkers, we like to feel that we're selling our intrinsic value to the company, but companies have their own reasons for buying or not.

The bigger value framework posed by the book Mass Career Customization has terms of measurement different from productivity and from the Deloitte matrix, where the employee must determine how much value the employee can have to the company. Instead, as seen below, the key terms are about how the company can have value in the new ecosystem generated by the Supply of Employees, the Demand for Employees, and how they relate to the Information Society supplying them versus the Knowledge-driven Organization using them.

This is probably where the individual knowledge worker can start to really understand the company's motivation to support what the reviewers at Hill and Knowlton called "a career engagement that is adaptable to changing priorities over time."

Posted by Malcolm Ryder at 9:14 PM | Comments (0) | TrackBack

September 15, 2007

Run That By Me Again

Recent messages from Hill & Knowlton alert that a topic of growing study about performance is on workers selecting their own career track. It goes without saying that this makes sense only if the selections turn out to be rewarding for employers. But what about the other side of the coin? You can't spend one side without spending the other too.

Much is made of the idea that, in life, and presumably here in self-selection career mode, we would transfer "lessons learned" from one arena to another. Alas,
this limitation is the case whenever the model of organizational performance can't be abstracted from the ladder of careers. Those square pegs that worked in another model won't fit neatly into the round holes provided for inserting rungs in the ladder.

The most important piece of the old system to change is the piece where employers and employees negotiate the terms of "compensation" -- terms that must include warranty (of opportunity) as well as objectivity (of measurement).

Both opportunity and warranty must be encoded in the operational "playbook". When the people in charge can show how the organizational model feeds the plays, instead of the other way around, the resourcing and subscription of the work is then much less restricted. Just as processes actually depend more on particular roles than on particular participants, participants need to be replaceable without breaking the system.

This has the fascinating effect of requiring managers to get more strategic in the organization of operations, just as the general manager of a baseball team is on even an everyday hour-to-hour basis. And, on the flip side, how many employees are willing to be "players" instead of secured workers?

Posted by Malcolm Ryder at 12:41 PM | Comments (0) | TrackBack

September 3, 2007

Performance Management meets Business Intelligence

If we assume that management prominently features Planning at the front end of the cycle of "management performance" (i.e., exercizing good competency in the discipline of "management")...

...and if we assume that planning uses intelligence in the form of research that provides indicators of the potential for future success and risk...

... then to establish that business intelligence (BI) is part of performance management (PM), it is unnecessary to go any further than the concept of forecasting. The important view of this involvement is that neither effort (BI nor PM) wholly includes or excludes the other; rather, they logically intersect, co-operatively.

BI manages the perception of the operational environment. PM manages investment in the operational dynamics.

Perhaps there will be comments from the readers on the idea that strategy manages the relationship of BI and PM for a target group of stakeholders...

Posted by Malcolm Ryder at 5:35 PM | Comments (0) | TrackBack

April 7, 2007

Performance Heretics

...or, How I Learned To Stop Worrying and Love the Chaos.

Normally things are a bit contrarian around here, so citing other sources is not the typical event in these articles. But everyone riffs on interesting things seen elsewhere, and here's a fresh bit that yet another speaker from McKinsey, Phil Rosenzweig, had released via McKinsey emails to readers, in a piece called "The halo effect, and other managerial delusions." Catchline: "Companies cannot achieve superior and lasting business performance simply by following a specific set of steps." Rosenweig says:

"The fact is that many everyday concepts in business—including leadership, corporate culture, core competencies, and customer orientation—are ambiguous and difficult to define. We often infer perceptions of them from something else, which appears to be more concrete and tangible: namely, financial performance. As a result, many of the things that we commonly believe are contributions to company performance are in fact attributions. In other words, outcomes can be mistaken for inputs."

This is my kind of guy. He likes the Archestra definition of mythology: mythology is when description becomes prescription." To see the article, you'll need to get to the McKinsey Quarterly 2007 Number 1 (if you're a subscriber, click on through)... More great (and copyrighted) points lay in wait, such as this one:

"Recognize the role of uncertainty: Rather than search in vain for success formulas, business executives would do better to adjust their thinking about the context of strategic decisions. As a first step, they should recognize the fundamental uncertainty of the business world."

No one has a legal lock on this piece of advice, so we won't worry about reprinting it here with due credits. But in the spirit of free advice being worth its price, let's riff:

When it comes to inputs and outputs, it's at least trendy, if not mythologically correct, to expect that Customer Orientation would drive the Leadership, which would drive the Corporate Culture, which would drive the Core Competencies, and voila the company is aligned by design. So why doesn't that formula work? For the same reason that oranges don't grow on apple trees. Just because we designate a point A and a point B doesn't mean that you can get there from here. Apple trees don't allow oranges to grow on them!

So, for example, does customer orientation allow leadership of the necessary kind? Why should it? And if so, how?

Customer Orientation -- the ability to understand demand from the customer's perspective. Problem: the customer is miscast as a "recipient", when the actual key to the dynamic is that the customer is a "requestor".

Leadership -- the assumption of responsibility for making decisions that others don't want to be held responsible for. Problem: leadership is not always tolerated, much less assigned, where it naturally happens.

Corporate Culture -- the set of expectations that become shared about what importance certain types of daily operational behaviors have. Problem: cultural behavior is fundamentally not "strategic"; only the negotiations between management and behavior are strategic.

Core Competencies -- the conditions under which the ability to appropriately produce is least hindered by the management in the culture. Problem: the attempted control of those conditions is often misdirected to internal capabilities when it should be attending to validating the external circumstances.

So what's the point?

It's this: the alignment imagined between these four factors might be pursued as a linear structure, but it is unlikely to be mechanical. Think more "chemical" -- which naturally suggests that they change each other in order to get some result. If the nature of requests cannot alter the attention to (i.e., awareness of) where leadership really is in the organization, and if those leaders can't emerge to help manage the negotiation of expectations and actions, and if that negotiation doesn't result in dynamically organizing resources, then there's a pretty good chance that something critical to winning is not going to happen. (Don't confuse hitting targets with winning. If that was all there was to it, we wouldn't have to worry about "competitors" -- namely, about what we don't know that they have done or are doing...)

Note: Phil Rosenzweig is a professor of strategy and international management at the International Institute for Management Development (IMD), in Lausanne, Switzerland.

Posted by Malcolm Ryder at 8:05 AM | Comments (0) | TrackBack

March 24, 2007

Big Brass versus Crystal

Some balls are easier to juggle than others. But is that stance any way to run a company?

Something we certainly think we'll have to read is Michael Raynor's book The Strategy Paradox. Why? Because, as Deloitte puts it in their website's introduction to the book, "Management orthodoxy demands that strategies be built on commitments, which leaves no alternative to basing today’s decisions on assumptions about an unknowable future." This observation quickly drives down to the more important point they cite from Raynor: "The board should not evaluate the chief executive officer (CEO) based on the company’s performance but instead on the firm’s strategic risk profile..."

Since a review of the book is not where these paragraphs are going (yet), please visit Deloitte or even Raynor himself. What the heck: skip all that and read the book.

Before I read it, I'll turn my cards face up: if Raynor's book winds up telling me something other than that enterprise architecture, theory of constraints, and real options analysis is what's needed (and we assume it should), then I'll probably talk about it again. Maybe here, like, you know, in the next paragraph that could follow this one. Why not. While we're at it, let's go dust off our books about Royal Dutch Shell, do 'em again, and come back in a while.

For those of you with not that much time on your hands, a suitable companion piece is still available from Strategy+Business thanks to our buddies at Booz Allen, whose website offered this bit last year (as announced through emails to the faithful). I'm going to assume that advertising this for them will leave me in friendly territory vis-a-vis their copyright on what they sent, shown here for your convenience:

Sharpening Your Business Acumen
by Ram Charan

Dallas, March 30, 2006 -- The ability to see the big picture, anticipate external trends, and adapt accordingly requires plenty of practice, but can create unique moneymaking opportunities. It requires executives to transcend old rules of thumb and take strategic risks that don't follow precedent; to envision the effects of change before change happens. Here's a six-step thinking process to help anticipate external influences in the marketplace and craft smart strategies accordingly.To read the full article:

http://www.strategy-business.com/enewsarticle/enews033006

Posted by Malcolm Ryder at 4:34 PM | Comments (0) | TrackBack

March 18, 2007

Personal Value, Company Worth

Despite the buzzing about organizational flatness, it is still customary to think hierarchically about the relative importance of individuals in the corporate workforce. This is continuously fortified by the dual notions of "promotions" and "tiers" that characterize most organization charts.

The attendant mythology is that if people are higher up the chart, then they are more important. More factually, there's little debate that more organizational power resides at higher altitudes -- but what must not be lost on everyone, meritocracy notwithstanding, is that even higher power is not the same as higher performance.

Org charts are just a sketch, with limited ability to explain three key issues.

1. How does the individual decide what kind of contribution to make? Does he want to be influential or just billable? Particularly critical, or broadly resourceful? What does it take, and is it possible in his workplace?

2. Conversely, when a particular company initiative or problem rolls around, what kind of value is most needed from the individual, and therefore what individual has the appropriate profile to meet the need?

3. Finally, is the company really cultivating the potential for getting the contributions that it most needs -- or is it just coasting on organizational conventions?

From the standpoint of performance, not only can higher ranking individuals be objectively evaluated in the same way that lower ranking ones are, but every individual actually thinks in the same terms to decide what kind of value he or she is really going to bring to the organization's performance. For everyone, there are the same two steps: they make decisions about modeling themselves, and they align the personal model with the circumstances. The effects are not uniform -- not for one person over time, nor for different people in the same moment. But what actually gets done by the organization is pretty much the consequence of all these individual decisions pitted or adapted against the day's environment.

To see how the self-model fits in at work, first walk through the self-modeling picture:

Here, within the main oval, we see the four key reference terms that the individual uses to describe their predisposition coming into the work situation: Billable, Critical, Resourceful, and Influential.

It's fair to see these terms as multiple "ambitions" occurring simultaneously but with varying degrees of strength; thus at any time the individual has a "profile", which may fluctuate from one time to the next.

Some individuals fluctuate more than others. But more to the point, there are surrounding factors that encourage or inhibit the person's profile, and that is how the rest of the picture comes in.

From the management viewpoint, the objective notion of the individual's value is simple, and twofold, in summary:

In effect, this is what the company is trying to do with or get from the individual.

When evaluation time rolls around, the question is largely one of whether the individual has committed to these two conversions as much as the company wanted him to. (In our research, we've noted that most observers initially believe the terms provided here are mis-ordered, and that the conversions should be "skills into quality" and "time into revenue". But, through most simple ROI analyses for intellectual capital and capacity management -- mandatory stuff for an enterprise -- that belief is quickly shown to be misguided.)

So, to understand why any success was possible or achieved in the person's alignment with the company's wish, it is necessary to see how the person's self-modeling fits into the company's model.

As arranged below, the remainder of the terms from our first illustration are indicators of that company model. They bring up the points at which the company makes things more or less hospitable through making investments that resolve key resources and constraints.

If the company doesn't make the investments, then the constraints do not enhance; instead, they become "restraints" -- and the resources (people) cannot be effectively heightened in value.

Roughly speaking, that final illustration compares "what kind of workplace" is available (worker in context) with "what kind of company" is there (work in context). Not coincidentally, these are the two key perspectives that the worker intuitively brings to the situation, greatly affecting his motivation (at least) or ambition (at most).

Back in the initial illustration above, the interdependencies involved in that comparison of workplace and company are laid out along the main oval, where they can be individually inspected.

Companies often make defacto decisions regarding those interdependencies that seem like no-brainers but may really be value-inhibiting. For example, assignments are an ordinary feature of the organization's workday. But assignments link skills to time and literally position the worker in the workflows. Thus, the potential of the business process is critically afffected; meanwhile, the logic of the process design is either a smart reason to invoke the worker or a not-so-smart reason. Bad processes can easily mis-position (i.e., waste) a worker, just as a bad worker can make a process ineffective. Management needs them both to be "good".

Likewise, it isn't hard to understand that overworking the person (in the "billable" link of time and revenue) lowers morale, or that training (education) would beneficially link skills and the quality wanted from the use of time.

Similarly, other "ordinary" aspects of the company will predictably map to the dynamics underlying value-capture. Depending on the point-of-view, these aspects may be recognized through other names or circumstances. For example, in our illustration's set of work-in-context constraints:
- Policy = "governance"
- Expertise = "intellectual property"
- Process = "organization" (dynamic, not static)
- Capacity = "goodwill" (of the stakeholders)

This helps us envision what impacts are really being obtained from things we know we're already thinking about or doing. But as arranged in the original oval, the most interesting part of the dynamics shown may be their bilateral nature. For example, just as education should be derived from investing in expertise, the picture asserts that strategy execution should be cultivated from policy (governance) -- certainly not only the reverse.

It is easy to recognize that the corporate valuation relies on those very issues of policy, capacity, etc. But now it is also easy to see how they are not just "performance results" but instead actually success factors -- due to the need for the company to invest in them as constraints to be managed around workers.

By tracking decisions and actions about the key factors illustrated above, we get answers to performance questions that may not have been apparent before.

Posted by Malcolm Ryder at 7:28 AM | Comments (1) | TrackBack

March 13, 2007

Fast and Pretty, but not Cheap

Normally you'll find an article here instead of a conventional blog posting, but today Michael Hugos, of CIO Insider, caught my attention with his blog posting about agility on his site, Doing Business In Real Time. It definitely warranted a fast reply of comparative and perhaps contrasting views, reproduced here below. (Be sure also to see his Comment following.)

Very often the agility issue comes up in conversations with managers, and there are two interesting and recurring characteristics when it does.

One, it comes up *after* results have been calculated and posted. That is, managers see what already happened and ask "if we had been more agile, would it have made a difference?"

And two, there is tremendous confusion of agility with other ideas including "flexibility", "resilience", and "versatility".

The one-two punch of being reactive and confused makes "agility" something that remains vaguely ambitious as most managers don't know where to start, on which aspect they are really concerned about, or whether it is the right aspect.

Let's call that the worst case scenario. Hugos' article addresses that by outlining "agility" measurements -- which turn out to be what is largely now identified as Operational Performance Management (OPM) -- great stuff that is not the same as "agility" but is the same as "alignment".

I propose that the agility issue comes in when OPM is a strong practice, allowing targets and their pursuit to change in ways that are (here's the punchline):
- easily operationalized...
- with successful change management...
- to realign on time...
- without breaking things.

There, in a nutshell, you have the four points of reference that allow you to spot why your company is or is not agile. It's a process matter.

As for the 2% to 4% financial improvement that Hugos uses to stand for agility, that's a target, interesting as a representation of what ROI might justify the effort to be agile. But knowing where the target is doesn't tell you how to get there. For most managers, it is not so much that being agile will "cause" the percentage increase; instead, the issue is one of "prerequisities" -- namely, the probability of getting the increase without being agile is so poor.

Posted by Malcolm Ryder at 12:15 PM | Comments (1) | TrackBack

February 28, 2007

Gettting from A to B

Ideas are a dime a dozen; implementations are a million dollars per success.

Is there a "model" that describes the success factors of "implementation" as a practice or methodology?

On the surface, "implementation" typically presumes translating an idea into requirements, specs, and engineering, with a quality (compliance validation) check and delivery effort at the end.

A more sophisticated look will generally include considerations about likely necessary environmental adaptations, so more efforts get included in the form of assessments and monitoring.

So far, the point is that there is a layering of attention that not only manages production but manages change. Are there ony two layers?

In future versions of this article, an Archestra framework for implementation is coming.

Posted by Malcolm Ryder at 7:53 AM | Comments (0) | TrackBack

February 17, 2007

Split P Soup

Be careful what you ask for. This is the part everyone already knows to heed, but who actually does?

Here's a favorite view of the intensive efforts made to satisfy the customer: Forbell's "Splitting Peas for Split Pea Soup" printed in Old "Judge" Magazine. We love the "system" of production controls, and the implication that the overkill is necessary to get the soup right.

This worked for Andersen's Pea Soup Restaurant in old Buellton California; the "home of pea soup", they were very clear on what their customer wanted, and they did that one thing well.

But isn't that the exception? From what we read and hear, throughout many fields of effort, from projects to purchasing, failure or buyer's remorse is easily just as common as their opposites. Despite decades of programmatic attention to "improvement", things have only marginally improved when it comes to actually wanting what gets delivered.

This obviously suggests that the supply side of improvement is only part of the problem. The other part has to be on the demand side. But as the customer, we're supposed to be always right. So why do we not get what we want? Because we don't ask for it. We might only ask for what is "high priority", to try to reduce the risk; but what does "priority" really mean?

Most often, the problem with priorities is that the way they relate to the "want" isn't understood or isn't communicated. They wind up being not ambiguous but out of context, leaving it much more likely that other parties responding to them (as providers or stakeholders) will respond the wrong way or simply disagree.

To sort this out, we have to trace the "priority" back to what made it a priority, and set that out as an explicit part of the receiver's specification for the deliverable. As seen in the picture below, this will show four different aspects that may get evaluated when the deliverable arrives. The risk is that the provider and the receiver didn't agree, in the first place, on what mattered -- making the deliverable less tolerable, suitable, usable or whatever, having not met the unstated criteria... At the point of delivery, disagreements about whether the right thing was provided often seem to be about splitting hairs, and the reality is that the hair to be split is what was meant by "priority".

In this framework, it's clear that the key points to consider are neither indefinite nor synonymous. And that is why they are not interchangeable. Thus it is easy to get one or another of them right, only to find out that whatever wasn't addressed will cause a "failure" or buyer's remorse.

The sophisticated customer or likewise provider will recognize in advance that all these different aspects must be accounted for: each one either satisfied or ruled out, in an agreement between the supplier and the customer. For example: take television commercials for successful "diet programs" -- now they must try harder to pre-empt deal-breakers, because the key considerations of most potential customers are well acknowledged to "cover the bases"...

With an opportunity to identify issues in advance this way, there's much less reason to tolerate asking (or being asked) for the wrong thing. We see the path to getting it right.

Posted by Malcolm Ryder at 11:55 AM | Comments (0) | TrackBack

January 15, 2007

Critical Mass on the Critical Path

In his comments on the Archestra article "Why Change Is So Hard", Sid Kemp of QTI, Inc. picks up the beat on how to campaign a change. His description highlights the idea of transitioning between different stable states: the periods before the change and after it. A seven-element program that Sid outlines is a case methodology for "covering the bases" that the Archestra matrix on individual attitudes presented in the original article.

Where it comes to covering these bases, Sid's comment calls out something of more pointed interest to think about -- i.e., that an individual exerts influence on other individuals in a way that leverages the current state of things into a sufficient level of steadiness for a change to be either "accomplished" or "prevented". In other words, the individual can disproportionately contribute to a critical degree of momentum or inertia.

Good call. Furthermore, that has very obvious implications for the idea of "leadership"... It's a given that a group involved in a change will typically feature, within the group, different functional roles in the composition of the "to be" steady state. Not everyone will have the same kind of influence, and the new equilibrium will not ask them to -- neither in the composition activity nor in the final composition structure. In effect, amongst the group of individuals involved, would-be leaders may need to adopt the change differently from would-be followers, and so forth. Along with that, some individuals may experience a change in role due to the move from before to after the adoption campaign. Following suit, have we as change managers identified the leaders and followers on the "momentum" side, separately from the leaders and followers on the "inertia" side? (By the way: we'll note here, for future consideration, that change leaders and change agents are not the same role, even though they may both be played by the same individual. But how about when the agent is not a leader?)

This lets us revisit a "truth" that we've both observed and experienced, which is that in some occasions, "success" is not pretty. It goes without saying that becoming different is not necessarily becoming better, so a proposed change has to carry with it a presumptive confidence that its objective is an outcome that has more value than does the status quo. This is exactly why one of the quadrants in the Archestra matrix is "appreciation" -- it includes the same sense that we convey when we say, as an objective measurement, that anything else has "appreciated". The change proposal argues that the value will be there; the question is, will the individual say "I'll buy that..."??

When the proposed change is an executive goal, those individuals that don't buy that may in a different sense "buy it" : they may become either targeted damage or collateral damage, clearing the way for transition.

But if these individuals are still deemed important as resources to the future state, then managing these resources is a risk management activity within the campaign for change. At minimum, the individual's role must be proposed.

Attention to this issue had been developed methodologically during 2000-2002 by the consulting group Fulcrum Management, whose principals Howard G. Hastings, David A. Messineo, and yours truly M. Ryder offered Change Assessments using the analytic cycle Requirements-Risks-Resources-Approvals to reality check the top-down alignment of objectives and commitments in change.

It is on this point of "alignment" that Sid Kemp's comments on populations being "systems" carry weight. Additional specific light on this alignment problem is cast quite strongly since 2004 by Jonathan Becher in his work with Pilot Software, Inc. in Operational Performance Management. Kemp likewise offers work on the "leverage points" of alignment through his current offerings, under other labels, at QTI, Inc. Neil Russell-Jones puts out "The Managing Change Pocketbook" at www.pocketbook.co.uk, containing a fairly classical approach that we can see mapping to this issue. And (if you are still reading this!), similar efforts in your own sphere of activity are likely familiar to you under various other programs and entities you can name.

So what?

In further articles at Archestra, we'll maintain an opportunity to show how these different offerings reiterate the attitudes matrix from "Why Change Is So Hard", and how they help to explain the criticality of the individual's adoption to the design for change. Naturally, if we find that the matrix is broken, we'll change it...

Posted by Malcolm Ryder at 7:34 AM | Comments (0) | TrackBack

December 12, 2006

How Much Is Enough?

Our colleague Charles H. Green at Trusted Advisor helps to reinforce some strong themes found around here in his comment on the very recent Archestra post, "Performance Recap".

One of his points is that measurement is probably overrated as a prerequisite for management. Enjoy his examples as soon as you can, but here I'll add a few more points to continue both the recap and the line of thought.

How can we define measurement, management and performance simply enough to see their absolute difference from each other but just as easily see how they might relate?

A simple version of that is as follows:
- measurement is a form of description that intends to identify a relative state.
- performance is a describable effect , of an effort that intends to create progress towards a target state.
- management is a form of influence that intends to establish a relative orderliness.

Measurement doesn't cause orderliness; it merely can support orderliness by giving management some grounds for a model of orderliness to pursue. But management can easily use other sources to develop models. Interestingly, though, it is hard to imagine any source of a model that does not essentially require description, so the difference is most likely in the forms of description that are used to assert the basis of the model. Gossip, for example, can be posed as an alternative to measurement. Plenty of people model their efforts to influence things, by relying on gossip.

And performance -- well, it can be "good" or "bad" or somewhere along that spectrum. The point is that it is not necessarily either, and the notion of performance requires only the ability to identify where the effect of effort fits relative to the ambition associated with the effort. Interestingly, this helps to point out that the actual effectiveness of an effort might be strong, but if that "effectiveness" isn't of the right flavor, it won't in most cases be evaluated as "good performance"...

As for management: we most often work under the assumption that some kind of orderliness, in our environment and/or our effort, is more likely to result in progress from our effort. Yet in art, in learning (not "teaching"), and in play, we also know that this orderliness might be very slight and it might not even be from a desirable mode of influence -- to wit, "the method in the madness" -- yet progress is actually just as intentional, plentiful and expected as it is in any routinely "managed" work of other kinds.

What Charles Green (and much of the thought on Archestra as well) points out is that management can influence progress without being concerned about measurement.

On the other hand, it's quite difficult to use the notion of performance without using measurement. Here, the real issue is not whether measurement is involved, but rather what kind of measurement is involved.

Having responsibility for progress creates too much anxiety for us to get relaxed about having "unmeasured progress" -- and yet unmeasured progress happens all the time -- both with and without management. We just don't want to take the chance, normally, that desirable progress will occur without management, and then we use measurement to prove that the management effort being made is worth the trouble.

So, having reached that punchline, there's nothing fundamentally wrong with liking measurement. It's one way that we can try to increase the amount of time we spend being both lucky and smart. This doesn't mean that other ways, such as relationship building and collaboration, wouldn't be just as helpful or even moreso. That's also management at work, and it probably has a much longer history of practice and success. Let's call in some high-performance historians and check it out, when we can.

Posted by Malcolm Ryder at 11:38 AM | Comments (1) | TrackBack

December 8, 2006

Who's Your Daddy Now?

Safe to say, many colleagues of ours are professionals in the area of leadership studies, leadership coaching, and (within performance management) leadership execution.

After more than twenty years of exposure and osmosis, we should be able to face the big question, what do we know about leadership now? Is there some conclusive shortlist of findings that frame the path to success, or at least that warn off people unlikely to succeed?

The question is not trivial, because twenty years of research findings amount to the observation that leadership is a condition that results from a huge variety of possible combinations of circumstance, predispositions and group motivation. One might say, fairly, that regardles of the style and occasion of attempts at leadership, the essential truth is that leadership occurs. Most of our excitement about it is in trying to figure out how to make it recur -- in particular, on demand.

Consequently, studying leadership is like studying the weather. Slap together two or three Crays, and see what conditions can be patterned that suggest we could make rain where we want it by seeding clouds today. The brute force of data crunching is certainly less daunting now than twenty years ago, so although there is no evidence that scientific study of leadership has actually generated mo' betta leaders, there's plenty of evidence that more people know how to describe their deliberate pursuit and strategy for becoming a leader.

That's compelling and all, at least because while we still don't have standard edition well-worn copies of Leadership For Dummies (well, I should fact-check that!) being passed around, there seems to be some strategy for almost any personality. To wit, the advice industry for ersatz leadership and repentance -- and statistically, perhaps, better chance of more good leaders.

Or not.

It must be said that the staffers of the repentance wing, which increasingly consist mostly of expensive therapists and inexpensive jail wardens, appear to be well suited to their jobs with very little certified expertise in "leadership" per se. However, at least in the Western cultures, they both know quite a lot about authority, which is an excellently revealing indicator of the noise factor in leadership.

What would we say is the "signal" in leadership? Simple: it is respect. Isn't it obvious that respect breeds authority whereas authority only incidentally breeds respect? Avoiding the easy mistake of confusing deference and respect, the answer is "Yes". Authority figures are almost wholly dependent on the circumstances of their authority, and that authority may be entirely meaningless in another context. Whereas respect turns out to be quite portable, and is even a pretty effective form of social currency. How common it is, that an individual who has or who quickly earns respect can sprout as the leader in even a wholly unexpected and/or unprecedented circumstance. (Readers of other Archestra content might also recognize this as a distinction between competency and technique, where competency points squarely at the ability to rise to the occasion, while technique is just a method that might be chosen in the heat of the moment by the competency.)

So, rather than obsess about controlling circumstances so that authority can blossom and survive, our real issue is to understand the ways and means of earning respect.

This means that if we look at leadership as an outcome for which a measurable supporting effort may be evaluated as a performance, then we might also stress certain behaviors that earn respect as being the key performance indicators, and the appropriateness of those behaviors to their occasions as being the critical success factors. Yet in the end there will always be the noise of authority, noise that most likely stems from the distorting influence of politics. Recognizing politics as a competitor to the competency of "respect" is certainly an interesting perspective on the prospects for leadership, but the point of that observation is to ask that politics not be used as a substitute for coaching and measuring leadership. We need a better signal-to-noise ratio, and we won't get one by overemphasizing politics.

Posted by Malcolm Ryder at 4:44 AM | Comments (0) | TrackBack

December 6, 2006

Performance Recap

Recently I ran across the phrase "You can't manage what you can't specify" - which is a very nice iteration of the central role of definitions in the sphere of assessing performance.

If you'd like to run across it too, see Paul Allen's book, "Service Orientation: Winning Strategies and Best Practices" from Cambridge University Press (www.cambridge.org).

To celebrate the phrase further, here is a skeletal recap of ideas posted throughout Archestra on the subject of performance management:

1- Performance management presumes performance measurement, but measurement is worthless unless it measures the right things.

2- Definitions of performance are conventionally all about identifying how well execution towards a target went. Picking good targets in the first place is of course more important than any followup form of execution.

3- Targets are meaningful when they mark the demonstrable generation of significant differences (or "values" in Archestra parlance); the significance must have an even better definition than does the targets.

4- For a difference to be significant, there must be some context, usually a model, that invests particular observed conditions (and changes of them) with meaning. Therefore, the model is the most fundamental thing in the assessment of "performance".

Example:

In a "re-building" year, a team may lose many more games than it wins -- but the pertinent model is not wins-&-losses; instead it is "increases in competency".

But in a year expected to be a "contending" year, the pertinent model is "wins and losses attributable to the game plan" -- an entirely different model.

So a rebuilding team may show excellent performance against its targets; but it might be nowhere near performing like a contender.

Finally (or in fact, right from the beginning), trying to practice "performance management" without practicing "change management" is a joke.

Posted by Malcolm Ryder at 4:47 PM | Comments (1) | TrackBack

November 7, 2006

Be Careful What You Ask For, You Might Get It

Recruiting for "performance" relies of course on what is measurable, but even intuitively we know that an "unqualified" or "incompatible" or "misapplied" resource, if found, will be a key factor of an explanation for performance shortcomings.

The difference between potential, production, and performance is something often assumed to be self evident. Yet not only is the difference given final credibility only through "objective" measurement, but the gaps between the three points are actually seen as more important to manage than the three points themselves.

That is, resources are often seen to be *starting out* at one of the three points -- after all, we make a big point of "acquiring" them that way, whereas the real work (supposedly) is to get them to move up. Then, because we want an easier time of moving them up, we try to determine what characteristics at each level of acquisition are already the best predictors of a high rise.

From an analytic point of view, the question must therefore also come up as to why the predictors are reliable. In other words, if the predictors are singled out because of their association with desirable outcomes, is it because they are causes or are they just prerequisites?

"Development" is the generic term for engineering productivity from potential, while "management" typically stands for engineering performance from production. This brings up two more topics to consider. One: what type of resources are most compatible with development and management? And two: what kinds of development and management are best at moving resources up the value chain?

It's a fact that these perspectives essentially anticipate "processing" the resources -- but meanwhile the utilization of the resource becomes a third major dimension of the picture. That is, in the big picture, the Predisposition of the resource (its starting characteristics), the Processing of it (through engineering), and finally the Positioning of it (its utilization) will effectively decide how the resource relates to the outcome that we'll call performance.

In explaining performance, it thus becomes both notable and logical to discriminate -- not just suspect -- the point of failure or disabling constraint. In low performance, is the problem a resource? And if yes, then is it that the resource had a bad predisposition (low intrinsic quality)? Poor compatibility (hard to process)? A bad assignment (deficient position)?

In answering those questions, it will be necessary (for the sake of intellectual honesty) to identify whether the applied (or withheld) development and management was appropriate to the identifiable prospects for success. By prospects, we mean that we understand a rational relationship between what characteristics of resources should be opportunities for performance leverage -- and HOW they are opportunities.

Most often, sports provides a laboratory for observing how prospects fare. A resource becomes a part of a system, and may thrive or not. Superstar college quarterbacks disappear in the systems of losing teams that draft them and can't resolve a mismatch with the talent. Third-round draft picks costing orders-of-magnitude less money go to well-run teams that nurture a role or two in which the player becomes a league standout.

As architects of business processes know (and practice), the definition of a role is one of the two most decisive factors in process performance, with the selection of actors for the role being the other overwhelming determinant. It sounds like a simple idea, but the role definition and the actor selection turns out to be full of the nuance of interactivity, reliability, flexibility, strength and availability that finally accounts for whether the process runs well under the demand that is placed on it.

Given that demand is both variable and influential (some call it "pressure"), it cannot be ignored in the exercise of evaluating resources. The resource must help make an adequately sustainable process successful under demand. But the demand cannot be undefined. And the method by which the resource supports the process cannot be arbitrary. There's a way to make a sheet of paper hold up a brick, but you still wouldn't want to stand on the contraption if you had any choice. Yet both paper and bricks have their place in the makeup of a successful housing structure, as proven over hundreds of years of design.

Roles address the issue of whether a resource is a cause or a prerequisite. In a sense, a role says either "neither" or "both". In saying "both", the role means that the resource is integral to a system that produces the desired results, without saying that the system will necessarily always produce that way. Systems host processes, while the resources materially constitute the system. (Some might argue that systems "occupy" processes, which is an insightful description of the relationship between design/process and the construction/system that "realizes" the design. Increasingly, this is being called "orchestration".)

The punchline to this is that the secret of excellent resource selection lies in knowing the architecture that accounts for why outputs and outcomes can be predicted. In that architecture, the roles given to resources are part of a framework that helps point out when a resource is going to readily fit into the value chain of potential to production to performance.

Roles strongly help to define the prospects. In recognizing that the prospects may be quite idiosyncratic to the given organization, it becomes apparent that two very similar resources from different organizations may not amount to the same prospects at all -- and before these resources are acquired they should be evaluated as prospects of the future, not as products of their histories.

Posted by Malcolm Ryder at 11:45 PM | Comments (0) | TrackBack

October 29, 2006

Changing Performance

Although quality of execution ("QOE") is not the same as "performance", in the minds of many managers QOE's Deming Cycle has long ago taken up permanent residence as the basis for performance improvement.

In that view, the mantra of PLAN DO CHECK ACT (i.e., design, execute, measure, and adjust) is a huge reminder that while the "activity" half of work (PLAN DO) is always to be attended formally and closely, the "achievement" half (CHECK, ACT) is not just a "gimme".

From that perspective, managers have a better view of how to make things work not just well but, due to the repetition of the cycle, also with continuous improvement.

Yet forty years after the cycle's debut, the challenge of ever-increasing organizational complexity makes the effectiveness of this advice harder and harder to realize. For management solution-builders like CEO Jonathan Becher of Pilot Software, a reinterpretation of management focus seemed necessary and timely enough to even build his company around. Becher's model -- MOTIVATE, MANAGE, MONITOR, MEASURE -- shifted emphasis from the "Plan / Do" of Deming to a sensitivity about how communication brings workers into the realm of reliable support for the Plan. As a result, purposecould become more consistently followed by execution.

Both of those men's approaches convey value through completeness in a scripted sequence of management influences. Yet both must be grasped within an even larger context of what more completely accounts for "performance".

What really controls the generation of events and their results is the interrelationship of internal forces in the organization; and what is often overlooked is the degree to which those connections are leverage points that are vulnerable to unscripted change. The following illustration's high-level view exposes these points of leverage:

In representing a cycle, part of how this picture works is of course how it positions the leverage points in question, which are Interpretation, Participation, Examination and Prioritization. Here, they take up spots in between the more conventional subjects of management attention.

Each of the "new" items significantly constrains the influence of managed strategy, planning, execution and evaluation. It is relatively easy to grasp that defects, omissions, exceptions or errors at any one of these four constraining points will potentially delay, disrupt or at worst cripple the cycle, despite attention to the more standard concerns. Yet all it takes to introduce those interruptions is competition from some recognized alternative -- in goals, methods or needs. Given that, can we say that we're managing things if we aren't attending to the four constraints on an explicit and sustained basis?

Sometimes the alternative comes from outside of the manager's field of view; sometimes, from deeply within.

For example, as now seen, a Plan is not a transcription of a Strategy; instead, it is more nearly a transcription of an interpretation of strategy. Or said better, interpretation is a precedent of the plan. People don't automatically interpret things the same way; and naturally, politics can play a heavy hand in which interpretation may have the best shot at prevailing. The point is, do we know why people are interpreting things the way they do?

And consider the phenomenon of a second opinion; if interpretation imposes a competing sense of credibility, opportunity or belief on the strategy, the prior anticipated plan will again likely risk being changed.

Further along in the cycle, at the point of Participation, a deeper look at people is also due.

Participation is perhaps the "intermediary" point that ordinarily gets the most attention. But what often gets overlooked in that attention is the distinction between productivity management and change management -- with the big question being how we know that people will really adopt and execute the plan.

These days it is still relevant and popular to understand productivity from the viewpoint of running healthy "systems". And most typical in our thinking about that is the mantra of "people/process/technology". That describes the three dimensions of the systems that we think are both useful and manageable -- plus it offers the encouraging claim that technology will make things more likely do-able. But the catch is: people have to want it to. If they don't want it to, a lot can change. (As noted frequently elsewhere in Archestra discussions, the People/Process/Technology mantra is essentially flawed and should be replaced with the mantra of People/Events/Technology, further superceded by Assignments/Processes/Configurations. But for now we'll leave that alone, and just take advantage of the focus on people.)

What about change? Underneath Deming's "DO", and between Becher's "MOTIVATE" and "MANAGE", people decide what they are going to actually bring to the party. They make the decision as a result of comparing what they are being offered as "next" versus "now". This will not just be a simple comparison of better versus worse, with "now" being the benchmark; "now" may not even be clearly good or bad.

Instead, the comparison will be about whether being involved as requested (for example, by the plan) is a difference that the person can prefer. So what in particular is getting compared?

Both "now" and "next" present possible but alternate realities that elaborate, in detail, the general picture below:

For the individual person, the issue is to reconcile how they already are now with how they are going to be next. Any part of the above cycle that changes -- whether that be expectations, intent, or observed effect -- can introduce a new preference, dissuasion, or even some cognitive dissonance such as pitting their desires against their ideas or against their ethics.

In this second picture, as in the first, the points of influence are interrelated by position. To the point, Acceptance is always preceded by Expectations. Then, when Acceptance is followed by Intent, people really arrive as drivers of the activity that eventually will be studied for determining performance.

What managers need to know is that the Expectations segment of the cycle is affected by both Awareness and Acceptance. If either of those changes, expectations change too. Likewise, intent will be sensitive to both Acceptance and Actualization -- so managers have to provide corresponding opportunity that moves Intent to real action. These sound a lot more like issues of leadership that managers must fit in.

Meanwhile, in the end, the individual's mentality about his/her requested role must track back beneficially to the participation needed in the point between planning and execution. That's what the two illustrations together reveal.

Posted by Malcolm Ryder at 6:37 AM | Comments (0) | TrackBack

August 25, 2006

What Matters versus What Counts

How do you decide the "most valuable"... the "best"... the "most significant" ??

Why Andre Agassi is on my list.

http://msn.foxsports.com/tennis/story/5892448?CMP=OTC-K9B140813162&ATT=199

When determining and understanding "value", it's all about what kind of difference the observed difference makes.

Posted by Malcolm Ryder at 1:44 PM | Comments (0) | TrackBack

July 9, 2006

Driving Action with "Values"

In most conversations about how to properly focus an organization for success, the prescription calls for the organization to leverage its identity as a source of performance strength. For doing that, the notion of "values" is promoted as a major success factor.

What makes "values" so important? The key ideas are that it is typically easier to maintain effort for what one believes in, and that not knowing what matters the most "internally" leads to an inability to sort out and navigate through what matters the most "externally".

In trying to make "values" an integral part of operations, the organization will typically develop priorities; then it will group and cascade the priorities into policies -- ones that can be applied as instructions accompanying activies that the organization anticipates it should conduct or host.

While policies provide the practical expression of the priorities, many organizations are only partially successful at providing them and even creating them. The initial challenge in developing the priorities is usually to decide not just what is considered to be a representative "value" but also to get agreement on why it is necessary to hold onto it. The challenge is made tougher by the fact that the circumstances surrounding the organization may be constantly changing in important ways demanding direct attention. Further, the identified priorities may seem to compete with or even contradict each other.

Consequently, this period of investigation and definition takes many forms and often must be repeated -- but while no two organizations may arrive at the same conclusions, they all try to arrive at them through what will be called a "value system" -- some model for evaluation that is persistent above and beyond the level of ordinary circumstantial change. This sytem will then govern, more or less, the ongoing refinement and validation of priorities and policy -- at least until again too many new occasions prove to be irreconcilable within that system.

When this roadblock occurs, individuals or organizations experience conflicted priorities as indicators of a defect or breakdown of the value system. But in this experience, it can be unclear as to whether the apparent conflict is really due to the system or instead due to a lack of rigor or understanding within its use. For example, rules are often seen as the specific expression of a priority. Sometimes in using them, there may be confusion about whether an undesirable situation -- meaning, one in which prior action has turned things sour or subsequent action will likely do so -- has been forced by "a bad rule", or whether instead a good rule has been inappropriately applied. The conflict stems from uncertainty about the correctness of what was done or of what to do.

This example is notable because the action that makes the situation "undesirable" normally derives its justification from the presumed value system. When the undesirability of the situation makes us debate the system's own correctness, we tend to wonder if the system is unfairly "skewed" one way or the other. Meanwhile, the conflicted priorities that come with the undesirable situation may be a disagreement between two or more parties, but the conflict can also be a disagreement that one party feels within itself.

An important part of a value system's responsibility is to provide a means of distinguishing the character of one action from another. A critical understanding of the importance attached to "value systems" is that they are focused on why things should or should not be done a certain way -- not on what the actual results are. But perhaps most important of all is that a value system's force comes first from its ability to identify and describe things, not from asking it to measure things. That is, a value system is a perspective, not a set of scales.

With that in mind, the discussion below takes a look at how the essential form of a "value system" works to provide critically distinctive identification (not measurement) in a "situation at hand".

To begin with an example, the following picture shows a highly generic framework, intended to more precisely declare the main factors that go into the often fuzzy notion of "values". These factors are what goes into actual decision-making in "real time".

In an ideal situation, this framework would represent an organization's or individual's "mindset" -- one with consistent awareness across all of the framework's factors. That is, there would be an equal and simultaneous grasp of what is "responsible" or not, and what is "right" or not. Armed with that awareness, the character of the action that is possible at any moment could be evaluated as one of a few basic types -- for example as being "virtuous" or being a "gamble".

The framework identifies these basic types by introducing and cross-referencing a major distinction between acts and beliefs -- which respectively translate into the corresponding difference between ethics and morals.

This framework can offer the terms that it uses without the burden of emotional and philosophical histories, because it is not concerned with persuasion but rather with description. All descriptive systems have built-in assumptions, and this framework is not an exception; however the purpose of the framework is completely explicit, with no ulterior motive -- and therefore it can easily be used or ignored according to the practical interest of the observer. It's not that one must compare acts and beliefs, but rather that one usually can.

Two important assumptions in the framework are indicated by the lower left and upper right tags added to the central 4x4 grid. (Arrows are also supplied to signify these assumptions in the diagram.)

The first assumption is that Laws are primarily concerned with enforcing behavior away from transgression and towards virtue. (Moving behavior both higher and towards the right eventually would converge in virtue.)

The second assumption is that Principles are primarily concerned with defining and promoting behaviors that meet acceptable standards. Principles "pull" behavior towards them.

The lower left and upper right regions in this framework are readily comparable. But what is among the most interesting experiences of our society and social value systems is that we are constantly bumping into behaviors that occupy the "middle zone" of sacrifice and gambling.

For example, with sacrifice, a person discovers, perhaps unexpectedly, that they feel an innate (not externally imposed) responsibility to do something that they actually did not otherwise believe was "right". The very occasion itself exposes the difference between what they recognize as acceptable from the standpoint of need, versus from the standpoint of preference. As very dramatic samples, commiting a mercy killing or submitting oneself to bullying in order to protect someone else both fall into this category. As a very mundane sample, giving up properly ("rightfully") earned profit in order to placate a confused customer falls into this category.

In the case of gambling, circumstances are such that the gambler (the actor) often knows a gamble is being taken when others cannot tell. TV shows regularly feature examples of this, where with the best intentions detectives search crime scenes without a warrant, or prosecutors try to use the "fruit of the poisoned tree". Yet sometimes the actor is doing something with self assuredness about rightness, while unaware of how it might be irresponsible. This latter case is accounted for by the framework, but in our discussion the framework is primarily interested in the awareness that motivates the actor. How does the actor decide to do something "irresponsible" in order to do something "right"?

The thinking behind this framework additionally assumes that the actor chooses to gamble -- to take an irresponsible action -- due to his perception of need, while the preference to cause something "desirable" is normally what actually provides the actor with his "justification". Clearly, this is the formula for pragmatism, or the idea that the ends justify the means. The problem lies in whether the "desirable" is also what's "right".

On the other corner, back to sacrifice, actors and their critics often mistakenly judge sacrifice as pragmatism. The judgement error lies in not realizing that sacrifice is not about the ends but instead about the means. Compared to gambling, sacrifice is about not having a choice in how to proceed and doing what is possible instead of doing nothing. This is why "heroes" are not always seen as "the good guys", even though they are usually distinguishable from anyone who is not heroic. Heroism is a way of being that is actually not defined by results. A sad and common example of this is the case of dysfunctional personal relationships wherein one party is routinely heroic but with only the effect of propagating a bad relationship. Likewise, heroic corporate leaders can quickly take the company to ruin. By the way, these examples only reinforce that the actor's overall frame of reference is the dominant one behind the activity. Meanwhile, external observers might readily conclude that the heroism was "noble" but still "not right". (Gambling is generally not seen as being noble.)

The above comments tend to suggest that action is based on needs while beliefs are based on preference -- and that suggestion is intentional even if conceptually experimental. Assuming the suggestion is valid, there is notably still no reason why both need and preference would be unaltered over time by experience and education, or by each other. So it is not a simple opposition of "needs vs. preference" that is unlikely to be valid -- rather, it is the actor's sophistication about the two of them that will make their opposition more or less complex and reconcilable.

We see this continuing dialog between them on a grand scale in the court system, where laws and principles tussle with each other for control of the interpretation to be applied to sacrifices and gambling -- to idiosyncratic heroism and to pragmatism. In light of the framework's clinical terms, the history is saturated with debates over things that seemed ethical but immoral, and things that seemed moral but unethical. Often, the challenge is to "unload" the labels of their psychological baggage, so that the important contrasts and comparisons can be made between the context that declares "right/wrong" (correct/incorrect) and the context that declares "responsible/irresponsible" (proper/improper).

On a corporate scale (i.e., a microsociety), requirements wrestle with policies to control the interpretation (and exploitation) of "opportunities". A company will agree that a lucrative and reasonable proposal should be accepted, but it will disagree that a non-executive should make the deal. The idea and goal of the deal might be right, but the non-executive taking charge of the transaction is irresponsible.

On a personal and private scale, roles wrestle with desires and wind up shaping personalities and relationships. In this discussion, the personal level is really not intended to be directly explored any further, but the recognition of the dynamic is not difficult on a personal level, so the discussion has leveraged this fact to help reinforce support of the framework's idea at other levels of organization or influence.

What clarification does the framework present, finally, about the notion of "values" ? The main clarification is that "values" are an idealized way of pointing at something more specific -- namely, the prescription for the balancing of beliefs and acts. But the framework shows that values come in a range from unambiguously good to unambiguously bad. Naturally we promote the "good", but this doesn't logically eliminate the others nor their actual practice.

The other key clarification is that the influence of values on action is by will of the actor -- meaning that values are not inherently compelling. Instead, the value system has to propose definitions of right and wrong, and propose definitions of responsible and irresponsible -- and the acting party (individual or organization) still has to find reasons to position itself within the range of values generated.

Posted by Malcolm Ryder at 10:22 AM | Comments (0) | TrackBack