September 3, 2010

Performance Measurement for Services

It goes without saying that a poor-quality service will risk a short life-span and throw its provider into the dark side of relationship management with customers.

Understandably, quality management is not outranked by any other type of service management attention. But where managers depend on measurements, the most common problem is a confusion about what measurements are "quality" measures and which might be unnecessary or better suited to a different management concern. The most frequent point of confusion is with performance management.

To distinguish the two, first it is worth noting that many measurements are important to both. But as facts within a point of view, these "shared" measurements fit differently into the two perspectives.

Quality is a percentage of a level of performance achieved both without defects and within the intended structural design of the acting entity. In comparison, performance itself is a level of operation achieved versus a target level of operation. As an example highlighting the difference and the relationship, high performance may be obtained from an acting entity, but because the quality of the entity is poor, the entity may break down or be distorted by the effort to reach and sustain the high performance. Logical management approaches aim to synchronize performance expectations with identifiable levvels of quality.

In overall operations, services underpin the performance of both products and processes, while the services themselves are also managed for their own performance. Different contexts then contribute the conditions that point those performances at quality considerations.

A business process that needs support is a "problem" for which applying a service is a "solution". In general, a service is a subscribed behavior of an operation. In this way we can see how standardized observations of the performance characteristics of the operation help to account for the success or failure of the business process.

 

Posted by Malcolm Ryder at 3:34 PM | Comments (0) | TrackBack

May 30, 2010

How IT Strategy and Business Strategy Co-Operate

What is the relationship between business strategy and IT strategy?

IT strategy must be seen not as a monolithic pronouncement but instead as a continual practice with which use of information technology is tailored to the business use of information.

Business use of information falls into many separate but inter-operable domains including (but not limited to) communications, learning, analytics, research, and history -- along with production, and then of course, process management.

When we say "business strategy", the assumption is that there is a type of influence that the business seeks to have on its community of stakeholders and in its operating environment. This is an influence that depends on a position that the business can establish for itself, relative to other functional or operational entities that are either contiguous or party to the community and environment. The strategy is made up of the intent and plan to take the position for the purpose.

The use of information corresponds to the strategy, but -- not all information usage is about the strategy, except in the sense that it needs to either allow or cause the strategy to succeed. This means that the usage itself needs to succeed given the particular method of usage and the actual information itself.

IT strategy must concern itself with what methods can be combined with what kind of information, to provide the opportunity that the business strategy needs, by creating effects that are either preconditions or causes of the opportunity.

Accordingly, for IT strategy to make sense, first the opportunity needed by the business strategy must be identified, and then the type of information usage needed for the opportunity must be enabled by IT.

This requires understanding how the different information usages will co-operate to create conditions that will add up to the opportunity.

Some of those combinations are intuitively appealing because they are part of proven past efforts.

• Communications, Production - selectively informing participants and stakeholders to establish efficiencies and quality in work
• Research, Analytics -- diligent search/discovery/arrangement of data, patterns and models that are useful for making and explaining things
• History, Learning -- compiling descriptions and interpretations of experience that clarify contexts and relationships

Bottom to top, those pairings usually allow the business to identify functions, design ways to conduct them, and generate specific operational capabilities from the designs. Obviously, relevant capabilities are an essential type of "opportunity". Drawing learning from history, or drawing analytics from research, and so forth, are typical interactions, and the effects of one pair are commonly leveraged by the pair above it. 

At the same time,  there is no guarantee that accomplishments in one area will flow up into others. Even where certain lineups are compelling, it is necessary to look into how a network of influences can arise in non-linear fashion amongst the full set of usages. These influences can be inhibitors as well as promoters.

For example: history can predispose analytics, by culturally reinforcing attention to some issues and neglect of others. Meanwhile, learning can predispose communications, by preselecting audiences. And production may impact research, whenever they compete for resources or persuasiveness.

Along with new capabilities, most business strategies can think in terms of ideas (knowledge), relationships and assets when exploring the types of opportunities that may be needed. Usually, in a mature business organization, these are all enjoying focused management The question is, for each type of opportunity, what should IT do to enable and orchestrate the six or more basic information usages required for creating and maintaining it?

The touchpoint between business strategy and IT strategy is those usages. In practice, the business strategist must determine which certain opportunities should be pursued. The IT strategist must identify, engage and evolve the related touchpoints so that their interactions are balanced towards providing the opportunities that the business strategy needs.

 

 

Posted by Malcolm Ryder at 1:00 PM

May 26, 2010

Why the Business is the primary customer of Service

 

The simplest definition of a "service" is:

• an ongoing running operation,
• that is presented to a consumer of the operation's output,
• with an offer and a mechanism (interface),
• for invoking the delivery of the output upon the consumer's occasion of demand.

The reason why this arrangement can actually work without imploding is three-fold:

• the provider of the service can share terms of agreement with the consumer about the allowable occasions of demand;


• the full range of operation outputs need not be offered as a service; and,


• the consumer need not know how the operation is constructed or maintained, so the provider can modify the operation behind the service.

In effect, it is do-able because the scope of the service can be managed.

Typically, it is the issue of operational modifications that generates the most excitement -- and the excitement typically comes to a head in the IT (and facilities) departments of the business. Levels of service, and qualities of service, are bound to managed risk and performance factors that must be aligned to each other within the architecture of the operation that will be exposed as a service.

To add further perspective: it really does go without saying that different tools may be employed to do the same job; and this points out that deployment decisions are more critical to risk and performance than are the attributes of the tools themselves. With that perspective, a "business view" of an operation concerns itself primarily with the possibility that operation structures are both rational and sustainable. This means, in turn, that the business view of how to reasonably warrant a level or quality of service relies mainly on two things:

• it looks at those same operational decisions


• it acquires a validation through test-and-proof that the outputs for offer are acceptable, within the risk and performance allowed by the decisions.

This structural coherency sought for operations is essentially what is pursued by the prescriptive practice called Configuration Management. Configuration Management is historically maturing within the domain of IT software and hardware management for integrated production systems. Today it is most heavily influenced by best practices described in the knowledge domain called IT Service Management, or ITSM. 

From the above notes, however, the emphasis would appear to be not primarily technological but instead concerned with the decisions (left side of the illustration), underpinning the business information model and business process model (right side) that together shape those outputs of the operation that are eventually made selectively consumable.

Where technology takes root, through IT architecture, is in operationally instantiating the service -- to meet a quality and level that works for the business. Primarily, the service must, on demand by the business,  be available within the rationality and sustainability that the business can accomodate. In that sense, the first customer of the service is the business itself.

The net of this is that the IT practice within the business will need to understand and mature configuration management on business terms, especially in a time when systems management of IT-based operations is relocating outside of the business campus to what is called the Cloud -- managers of provision of web-based delivery of IT-systems-as-services. Although the Cloud is most often referred to as an "environment", its business role is that of a contracted service partner or supplier, conducting critical chunks of operations that must not disconnect from information and process management.

The takeaway: alignment of operations to information and process models will call on the ability to articulate how much configuration specification by the business is necessary for the business to achieve confidence in risks and performance levels, and thereby agree to the terms of service delivery.

Posted by Malcolm Ryder at 2:52 PM

August 13, 2009

Why Business Processes drive Customization... and what to do about it

Customization of business processes means that there is more "precision" in the targeted effort to succeed. But in situations where support may not be up to speed and where targets may change, this precision comes at a high cost of achieving readiness and warding off eventual irrelevance, making it just as risky as it may be attractive.

The general sense of "customization" compares against three basic options for the formations of a business process.

Option 1: One-Size-Fits-All

For business processes, this is a myth, because “business” is primarily about accommodating multiple relationships and requirements, not primarily about manufacturing a standard product. The “process” must support what business “is about”. Relationships tend to be privileged, not indifferently available.

Option 2: Specialization

Sometimes incorrectly called “customization”, specialization is different: it means variations on a single theme. The theme has standard requirements; the fulfillment is where the variety occurs.

Option 3: Customization

Customization begins in the requirements, not in the fulfillment of them.
There are three reasons why requirements may be “custom”:

• Cost structures


• Competitive Innovation


• Capability Immaturity

Three reasons why requirements may be custom, not generic.

Cost Structures:

• Satisfying customers is not profitable if it is too expensive; different organizations (different suppliers, and different consumers) have different cashflows

Competitive Innovation:

• Existing customers, to decide to stick around, need to feel that the relationship is fresh and current
• Potential customers need a reason to prefer one provider over another

Capability Immaturity:

• The time available to use for improving capability may not be in synch (priority, availability) with other resources

Three reasons why requirements may be "custom", explained.

Cost Structures:

• Lack of visibility on true economic impacts puts operations on a risk-aversion basis seen in typical micro-management approches

Competitive Innovation:

• High rate of change is necessary to sustain improvisations that generate necessary nw effects or advantages

Capability Immaturity:

• Required performance level outstrips currently available supporting mechanisms, forcing risky workarounds. 

How to mitigate or avoid customization.

Micro-management:

• An operational performance model allows activity to be prioritized and weighed by differential contribution to goals and thus by ROI perspective. (For example, the 80/20 rule.) Relieves pressure to dwell on the microscopic. Define objectives, CSFs and KPIs. Switch to “trust-and-verify” mode.

Improvisations:

• Linking process models to knowledge management allows standardized roles to be able to move quickly and differently on incoming information, without re-organizations.
  

Workarounds:

• Organizing around known best practices clarifies ways to structurally reduce risk and to more rationally divide the labor required to meet performance targets. Such greater clarity allows managers to make the compelling business case for additional help to cover properly allocated responsibilities.

When to Customize.

Considering the above notes, executives should still project the likely value of customizations. The punchline is that it cannot be taken for granted that customization is the best path to take, neither in the short run nor the long. Customization proposals that withstand comparison to the above considerations should be given even more enthusiasm than usual, as they probably then point at nearly unique opportunities to do something strategically important to the business.

 

Posted by Malcolm Ryder at 10:37 AM

February 9, 2009

Street Smarts

In the post Gut Versus Analytics: What's the Real Story?, Intelligent Enterprise's blogger Neil Raden riffed on an article from CIO Magazine citing takes on research by Accenture and Forrester.

The key sub-topic here is about vendors of BI and Analytics allegedly and programmatically prioritizing subjective instinct over objective calculation [my summary labels].

If that characterization of the choices is a left-vs-right choice (x-axis), I find it distracting and not as useful as a top-vs-bottom (y-axis) difference.

Namely, it seems almost always more useful to approach analytics as a way to take things apart, and BI as a way to put things back together. For example, it might really take only 4 (not 4000) data points to spot a trend, etc., but the magic would be in picking the correct four data points first. So wouldn't we expect "analytics" to help us pick the right four, and "BI" to tell us about their effects and co-effects? Do we need an industrial do-over to get tools orientated this way?

This relative difference is far more interesting than the difference between the brain and the gut, since in this view you get to use both organs on both the take-apart and put-together efforts.

Moreover, if the issue is really about "how managers decide what actions to take", then let's consider this real-world observation: actionable decisions and decisive action are not the same thing; the politics of the manager's position in the organization will sway things one way or the other.

Generally, the first decision made is about which evident problems the manager prefers to solve, whereas the first action taken is generally based on opportunity cost.

Those bases change from person to person and from time to time, but nearly all organizations try to implement some kind of policy or other standard(s) to bring about consistency in what is acceptable as "preference" and "cost".

The point is that the tension is not between the head and the gut; rather, it is between responsibility and accountability, each as practiced under the prevailing terms of risk and reward at the management venue.

Posted by Malcolm Ryder at 11:01 AM

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.

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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."

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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?

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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...

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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.

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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

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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.

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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.

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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.

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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...

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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.

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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.

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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.

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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.

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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.

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July 4, 2006

Managing the process of internal Business Change

This image distinguishes itself from the Deming Cycle by positioning the difference of responsibilities and accountability of involved processes. The outer ring of terms typifies business positioning, while the inner ring of terms typifies business enablement. As seen here, the positioning steps typically transition the business from one point of enablement to the next; for example, support transitions the business from installation to use. But basically, nothing actually happens in the business except due to the enablement steps taking place.

A crucial observation is that enablement does not dictate positioning. In fact, management generally has the power to arbitrarily set positioning, and due to that it risks misaligning the intent of the business with its actual enablement. This is the reason why the picture must be as specific as it is, whereas the Deming Cycle does not inform this problem.

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June 18, 2006

Operations Value versus Operations Performance

To say the least, operations are a lot of costly effort. Then, because we're concerned about what our expended effort is worth, everyone wants to measure value and measure performance.

But not many bother to distinguish the two well enough.

The point of measuring performance is to determine what one's effort is worth. In fact, we'll often think and say that if performance is good then the effort was "valuable". But it doesn't necessarily follow that the effort wasn't valuable if performance was not good. Why not?

Don't confuse "value" and worth: instead, think of worth as the target impact of the overall effort -- or in other words the goal.

Meanwhile:
- Performance indicates how close to the goal your effort got you;
- Value indicates what was effective about how the effort got you there.

The danger in confusing the two is that steps taken to "correct" or "enhance" previous results can too easily turn into solving the wrong problem. For example, in the name of getting better results, changing value doesn't necessarily change performance -- nor vice-versa.

To choose and make the right kind of change, and to know how it will finally help, each kind of change -- value or performance -- must be accurately conceived, and their relationship to each other must also be defined.

I.

First, consider value. Put simply, value within operations is identified in the production of a significant difference.

Ordinarily, we think that "significant" means that things didn't just get different but that they got closer to what is desired. But more strictly speaking, any difference that alters the dynamics of conditions from what they had previously been must be recognized as "significant". In that case, determining value means understanding the meaning of whatever actual difference has occurred -- whether the meaning is desirable or not.

One of the main reasons to recognize different roles in organizations is to be able to focus on different kinds of value being created. For example:
- Leaders see themselves as creating culture.
- Managers see themselves as creating viability.
- Implementers see themselves as creating capability.

So they each have different ideas about value -- and also possibly about performance. More importantly, these different approaches have to be leveraged in a way that actually does improve overall performance, which means there must be some model or "performance logic" that explains and reconciles how the various approaches get the job done.

Let's take the example of what a business wants from an IT organization. To understand this relationship properly, it must be recognized that a business person who has responsibility for leadership, management or implementation is in the role of a "leader", "manager" or "implementer". Where IT is concerned:
- Leaders want IT to provide advantages through innovation and cost-reduction.
- Managers, serving the leaders, want complexity and risk minimized, and availability maximized.
- Implementers want customizations and configurations to be prefigured and completed, not ad hoc and hurried.

And to fully understand that state of affairs, it must be recognized that ideally an IT person can take on all of these roles as well. What should happen is that in sharing a given role, the business person and the IT person should divide the labor called for within that role, and conduct the labor to make the appropriate kind of difference with that role.

The division of labors starts with clarity on what the issues are to which each role should be primarily attentive.
- Leaders see change in terms of Opportunities and Threats.
- Managers see change in terms of Strengths and Weaknesses.
- Implementers see change in terms of Norms and Exceptions.

With the issues distinguished by role, a given role's two main viewpoints on responding to them are as a Decider and as an Enabler.

II.

In the Business/IT example, it is common that the Business takes the Decider view and IT takes the Enabler view. But -- to cite an instructive case in cooperative role-fulfillment -- these days IT executives are usually strongly urged to acquire the ability to understand things from both points of view, and to exploit that ability within their responsibility and domain expertise for managing IT.

In pursuit of goals (i.e., worth), everyone wants change to be positively valuable instead of indifferent or destructive. In the normal business context, recognized value is associated with the ability to positively influence the customer's acceptance of what you want to offer. For this purpose, the roles align with each other to systemically (not systematically) address each other's requirements and leverage each other's contributions. Leaders look at the market and respond to it; but Managers respond to the leaders, and Implementers respond to the managers. In the flow of requirements from leaders to implementers, this alignment -- or better, coherence -- can draft progress towards the goal. The point is that each role makes a kind of difference that nurtures the effort of the role next in line. In the following illustration, we go further and argue for a fully interconnected set of relationships.

Given this "closed loop" view, the final link of alignment would appear to be that Leaders will also look to Implementers in some way, not just to the market. Superficially, it's hard to argue against that link being "evaluation" or "assessment" -- that is, leaders taking the time to decide whether the implementers (were able to ) have realized what is needed.

But based on long-standing arguments in the field, most organizations need a better understanding of what this last apparent link is really about. The starting point for clarification is simple: Leaders should not tell implementers what to do -- but instead tell implementers what is needed. The better Business gets at defining needs, the more likely it will wind up with something valuable that it wants -- so it falls to Leaders to assure that Business Needs are well defined and communicated. For example, in the classic case of trying to coordinate business and IT interests, leaders need to set the business agenda for IT -- but business should not set the technology agenda.

But how do they forge their cooperation?

III.

In general, agreement, not command, is the "constructive" mode for their coherence or alignment:
- The business agenda for IT is made up of objectives; it should be all about when and why. Leaders and managers should agree on that -- on when some condition should be developed or pursued, and why. This will be reflected in planning.
- The production agenda is made up of requirements; it should be all about which and how. Managers and implementers should agree on which activities should be executed and how. This will naturally be reflected in the choice of producers but will also be reflected even more basically in processes.
- The technology agenda is made up of resources; it should be all about what and who. Implementers and Leaders should agree on what gets used and who gets to use it. But that agreement will be based on business needs. Policies, especially, will hold this connection.

The set of agreements describes how the continuously interacting roles stay contained in the loop.

How does this model the logic of performance instead of just the range of value types?

Going back to the basic definition of "performance", the focus is on how far the effort has taken us towards the goal. The key idea of the performance logic is that certain types of value are created by the effort, and the value-types combine to foster progress towards the goal. The "logic" of the progress is in how the value-combinations create advantages for, or remove barriers to, progress -- and the punchline is that progress itself must be defined before it can be measured. In the model offered by the diagram above, performance is seen in the additional degree to which a goal-oriented change means capability (through implementers), viability (through managers), and acceptability (through leaders). Said differently: what can be done, how well can it be done, and how much will we support doing it? To the extent that those factors account for successes already noted, their combination may be used as a predicter of future success. For the most part, amongst roles that generate these "success factors", the coherence provided by plans, processes and policies mirrors and directs the logic and its re-use.

The table below pulls together the above thoughts in a representation of discovering and cataloging the generation of these success factors. It overlays the distinction of the key roles with the main viewpoints within each role. The table lays out the task of identifying what decisions and enablements can be associated with each role -- and from there, alignment would be tested or attempted in plans, processes and policies.

IV.

Postscript:
Because production flows from implementers to the leaders, Managers bear the responsibility for proving that implementations can be aligned sustainably with the business objectives. In effect, Managers act as the "agents" and "brokers" for Leaders.

Of particular note in the IT example scenario, change is the biggest problem in IT, because it challenges standards, forecasts, and budgets -- all the things that make it possible for managers to minimize complexity and risk. For that reason, Change Management must be something that Leaders are willing to be champions for, otherwise they should not expect managers to do well.

Posted by Malcolm Ryder at 7:25 AM | Comments (0) | TrackBack

May 31, 2006

Debating IT's Value

The April 14 2006 web version of CIO Magazine brings this refreshing editorial "Credit Where Credit Is Due" to the ongoing jousting about how to measure the business impact of IT. In the editorial, MIT's Erik Brynjolfsson advises that, based on recent research conclusions, we need a new approach to talking about IT and business success.

What is "success"? From the perspective of the goals of the measurer, it is performance versus goals. Not coincidentally, when the business and its stakeholders think of "value" they typically think of performance versus goals. It makes perfect sense, then, that each business would want to recognize its particular success factors -- the aspects of its performance that drives it towards its goals. Naturally these goals may or may not coincide with those of other companies at the same time of reckoning. After all, any given time, two companies might not agree on where they need to try to be, but even if that coincides they might not agree on how to get there.

Good debaters know that a lot rides on how a question is phrased, and the right phrasing about IT's value is "what *kind of* value does IT offer to supporting the success factors of business performance?" This makes it more obvious that getting the success factors right is the first step in measuring IT value. In other words, the reason a tool is valuable is because the work that it's doing is valuable work.

This seems blindingly obvious; and more to the point, it is in no sense a new idea. As a concept, it doesn't need to change at all -- rather, when mulling over IT and trying to explain why we ought to have something, we need to abandon the distracting obsession of using asset metrics instead of using performance logic.

Posted by Malcolm Ryder at 6:58 AM | Comments (0) | TrackBack

May 20, 2006

The Performance of Operations Management

Organizations struggling to get a grip on operational performance should remain motivated by the goal of higher performance. But it's not the management of performance that they need to solve; it's the performance of management.

As an activity, management's value lies in its ability to make a significant difference towards achieving the goals of operations. Operations construct support for organizational intents.

But in the bigger picture, there are also various other ways of pursuing the organization's goals. As a form of organizational conduct, when are "operations" needed, anyway?

Operations are distinguished from other forms of construction by their mode and their product. The natural comparison to make against operations is "projects". For example, the mode of a Project is to sequentially develop new assets to conform them to requirements (e.g. an application or a building).

We can also consider "processes". The construction mode of a Process is to sequentially transform existing assets in a way that outputs resources which have been requested (e.g., power from chemicals, or workflow from IT).

But the mode of an Operation is to direct multiple simultaneous functions to cultivate a defined synergy. (Think of it as synchronized energy.) Unlike a project or process, an operation intends to develop important impacts and outcomes by coordinating already developed, ongoing concurrent forces that are independent functions but that, if directed to leverage each other, will generate a collective synergy. Again, the defined synergy is the goal of using an operation.

Appropriately, being an operator -- whether it be driving a vehicle, conducting an orchestra, waging a battle, or whatever -- usually involves multitasking. That is generally familiar territory.

But more to our point, managing an operation is about providing for the means and opportunities to create synergistic coordination.

I.

Where "means" are concerned, we first look at the characteristic key dimensions of management. In the responsibility of management, the idea is that all of the dimensions are to be applied to each one of the the independent forces gathered within an operation, to direct and sustain its coordination with the other forces:

1. Monitoring
2. Analysis
3. Decisions
4. Communications
5. Controls

Normally, the primary goal of management is to be effective , through integrating these five dimensions as a "system" of capabilities.

Organizations like to approach this integration as a "process", in which the group of capabilities run in a closed-loop cycle from capability #1 through #5 and back to #1 again. That process mentality makes things easier to understand, but it may be a mistake. Instead, all five dimensions must continuously be exercised. Why? Because in real life, the opportunities presented to the set of capabilities may be random -- unpredictably multiple, concurrent, and inconsistent. They are never guaranteed the ideal opportunity to execute in the order we might want -- which tells us that at any given time, the output of one capability may not be ready as input for the next.

Consequently, it's hard to know when all capabilities will be productively available to each other. Analogous to a radio signal trying to make it through interference, the moment of successful end-to-end alignment across capabilities can quickly come and go, with a stronger overall evidence at one moment than at another.

Process uncertainty can't be the basis of solving performance uncertainty. Therefore, the essential management effort is not to activate a linear process, but instead to continuously exercise all five dimensions simultaneously, just-in-case -- with persistent vigilance for their moment(s) of alignment.

II.

Along with that persistence, the operations scenario is that all management dimensions are applied to each function of interest in the operation.

In tackling any one function to associate it with another one, each management dimension likely features some capability level that is anchored by some characteristic or preferred method. In each dimension, method is utilized as a type of capability assurance -- yet still not all dimensions contain "comparable" levels of capability at a given time.

Such comparability may be desirable, particularly where it offers more breadth of opportunity (versatility); usually, though, the more important issue is to establish balanced capabilities. Here, balance refers to every capability getting at least enough of what it needs from its interaction or dependency on the others -- to support the corraling of a function towards the targeted synergy.

But just as with the means, variability in coordination opportunities is more the rule than the exception.

Overall, each moment of management in operations features a variety of levels of capability, with each capability facing a different level of opportunity to produce. In the usual scenario, any capability, at whatever level when it faces its target environment, is looking for the complementary input or material that it wants to use and affect, without knowing how much it will find useful. Also, the profile of that moment, as illustrated by the example below, likely differs from a later moment's due to issues such as (but not exclusively) those seen at far right -- and that difference increases the challenge that management faces.

(click here to enlarge)

Those observations point out that there are constraints on both the means and opportunity for coordination -- affecting the ability to associate any one function with another. One kind of response that a manager may have to this challenge is to hunt for a "lowest common denominator environment" or scope that can consistently be addressed adequately by all five dimensions of capability. This approach tends to be one that defines a boundary of a recognized "system" -- but the flaw here is that such systems may be arbitrarily "created" based on whatever scope turns out to be manageable at the time.

The risk is that the resulting system might in effect allow some kind of work to be done well, while missing the mark of what work really needs to be done to drive progress towards satisfaction of the organization's actual need. (Classic examples of this problem are often found in arenas other than operations, including good automation of bad processes, completion of projects that will deliver the well-wrought thing at the wrong time, or even employees who will do things only the way "things have always been done around here"...i.e., the way that they have themselves already mastered.) Overreliance on such arbitrary systems is a serious defect in the organization.

It follows, therefore, that improving systems by raising capability levels, to cover greater scope or more important opportunity, is a worthwhile idea not just for versatility's sake. There is no absolute "best" level of capabilities; but capability should be raised to a point of "good enough" and "sustainable" for the operation's purpose. As we would surmise from the illustration, it makes sense to remedy things like mediocre analysis facing oceans of data, but only enough to give the followup decision-making relevant input that it should in turn utilize more promptly.

Yet, responding to the constraints can be done at a more fundamental level. To smooth out the variability of both means and opportunities, and thereby raise the overall prospects of being immediately effective most of the time, management needs to be a practice that pervades all levels of an organization -- not as a specialized role but as a learned behavior. Thi is what really fosters operations.

It doesn't mean that everyone should have the same tasks and duties -- but instead, that everyone should know what it means to conduct their activities from a "managed" perspective and in a "managed" context. This is not, in fact, about making better systems, but it is about making the success of operations more systemic, with success being good coordination of functions towards the targeted synergy. An example of this is a customer service desk (function) that easily cooperates with accounting (another function) to raise customer satisfaction (operation) during a testy product support call, by quickly determining that a free replacement is affordable. Coordinate functions and save the patient...

III.

In the abstract, we know what synergy refers to: a whole greater than the sum of its parts. But concretely, the "defined synergy" that management achieves with an operation is competency.

Another easy way to observe this overall effect is to consider the common example that getting a better coach can cause the "same" old team to win more than it used to. What happens here?
- Getting a "better coach" is a move that improves (sometimes suddenly!) the performance of management.
- The higher-performance management brings about stronger coordination of the team's functions, from its supporting services and facilities on through to the interaction of the roles of its players.
- The outcome is better execution on demand, with a higher frequency of significant payoff.

In that example, improved management is handily packaged in the person of the experienced coach; but the point is that the dimensions of management are better exercised, which makes the difference.

However, within the global alignment that the management cultivated, success really occurs and persists because each participant generally takes on the perspective of the need for and effect of alignment -- which orients their own individual interest and capability in monitoring, analyzing, deciding, etc. In effect, understanding and supporting the meaning of what they do allows better leveraging of their activities across roles and functions, whether requested or offered.

In light of all the above, some notable alternative strategies for production performance, such as collaboration and self-organizing systems, clearly reflect the emerging recognition of what an "operation" can accomplish in circumstances where other techniques do not or cannot successfully apply. It makes sense to examine them as two instances or flavors of operation -- ones that actually are not even particularly exotic examples, and that share the same interesting key characteristic: a desirable level of competency that arrives outside of the other more usual approaches. We should expect that their success, when pursued deliberately, can be accounted for fairly well in terms of the performance of their management -- as already outlined in this discussion. That is, if the desire is to increase performance, and approaches like collaboraton or other flavors of operation are considered, then it is important to recognize that the performance of management itself is still likely why those approaches can work.

Posted by Malcolm Ryder at 7:04 AM | Comments (0) | TrackBack

March 22, 2006

A New Way To Think About Requirements

All progress does not result from meeting requirements. Sometimes, luck prevails, and the conditions in which we were laboring simply change to our advantage without being influenced by us. But all requirements are considered meaningful because they indicate a path to progress. Although competing definitions of progress may exist, no one debates the purpose and virtue of setting requirements.

Defining requirements is difficult. The empirical contrast of results from carefully defined requirements versus ill-defined ones has demonstrated that, and also shown that the cost of failing existing expectations easily wipes out the apparent value of isolated progress. This setback happens when it is unclear where expectations are coming from, and/or when the activity develops new circumstances without certainty of being aligned with the expectations of record.

The frustration of unstated expectations or of ones that have changed or appeared without warning may be a legitimate feeling -- but that in no way exempts the failure from the oversight or purpose of management.

Although change management is successful as a remedy and is ready for use from the start, it comes late in the proceedings.

At the start, the more important and urgent instrument is a model that allows comprehensive discovery of expectations, in a way that allows them to be processed into requirements. Shown below are the four main categories of expectations, ordered to help reveal the multiple perspectives that result in requirements being adequately defined. The categories of expectations -- responsibility, organization, resources, and objectives -- are obviously reflected in most systems of accountability.

Yet it is typical that even knowing the accounting systems, confusion or obscurity develops between what gets done and what is expected.

This problem is most often referred to as a "gap" of some kind -- for example a gap between strategy and execution. But that reference is probably erroneous in two ways.

First, it is production, not execution, that normally gets measured against strategy and coughs up a "gap" between the intended and the actual. (Execution is not about the results. Execution is predominantly about the decisions that generate actions.)

Second, as represented in the model here, the key problem of developing progress is worked out through systematically and iteratively deciding potential values, not compliance, to be leveraged from execution's direction. Implementation proceeds moment by moment through reality, constantly asking the question "what difference will this next item make?" and adjusting its navigation accordingly. In answering, the point of view on that progression sequentially escalates from strategy to achievement, to performance and then to outcomes. The expectations at any one of those steps can trigger a reworking of the previous step. And the implementation does not "finish" but rather continues cycling through the four steps, until the risks outweigh the benefits.

That suggests the importance associated with translating facts about events into facts about states -- which not surprisingly is a huge business, built on faith in causality and an appetite for analysis.

On the other hand, translating expectations into progress is what is really mandated and is always being attempted. This translation demands concurrently managing construction, integration and target deltas (change) -- the main elements of production activity.

The model of progress shown in this discussion assumes a sensibility most like "implementation" (i.e., synthesis rather than analysis). The model's synopsis of "implementation" is that expectations become intentions, which become behaviors, which become events:
- execution formalizes expectations as "intentions"; namely, missions, plans, functions, and operations
- those intentions are used as instruments of execution, to determine the institutional "behaviors and effects" recognized as strategy, achievement, performance and outcomes.
- those behaviors cooperatively drive events, and are interrelated and assessed by general perspectives representing factors of change, such as What, Why , How and Which. These factors may be expressed both as preferences (future) and as facts (current or past).

As a result, "gaps" may appear between the "intended" and the "actual" for any of the effects -- but the progression of management attention from strategy to achievement, to performance and outcomes does not change in order, and outcomes regenerate strategy, closing the loop of influence.

Posted by Malcolm Ryder at 8:27 PM | Comments (0) | TrackBack

March 1, 2006

BI versus Parkinson's Law

Technologies that can effectively extract management-grade data from the flow of changing operations states have now surfaced in all three main layers of the business structure: resources, functions and transactions.

All parts of the business can now be smarter about the business.

But the danger in focusing on that as an expansion of "the "BI category" is that such a viewpoint does not add quality or maturity to the management disciplines. Instead, it will just increase the complexity and difficulty that a business has in dealing with so-called "BI" solution providers in the marketplace, because their overlapping and competing notions of "intelligence" as a practice will be even more unbounded. Without practice-level discipline, the more BI is said to encompass the less it will mean.

In contrast, consider this: the idea that we can "drive the business" has gone from being just "instrumental" to actually *instrumented*. We can now have real-time mapping of the resources to the functions to the transactions and their impact.

Now that we've crossed that bridge, "navigation" becomes a most powerful model for understanding the probable requirements of an information infrastructure in the business, giving BI a context.

Before thinking about BI, for example, a business needs to understand the difference between its engineering, its navigation, and its governance -- and how to mature its planning and execution capability in each practice.

- Business engineering, for example, would attend to the performance management, business model, and production architecture issues.
- Business navigation would attend to the mission, strategy, and continuity issues.
- Business governance would attend to the alignment of policy, opportunity and change management within execution.

Each of the three major groups has its own needs for management information. Since all of them are likely already pursued by most mid-to-large sized organizations, the question is one of what key information has usually been unavailable to those management efforts on time, making it harder for them to predictably do business well.

Except in some vestigial marketing sense, the solutions to those deficits are not better understood by calling them "BI" solutions.

Rather, we might evangelize the idea that "management" should not be an elite responsibility in the business but instead a competency that is increasingly and pervasively enabled by information processing focused on the business issues. Taking the business management instrumentation everywhere -- such as through BSM and enterprise architecture in IT, or through transparency in Finance and in Process Management -- will make sense to organizations for reasons that they already understand.

Posted by Malcolm Ryder at 10:49 AM | Comments (0) | TrackBack

February 10, 2006

Pointing The First Finger, Having the Last Word

One of the more interesting opportunities to demystify organizational ineffectiveness rests on turning over a common assumption that Authority should delegate Responsibility.

In a revised view that brings operational discontinuities to the surface before they do their damage, organizations should consider having Responsibility delegate Authority.

Responsibility requires explicitly committing to performance levels that are critical to the welfare of an organization's clients and stakeholders. When the stakeholder view of performance is itself explicit to all members of the organization, authority can be a flexible tool dynamically distributed to where and when it is needed most.

Members of the organization should be encouraged to identify what they can do to contribute to the organization's successfully meeting the responsibility; thereafter, the operational issue is understanding when their actual opportunities to contribute should be solicited and/or approved -- in other words, authorized.

Distributing authority is the main purpose of Approvals. If approvals are designed correctly, they are based on a set of priorities based on rules and requirements that represent the stakeholders' best interest and guide the interpretation of real-time events versus. Formalizing the understanding of these interests is where Policy comes in.

Obviously this also brings up the issue of what stakeholder is being represented -- consequently it is easy to appreciate that there may be multiple policies representing multiple stakeholders. This is presumably good for the stakeholders, but it is also problematic. For example, customer-oriented policies may overlap supplier-oriented policies in some repects but conflict with them in others. Since there is a greater variety of customers than suppliers, the chance of this happening is not insignificant. Emphasizing this point: anyone who has been caught in an "unsolvable" customer support problem, where multiple support parties cannot agree on providing a successful response, already knows that the likelihood of conflict is very real. This means that policy reconciliation is important to be able to pursue, and it needs to be timely in order to be considered effective.

By example on a grander scale, the breakdown of cooperative recovery in disaster situations such as the Katrina Aftermath exemplifies the weakness inherent in the system of authority delegating responsibility. This article from the New Orleans Times Picayune spells out the typical complications. In the story, the presumed top-level responsibility is to manage levees to protect the city from future flooding. But the attempts to align parties to the responsibility are conflicting with the current distribution of authorities (which have not issued from the responsibility). This current setup finds the practice of "standing authorities" delegating responsibility, with the result that the levee protection appears to remain uncoordinated. Excerpt:
[Republican Representative M.J. Mert] Smiley, whose district includes Livingston Parish, told Boasso that local-level leaders had opposed being part of the [proposed consolidated] authority “because we will never benefit in any form from your bill.”

In essense, that party refuses to accept the high-level responsibility, leaving it dis-organized and, even worse, ripe for competitive blaming should future flooding occur.

But let's keep that in context. Policy-based granting of authority also presents the issue of who should be interpreting approval requests, and who should account for compliance to approval standards. Since the policies and rules already set the key terms for granting the approval, approvals per se do not stem from the interpreters. However, in actual practice, authority based on the approval mechanism is granted by virtue of the interpreters. Who are these interpreters? Administrators and executives.

Thus we can see that to avoid dis-organization, what an organization needs administrators and executives to do is to dedicate themselves primarily to promoting acceptance of the high-level responsibility that represents the stakeholder to the organization. From this predisposition, it is far more likely that the resources actually resident in the organization can be tapped at far more depth and variety than is usually done. Organizations that enjoy the idea of being "agile" and "adaptable" must understand whether their basic premise for granting authority internally is actually productive or counter-productive.

In achieving that understanding, another key consideration will need to be the ways that processes currently distribute authority in competition with policy interpretation. As a proxy for approvals, processes can eventually hide the assumptions behind the decisions that the process enforces. This is actually being revealed somewhat dramatically through a new generation of business process management tools (BPM) that excavate rules from the processes and leave the rules bared to direct re-examination. Because of that, organizational behavior can be freshly evluated for how it connects the assumptions behind the rules to the demands behind currently respected requirements. Then we can adjust the assumptions, the connections, or both. Thus we can see how BPM works as an aspect of managing performance. The big opportunity is to improve alignment of the processes to the same responsibility that spawns policy and its approvals. That way, processes are more likely to productively support policy -- a "no-brainer" improvement objective in the face of challenges such as regulations, competitive differentiation, environmental risk, and economic pressure.

Posted by Malcolm Ryder at 8:22 AM | Comments (0)

January 25, 2006

Selling the Change

You can lead a horse to water, but you can't make him drink.

The consulting industry that has built up around this challenge offers years of multidisciplinary research in its solution recommendations.

But in the center of the vast collective scope of the recommendation, a repeatedly confirmed synopsis appears, looking more or less like this:

- People have an innate sense of risk and reward, and they are willing to change their personal balance of them for a good reason.

- Giving people a reason to change requires more than just promising them additional tangible compensation. People want opportunity. The best opportunity you can give someone is support for them to be who they want to be.

- Part of that comes from clarity about what will be expected of them in a successful change. People need to see requirements that they feel are relevant and achievable. They need to see the difference between what they have already been responsible for and what they will next be responsible for.

- But the strategy for fostering change is to excite people about becoming a certain way or contributing themselves to something they believe in.

The excitement comes from communication. But the communication effort is not just information delivery.

Change envisions a future state and ascribes some "reality" to it by presuming that, on certain already manageable terms, individuals will make it happen. Communications to promote change must therefore answer some basic questions in a way that fosters the alignment of personal and organizational agendas.

That alignment revolves around two major concerns:
- What accountability is associated with the particular change?
- Do we believe the change is intrinsically do-able and worthwhile?

Those considerations are not in rank order here. Because they are each so basic, both concerns pertain to any given change. (But it's true that organizations more often change the way they tackle an unchanged objective, and less often change the objective itself. For that reason are the two concerns mentioned in this order here.)

As illustrated in the following picture, the connection of business vision to personal opportunity results from a "discussion" of the two concerns, in each of which the connection is logically fortified by the way key questions are answered. Negotiation to the answers may be more the rule than the exception.

Click here for enlarged image.

The above provides an overview of the key factors. Covering all of them is important, But getting right to the heart of the matter: for people to power the change, communications (as outlined above) must establish trust, visibility, roles and boundaries -- so that people feel empowered to take ownership of their decision to commit.

Violating those terms is a sure-fire way to undermine the motivation to change. As seen below, normal instruments of daily management need to be adequately focused on satisfying those terms.

In some ways these views are incomplete and have big spaces in them -- but if this much of the scenario isn't true as shown, then there's no reason to expect to be able to get people to change...

Posted by Malcolm Ryder at 6:45 AM | Comments (0) | TrackBack

January 22, 2006

What's So Smart About BI?

BI for most companies means implementing analyses. Analyses can be inward-facing, outward-facing, diagnostic or predictive.

Those four characteristics blend like this:
- Inward and diagnostic: improve production efficiency
- Outward and diagnostic: improve relationships
- Inward and predictive: reorganize processes
- Outward and predictive: reengineer position

The best reason to use BI is to answer "Why?" for each of those four things. It also makes a difference which one gets answered first, which second, and so on, because all businesses do not have the same current constraint or advantage.

If the various answers to "Why?" do not align in the near future, the organization is FAR less likely to get beyond quality control and into actual growth.

Naturally, if sustained competitiveness is critically dependent on growth, then not getting growth from BI means not getting ROI from BI.

Posted by Malcolm Ryder at 7:45 PM | Comments (0)

January 14, 2006

"Effectiveness" -- the essence of Operational Performance

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

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

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

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

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

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

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

I.

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

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

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

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

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

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

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

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

II.

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

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

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

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

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

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

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

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

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

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

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

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

III.

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

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

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

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

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

IV.

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

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

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

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

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

V.

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

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

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

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

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

VI.

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

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

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

Posted by Malcolm Ryder at 7:04 AM | Comments (0)

January 5, 2006

Infrastructure, Information and Innovation - Who's on First?

"Business improvement" is an easy ambition to have but often hard to act on effectively, because it is so vague. However, the beginning steps of defining it are well known -- they always include deciding what are the needs and requirements of the business.

Yet too often that yields to confusion bred by habitual thinking, political and religious energy, risk-aversion, and inexperience. Each of those different influences is a considerable threat to "improvement" if it distorts a constructive path of change. However, all of them can be dealt with through the same review of basics that help identify why anything should change.

The outcome of the review is clarity on what kind of change is most likely to constitute meaningful improvement.

I.

As a rule of thumb, needs are recognizable as what effect must be obtained from activity; requirements are recognizable as how the effects must be achieved.

This is how we can understand that even when "everything was done correctly", the result may be unusable or unacceptable. In such cases, the mistake is often that needs were not adequately translated into requirements because the nature (persistence, priority or timing) of the need was not strongly enough determined. This uncertainty allows the "wrong" requirements to be derived, because the requirements do not actually solve the right problem even though they drive downstream impacts inviting not only failure but the "law of unintended consequences".

Paralleling the importance of that distinction, the key difference between capability and competency is that capability addresses requirements while competency addresses needs.

Because of this difference, when "business needs" change it is the type and strength of competency that must first be determined.

On the other hand, business requirements may be changing even when needs are not, and this should be addressed with capabilty.

The message to the business improvement crowd is that the organization's leaders must confirm the right problem to solve before it decides "the right way" to solve anything.

Meanwhile, for managers the most interesting aspect of the relationship between needs and requirements is that an inability to satisfy requirements that support a need can actually force the need to change. That is, if a party's capabilities leave its problem effectively unsolvable, the party must then either reposition itself to make the problem irrelevant, or it must suffer consequences that will alter its circumstance in ways that most likely reset its agenda. Either way, the needs will have changed.

In effect, business actually predicates its success on "picking the right needs"... That is, its needs come from a position that the business takes in order to have certain advantages, and it typically organizes itself around the needs of the position. Thus, unless the position is intentionally changed, the business is actually reluctant to have needs change! This focus on a status quo encourages a mindset of, primarily, attention to planned capability over competency. But capability improvement will prove to be no more important than competency improvement.

II.

Business looks to "IT" to provide capability that is appropriate for needs. The business value of managing IT is in that it manages a "resource", which in this case involves managing both the quality and delivery of information and of technology. But the key responsibility of that management is not to select the "correct" information; rather it is to establish and operate technology that assures quality and delivery of information.

A strict understanding of that scope of responsibility makes it easy for us to identify that "information technology" is different from, but accompanied by, "information process".

Information process, for example, determines what information should exist, where it should exist, when, and why -- in utilization. Information technology is then employed to enact and defend those decisions. A typewriter doesn't decide what to put on the paper, but it enables putting the right thing on the page.

If we extend this idea by using customary business mantras, we ultimately also distinctly consider "information people". Information people determine whether information is valuable or not. They must determine which information (from that which is available) should be accepted, and what purpose demands the acceptance.

Information people operate with a chain of dependencies -- they need information process to make suitable information available, and process needs technology to provide practical information-supply. Thus each link in the chain offers an element of opportunity to the business activity relying on information. But likewise, since each link has its respective responsibility, a lack of capability can strike at any of the three points, disrupting their interdependencies.

Supporting the integrity of the chain requires a practice that addresses the risk factors especially pertinent to each part of the chain. These factors can differ radically from one link to another, and ultimately the approach to maintaining the chain's integrity is not just one of spot maintenance of the links but instead systematic and ecological balancing of overall stress.

Seen as the "requirements" arena, this approach has to be translated into a management practice. The practice must include -- and organize dynamic access to -- knowledge that spans the experience, expertise and expectations of the three points in the chain.

III.

That holistic perspective strongly affects how we understand the three most urgent management concerns of the business "performance" -- infrastructure, information and innovation.

In general, "performance" measures how much achievement occurred towards a target amount of progress. Ordinarily, management emphasizes execution of planned procedures when trying to improve achievement. But to really grasp the situation, we need to look at prerequisites for progress, understanding that execution simply exercizes the potential these prerequisites provide.

Infrastructure provides the environment in which things can get done, in the form of services and facilities that support processes. This makes information technology and infrastructure parallel concerns, but the components of an adequate infrastructure are clearly broader than just technology. Obviously, you cannot have a service or a facility without also incorporating decisions and procedures. The challenge is to coordinate the various success factors of a "service" or "facility" to assure their presence for users in the environment. (Thus, infrastructure all by itself already includes technology, process and people dimensions to manage.)

Information provides the description of states and events that distinguish what needs to be done. The decision about what needs to be done will matter not just because of its eventual outcome, but more because at any given time more than one thing might be do-able and the challenge is to make the optimal choice.

Innovation provides the opportunity to bring new solutions to problems and/or to solve new problems. This represents a party's ability to act beyond its previous limits, but on its own it does not automatically mean that there is a need to do so. Without context, innovation has little intrinsic business value, so first the challenge is to identify the context that represents a "necessary change".

Given the co-existence of these three problems -- assured presence, optimal choice, and necessary change -- a party must consider its ability to work on all three, which calls for both capacity and prioritization.

Capacity will involve both (a.) resources and (b.) the practices that direct and constrain their lifecycle. Practices will in effect generate the technology, information and people that are actually employed at any time for the purpose of business improvement (i.e., solving the three problems). Pragmatically, that overall employment effectively predetermines the capacity.

Priority will involve both (a.) importance and (b.) urgency. Urgency will be the bulk of the influence by which the business's activity shapes the environment in which it finds itself. Urgency is not about how fast and hard something is done. Rather, it is about how soon the party takes significant action on a need. Pragmatically, urgency doesn't make an action important; instead, the significance gives the urgency priority.

Resources, practices, importance and urgency are ingredients that must be blended into a solution for each of the three problems.

But to direct that blending, the right first move is to isolate what the most fundamental inhibitor of business improvement is at the time, and rank the problems accordingly.

IV.

For example, each prerequisite has a characteristic underying issue that dominates its intensity, persistence, and overall difficulty. That issue is a candidate inhibitor.

According to the basic purpose we've identified for each prerequisite:
- Infrastructure must work within the certainty of user demand
- Information must work within the complexity of the operating circumstances
- Innovation must work within the equilibrium of the environmental dynamics

Levels of certainty, complexity and equilibrium -- which can dramatically and suddenly vary -- must be consciously approached with an awareness of what kind of opportunities and risks they present to the business agenda. In that awareness, rating them individually and against each other as problems establishes a sense of what needs the most attention. Thereafter, the issue is to look at whether the existing capability to attend to a problem is already sufficient or needs to be modified.

This does not mean that each of the three prerequisites has a single unique issue to address. The reality is that each one (infrastructure, information and innovation) has its own flavors and ingredients of uncertainty, overcomplexity and disequilibrium that it may need to resolve.

But the business overview of the problems must try to reveal where the biggest bang for the buck is in directing its capacity and priority, and this takes the matter back to understanding the interdependencies that create the chain of throughput needed for the business to succeed with its agenda.

As businesses become more knowledge-driven, the view and prediction here is more systemic: if infrastructure cannot adequately address the level of demand, then information cannot adequately address the level of complexity, and innovation cannot adequately address the level of equilibrium.

Success looks different at each of the three different points, while success at all three points maximizes overall "throughput". This is the picture of business capability -- the ability to generate necessary effects in the required way. But what about competency?

Business competency exhibits the ability to produce what is necessary on demand, but it must largely concern itself first with being able to determine and understand what is necessary.

Necessity cannot be determined without a model that defines (a.) the intended effect of the business and (b.) how the structure of the business logically addresses the intended effect. If the business has decided what it intends to be, then it has a reference point for determining what conditions are compatible or incompatible with that intent.

This awareness may never even reach "perfect knowledge", but it doesn't need to be perfect -- rather only "good enough", for health and growth.

V.

Increasingly, business looks to "IT" to improve business competency. This is important in two major ways.

First, it represents a set of expectations of IT-based capability that may need to be validated before they can be considered reasonable.

Second, it becomes mandatory to distinguish but then logically relate "IT competency" and "business competency".

The idea that IT might "improve competency" is probably an unhelpful contraction of what should really be stated: "IT support of improvement in business competency." This way we initially (and properly) focus on how business competency is recognized, and then on how those terms translate into (business) requirements that IT can help to meet. To complete the thought process carefully, we finally describe how those business requirements compare to the model of IT activity in the business, and concentrate on aligning the IT model with the business requirements, so that IT's position has the "right needs" defined for decomposition into IT requirements.

Some may say, "but what about e-business?"

E-business, in the form of end-consumers using IT to directly interact with the business, puts more business pressure on the performance management of the IT infrastructure, but it does not fundamentally change the relationship of IT competency to business competency.

Instead, what is brought into high relief by ongoing e-business is the business's ability to position the IT infrastructure in a more valuable sustained position for consumers (business capability), along with the IT organization's ability to comprehensively support information process (IT capability).

However, the transformation from pre-e-business to post-e-business was a crucial demonstration of business competency in the marketplace, and the accompanying management reengineering of IT practice to incorporate the e-business needs is a parallel demonstration of IT competency.

How do we recognize the position of infrastructure, information and innovation in the realm of business competency?

As a baseline:
- Infrastructure calls on Architecture;
- Information calls on Predictive Analytics;
- Innovation calls on Prototyping.

These three disiplines share the common objective of designing operations for optimizing the two-way relationship of change to demand -- the two factors most critical to business survival.

Architecture, predictive analytics and prototyping all recognize change and demand as independent factors. Then they all attempt to identify the ways that change and demand affect each other -- and thereafter they provide direction (requirements) to the development and use of capability -- for meeting needs dictated by the influence (i.e., opportunities and risks) of the change-demand relationship.

Posted by Malcolm Ryder at 7:47 AM | Comments (0) | TrackBack

December 5, 2005

Stats don't lie; but can they forget?

Our colleague Steven M. Kemp, at the department of psychology at UNC, reports:

I thought of a quick summary statement about the slogan, "You can't manage what you can't measure."

"You can't manage what you can't measure" is a terrific slogan for exhorting business folk to consider measuring what they are not currently measuring, or not even considering measuring.

Taken as a claim, it may be harmful if it encourages folks not to manage what they are not measuring. Measuring constrains the degree to which we can manage, but managing to the degree that we can is an imperative."

Co-authored with his brother Sid Kemp, Steve's book, Business Statistics Demystified at http://tinyurl.com/2lxyr, explores the measurement issue deeply, with an eye towards getting it right instead of just getting it done.

Posted by Malcolm Ryder at 5:49 PM | Comments (0) | TrackBack

Managing versus Measuring

We always say that we can't manage what we can't measure.

But what are you doing? Are you just measuring the management? Managing the measurement? Or, actually managing the item on which you're using the measurement and management processes?

I.

Management is essentially about determining whether the state of things needs adjusting and then intervening with adjustment actions that are appropriate. On their own, both environmental conditions and activities can be hugely indifferent to the particular desires of an organization, and to be routinely leveraged they must be perceived in consistent, non-random ways. Therefore, one can't manage what can't be described. Measurement is just one aspect of the fundamental management need for description, and it must be complemented by other forms. (See the illustration here and again near the end of this discussion.)

To understand this, it's important to immediately broaden our sensitivity about measurement -- away from "metrics", up to to the general functional problem of "description", and back down much closer to "definition".

Defining current states is a mandatory part of the management equation, but that doesn't amount to management. Instead, if the adjustments are the whole point of having management, then actually it's more critical that we define the adjustments. It's what kind of an adjustment, and how much of an adjustment, that drives the only difference we expect from what we'll later on still call "management"...

And just as all rectangles are not squares, not all definitions are measurements. Definitions are descriptions, and "measurements" are just a form of expression that descriptions can take.

But because measurements are so prolific, complicated and frequently debatable, we're concerned enough to ask the question, "can management be done without that form of description?"

II.

Let's say that you have a task to put a stone in a box, but the stone is initially too big -- which we determine simply from trial. How are you going to "manage to" get the stone into the box? Do you need measurement to get the stone certifiably "in the box"?

You could chip away at the stone to make it smaller, and keep trying after chipping it to put it in the box. Your action makes the stone different. Eventually you'll get the stone into the box.
- On the other hand, if you don't care how long it takes, how small the stone winds up, and other such things, you don't need measurement -- you just need the stone to finally fit into the box. But each attempt to fit the stone in the box is actually a measurement.
- And on the other hand, if it matters how long it takes, how big the stone finally is, etc., then of course you need even more measurement.

We tend to think of the latter case as being managed and the former not; but strictly speaking they are both managed. That is, in both cases, proactive adjustments are determined and made deliberately towards the target state until the target state is true. We see that measurement figures in differently but both times. Most importantly, the target state is true only when we agree that it is true, and we use the measurement to gauge the distance from the agreement.

So far, to act towards the target we still haven't necessarily invoked measurement, but to know that we're reaching the target we must have it.

Practically speaking, the key element is actually the agreement beforehand, which means that the terms of agreement are the key to describing the target state. These terms may be non-metrical, while still being highly differentiating. For example, objectives are often stated to represent the terms of agreement by which most comparisons will be made. Compatibility, not compliance, is usually the subject of this perspective on things.

But let's get back to measurement. Measurement provides a kind of additional certainty to definitions, by sharpening the definition's ability to express distinction -- typically in terms of "amounts". For example, even a qualitative binary distinction - true vs. false - can be considered almost purely measurement if the real question posed is "how much 'false' is there?" and the answer is "None."

Yet in that example, it's obvious that we must still know beforehand which conditions actually mean "True". Can we identify (define) the conditions without measurement?

Sure, if we can distinguish them in other ways.

First we should look at why we can do that, and then at why we should do that.

III.

In the example above, it can be argued that management didn't require measurement to make "stone in the box" become true. But measurement is required to confirm that it actually is finally true. So the point is that the success of the management is what we need measurement to expose.

Let's make that thought more concrete with another example. If a test case is looking for exactly a 3-foot length, any length tested will need to have been measured before we can say that it complies. Compliance is determined purely by comparison to some standard (in this case, something that we already know is 3 feet long). What makes the comparison work is that the standard has already been selected. Actually doing the comparison -- that is, simply applying the standard to the test item -- is an action that might be "managed" or accidental, but we can confirm the outcome only through measurement, and the confirmation is what tells us whether or not we need to try againto hit our target.

This is all adding up in a certain way:
- definition is aimed at identifying the distinction of the target conditions
- the difference is described and recognizable by terms of agreement
- compliance to those terms is largely detectible or provable through testing
- the testing would rely on a standard to help establish the degree of compliance to the terms
- more than one condition might be part of the standard

But there is another way to work in terms of a standard: procedure.

Procedure prescribes steps that are expected to produce compliance. The assumption built into a procedure is that during execution each step of the procedure should become true. Largely without measurement, we can simply follow the procedure. In this case, most measurement used is dedicated to determining how much execution complies with the procedure (supervision), and to confirming the effects of making adjustments (intervention) -- but the choice to use the procedure is far more significant: it means that given the responsibility to direct the course of events, we have agreed to the procedure's logic. Exercizing the logic, with whatever level of competence, is the most differentiating characteristic of what we are calling "management"...

IV.

So, as it turns out, the urgency about measurements is not really about manageability but instead is about predicting the effectiveness of the management, and about increasing the accountability of the management. In short, they are about making management scientific.

However, management need not be scientific in order to be management. What management really depends on even more than measurement is logic. Measurement should be a means of testing and tracking the logic, but logic must be derived even in the absence of desired measurements. This takes place in the form of assumptions and objectives. Management logic can form a closed loop or system when its assumptions and objectives are followed with ratings. (Current ratings influence future assumptions.)

In completing that loop we also get the broad outline of the framework for management description:
- Assumptions represent the key initial distinctions acknowledged in the management effort; this includes discovery of identities and definitions
- Objectives represent the point of view that finds comparative significance in what is done and monitored; this includes test criteria and terms of agreement
- Ratings represent the actual visibility on the value of conditions, achievable from foresight to hindsight; this includes standards and priorities.

With those anchoring observations, we can see the universe of description that management needs.

This framework intends to position the many modes and artifacts of description in a way that highlights where they make the key difference to management's overview of conditions. Against that, it sorts out and addresses the basic management concerns that drive decisions to intervene:
- preferred states;
- adjustment progress; and,
- the impact of changes.

In the illustration it is easy to see the range of formats for describing conditions, along with the fact that they are not necesarily metrical in nature. However, it is also evident that measurement plays some role in every area of description -- such as, by establishing trending ("track"), marking off milestones ("score"), or detailing cost/time limitations on requirements ("specify")...

V.

Our key management challenge is to conceptually arrive at definitions identifying one thing versus another, so that we can properly identify their relationships and leverage the relationships.

These definitions, when treated *as if* they are 'facts', are the normal basis of managerial logic. Communities of practice may develop and even enforce 'standards' of definition, but this ultimately does not prevent management from being practiced based on other standards or knowledges and in non-scientific yet still logical modes.

As for measurement, it has the task of identifying and comparing differences in an accounting mode. Three other issues ensue:
- to actually do the measuring;
- to measure the things that matter; and,
- to match the right measures with the right management.

Otherwise, measures simply become an unreliable tool being used for "solving the wrong problem."

Posted by Malcolm Ryder at 7:46 AM | Comments (0) | TrackBack

December 3, 2005

Performance Analysis and the Six Types of Performance Management Information

Performance is a measure of the degree to which observed effects are meeting the plan.

In management, planning represents the "agreement" that a manager has proposed between the possible and the probable.

I.

The plan is developed from a theory or model of how progress towards value results from the organization of the operations.

But a more general function of the model is to define all conditions that must be present for value generation, and describe why their combination is coherent for the purpose at hand. That is, the model describes conditions that drive progress, while explaining why those conditions must be supported.

Meanwhile, monitors will determine that a condition is in this state or that state, while the plan describes the target state desired. That is, the measurements supported by monitoring presume that conditions and states are two different things. Observation confirms conditions, while measurement confirms states. (For example, cooking requires heat -- representing a necesary condition; the heat may be at a certain temperature, representing a state.)

This means that managers must not only work on distinguishing conditions that matter from those that don't (as per models), but also the states (of conditions) that matter versus states that don't (as per plans). Only within a certain range of states is a condition significant, and only at the proper state are certain conditions significant.

II.

Management attends to the actual versus the planned organizational status of operations.

By "organizational", we mean the distribution of resources in a structure designed to support fulfillment of demand. This structure is an implementation of the model, in the same way that an actual building is an implementation of the design in a blueprint.

In management, we assume that the necessary conditions are in the required states unless proved otherwise. If things are proved to be otherwise, we revisit the necessity of those conditions, the states of the conditions, or both. Faced with gaps between the actual and the planned, we make repairs or we make modifications -- to restore coherence to the conditions, restore compliance to the target states, or both. But to do that appropriately and tolerably, we have to account for our decisions with information that
- (first) describes and confirms the gap, and
- (second) interprets the gap for its probable meaning versus our purpose.

This all amounts to six uses of information that contribute to a full cycle of analysis about performance. Information is used to:
1 - develop the model
2 - develop the plan
3 - initialize and prioritize action
4 - monitor status
5 - confirm underlying and correlated events
6 - reconcile differences.

With those six uses of information, managers can continually influence the state of conditions that are likely prerequisite to the capture and delivery of value to the organization's targeted stakeholders.

III.

The purpose of organization is to support desired behavior.

In managing performance, the desired behavior has significance because of the effects it produces relevant to the model.

The first priority of behavior is to create the states that conditions need to be valid per the model. Variance from targeted behavior is not just an enforcement issue, but since success sometimes accompanies variance it is also a way of understanding that different but similar plans could work for the organization immediately.

Many different behaviors may achieve the same effect, so if there is any reason to prefer one behavior over another, analysis of the behavioral facts is key to finding the best behavior. Because the main point is just to distinguish the behaviors from each other, these "facts" may be more descriptions than measurements.

In producing these descriptions, most managers are actually focused on "business intelligence" (BI) instead of on performance analysis. This is because the Plan is the central and most public manifestation of management. Business intelligence has the capability to expose facts such as patterns of relationships, that can then be judiciously embraced or avoided for the future. By suggesting the needs or options to make decisions that affect compliance with the plan, BI broadcasts visibility of the accountability of managers.

Meanwhile, as an aftereffect of increasing exposure, BI can have the "feedback" effect of informing and suggesting evolution of the organization's theory of progress, so modifications to performance plans might also follow.

But performance analysis directly concerns itself with the degree of tolerance the organization has for complying with its own model. In that way, performance analysis will explore how flexibly the plan can be executed before the plan is considered "violated" or "broken"... and thus unable to support the ultimate goal for which it was designed to serve.

IV.

Performance managers must recognize that performance analysis must be done with or without BI. In order to understand how that can make sense, managers need to understand that while observation and measurement both generate descriptions, they are not the same thing.

The essential purpose of BI is to gather enough evidence of activity patterns, in operations and transactions, for identifying the most probable patterns associated with "valuable" outcomes. However, BI starts without an idea of why things work, and builds a picture of what is working or not, regardless of the plan.

In comparison, the main purpose of performance analysis is to discover and prioritize the factors having the most significant current impact on the "effects" of the plan's execution. Performance analysis information starts with the existing idea of why things should work, and acquires more information to test how to make it work in light of reality.

Business intelligence clearly has a role in performance analysis, because it can help tremendously with the discovery tasks in performance analysis. However, BI's capability to help is not automatically used that way. As is pointed out by many experts: "it's all good for measuring and reporting information from events, but if you don't have a hypothesis to test, you can be incredibly efficient in measuring events and still learn nothing about how things really work." (Christopher Kenton, columnist for Business Week Online)

Furthermore, representing the hypothesis and how things really work is a task for "knowledge" as opposed to "information". The role of an information system is to feed knowledge, but then management needs a knowledge system to process the information.

In the knowledge system, here are six fundamentals for the performance manager:
1 - Goals
2 - Assumptions
3 - Progress
4 - Priority
5 - Variance
6 - Status

Again, the objective of performance management is to identify and control occasions calling for repair or modification of the coherence of, or the compliance to, conditions prerequisite for appropriately meeting demand. Performance analysis features a method for interpreting information pertinent to that objective.

V.

No less impressive, but different, is BI. In this definition from an e-commerce glossary of the Pennsylvania Department of Environmental Protection, we see the difference and the overlap:

Business Intelligence (BI): An interactive process of analyzing and exploring structured, domain-specific information (often stored in a data warehouse) to discern trends or patterns, thereby deriving insights and drawing conclusions. The BI process includes communicating findings and effecting change. BI domains include customers, products, services or competitors.

That notion of BI "process" is a little hyperbolic; it really is describing the uses of BI that give it importance, rather than the process of BI er se. However, it is definitely appropriate to put BI into the larger perspective of business management. Along that line, we consider that BI can affect the perception and acceptance of the business model:

Business model: a design of the operations of a business which focuses on how revenue will be generated. -- Webster's New Millennium™ Dictionary of English

BI's emphasis on domains is vital to validating the integrity of "business models". It tests assumptions about processes and relationships that underlie expectations of operational output.

But performance analysis' emphasis on behaviors is vital to validating models of business value and operational outcomes. This takes the management consideration to a higher level, for understanding the organization's capability, relevance and fit to its environment instead of just its activity and discipline.

Business value: In management, business value is an informal term that includes all forms of value that determine the health and well-being of the firm in the long-run. Business value expands the concept of value of the firm beyond economic value (also known as economic profit, Economic value added, and Shareholder value) to include other forms of value such as employee value, customer value, supplier value, channel partner value, alliance partner value, managerial value, and societal value. Many of these forms of value are not directly measured in monetary terms. -- Wikipedia

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November 30, 2005

Environment or Process: which helps Innovation more?

Looked at entirely dispassionately, environment is cultural, and process is political. Add to that the key thing that warrants being called "innovation" -- which is simply a quality of newness that is the difference that has significance.

In practical measure, an innovation is something that is unprecedented and has either compelled or attracted acceptance. But the "newness" is always entirely a matter of context. Organizations, therefore, should understand innovation in terms of whether their basic need is for a cultural change (which alters the way value is defined) or a political change (which alters the way value is pursued).

As for being helped more by environment (culture) or by process (politics), the issue is not so much about one versus the other, but instead about whether the alignment of the two -- a prerequisite for successful innovations -- is more likely to be accomplished by emphasizing one or the other.

Acknowledging that, the opportunity to foster innovation can readily differ from one area in an organization to another, and from one time to another in the organization's operations. That's why innovation opportunities must be managed.

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Communications in Performance Management Pt. 2

"Performance" rates the value provided under demand.

With that working definition, it's easy to see why modelling processes is so important: the process model is expected to account for how the organization successfully and predictably handles the stress of the demand and allows "performance" to be engineered.

That is, process modelling interprets performance in an explicit operational language that connects capabilities to requirements.

Process Management attends to those connections by maximizing the availability, economy and efficiency of the connections. To leverage potential connections, the management effort carefully but quickly associates the model of a process with the requirements of a demand. The associations that prove to be the most frequently successful lead to two things: refinements of the models, and standardization of the selections made amongst potential connections. In that way, we decide that the reliance on processes is improved according to the definition of "success". Net: we decide that "process improvement improves performance."

But the number one problem in managing performance is not a matter of correct processes; rather, it is a matter of knowing what is currently really going on. This knowledge is not simply a matter of timely fact-finding but instead of sophisticated interpretation of the state and trajectory of current conditions. Assuming that the right facts are discovered and studied, we rely on the analysis of facts to accomplish this interpretation. Properly done, the analysis must examine facts to determine their significance to the definition of success. So, given our working the definition of "performance", the analysis of facts is potentially critical, but it is irrelevant unless the current definition of success is well established.

In practice, success is generally identified as a "goal", but what practically matters are the characteristics of that goal. Whenever a goal has multiple stakeholders (which is, most of the time), it is necessary to not only "get there" but to get there "in the right way". The understanding of the right way to get there must drive management decisions about what processes are "best" against demand. The right way is defined through "terms" of success.

Meanwhile, the immediate priorities of the different stakeholders can and do change independently of each other, so in a given instance of demand the most proper (balanced) response may be very specific to the moment. Politics notwithstanding, this inherent complexity also means that the management effort itself may not be practical (towards high performance) except through on-the-fly collaboration that allows the true current terms of success to be properly recognized.

Net: modeling the collaboration is more important than modeling the process.

Collaborative management fundamentally acknowledges that different perspectives must be reconciled in a process, not just that the process should mechanize the stability of operations. As seen in the following picture, each stakeholder has a point of view offering at least two perspectives -- perspectives that can raise and evaluate issues, actions and likewise events.

Therefore, proper management calls for an integrated management communications platform that allows all members of the organization to:
- continuously observe and immediately understand the context and implications of operational events; and...
- communicate the issues pertinent to the observations and understanding, and...
- appropriately collaborate on timely follow-up decisions and actions that create or restore critical alignment of activities to the directions of strategic and tactical goals.

Observation becomes meaningful when the items within view have definition. In performance management, the importance of communications is to indicate the impact of events, but this cannot be done unless both events and impacts are specifically and suitably defined. The caveats are that Events are defined within the mode of monitoring, and Impacts are defined within the mode of interpretation. Consequently, the actual implementation of these management activities can be highly specific to time and place -- and for any given implementation, the modes of monitoring and interpretation must be logically related to each other. Thus, "one size does not fit all."

Understanding is accomplished when:
- those above-made definitions of events and impacts allow their associations to be determined and classified, and when...
- those classifications can be used to account for the status and dynamics of circumstances, both present and future.
In implementation, the degree of understanding achieved is usually represented in a level of compliance to rules and plans that are intended to control, by force of design, the status and dynamics of circumstances. These exert their influence as "requirements" for the processes that are ultimately selected to respond to demand.

To establish and maintain credibility as an agent of performance, management must be directly responsive to the implications of current circumstances. As shown in the diagram above, a performance management solution must bring practical visibility to the fact that any of the terms of the operations environment, and any of the values in the management context, may change at any time. Changes will affect both the events and the impacts observed, thus their relationship can change and take on a different meaning.

Ultimately, what the “business” must gain from performance management is the ability to better orchestrate the changes -- in order to direct affairs in a logically calculated way towards the meaning that the business desires.

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November 28, 2005

ITIL, Optimization, and the Performance Management Approach

Business derives value from the utilization of IT in the same way that it derives value from the use of money or people: the business applies the asset to enabling those events that have a designed ability to impact business conditions.

Assets may be applied directly or indirectly to the target event.
- Directly, the asset is deliberately "consumed" by the event itself. This involves using the asset as a material element of the event. The event may employ, transform or exchange the asset, in order to produce another output.
- Indirectly, the asset may be used to deliberately affect circumstances surrounding the target event. By "circumstances", we mean conditions surrounding the moment or location of an event.

Consumption and circumstances often develop independently, and they often coincide without much resistance on the way. But management's intent is to replace coincidence with planning, and move consumption and circumstances to co-operation .

If cooperation didn't need to be planned, we wouldn't need management. For this concern, the proper focal point is not the assets, but the events in which they are involved.

I.

In producing cooperation, one of management's primary responsibilities is to establish compatibility between the circumstances and the consumption. With assets at stake on both sides, competition for the supply and deployment of assets is an issue. Since no event goes unfollowed by others of equal importance, organizations need to know what will happen to their capacity as an aftereffect of the cooperation.

In effect, whatever requires the cooperation -- namely, the target event -- is seen as something that must either conserve or replenish assets, so that business will be continuous and ongoing instead of episodic or temporary.

Yet placing that restraint on the target event must not prevent the event from bringing the needed impact on business conditions.

This reflects a broader principle: environmental conditions are part of the "infrastructure" for business functions, and meanwhile, consumption (business function) has prerequisites (specifications). Circumstances (environmental conditions) have effects (states) that must productively correspond to those prerequisites.

This "productive correspondence" of current specifications and current states is exactly the compatibility being sought from management.

Consequently, it is evident that the key issue is not asset management; rather, it is event management driven by business requirements -- which is the ordinary description of business capability.

II.

The history of the business capability is largely recorded in the history of events that occurred under the pressure of demand. As pictured above, an "event" is the overall result of interacting capacities and requirements. Thus, we easily expect an event to vary widely as the number and strength of influences on its separate elements varies. The primary threat to manageability of events is the inability to control that variation and maintain a useful synchronization of the elements.

In periods where management efforts are successful, events are the normal focal point of attention to whether the business is getting what it desires from IT. The benefits of events are the most ordinary measure of success. When event benefits fall short of desires, then the typical approach is to look for what disabled the event from being beneficial. This disability will usually be found in either of two areas: one, the context of the event (as in time and place); and two, the makeup (causes) of the event.

In accordance with the "event model" discussed so far, we can especially appreciate thatprocesses are used to place controls on the makeup of an event, so that the event's final character is appropriate to desires.

Ideally, a process predictably selects and coordinates the event's elements, with as much aggressiveness and detail as necessary to assure the needed character of the event. By increasing the process's ability to reliably find and control necessary event elements, management can mature the process to a point where the timing and location of a certain type of event also becomes more and more predictable -- which is hugely valuable to selecting and organizing responses to demand.

Process-modeling (now evident as a form of "event-planning") usually seems highly convenient to management. Mmanagement readily adopts a "process" approach to designing and cultivating desirable events. And more maturity in the approach promises the business greater opportunity to create (or find) and leverage advantageous business conditions, strengthening the approach's justification.

But acquiring strength and quality of maturity cannot be taken for granted. This means, in turn, that the assumed benefits of processes are always to some degree uncertain to occur.

“Complexity is intrinsically predictable,” Wharton management professor Saikat Chaudhuri notes, with a very major caveat. “If one places sufficient resources and project management strategies in the right places, it’s possible to manage the complexity. You can learn how to do it. But uncertainty, by its very nature, requires constant adjustment. This type of flexibility is tough to achieve, especially in the middle of integration activity.”

Challenges to process maturity are a part of the uncertainty, affecting the makeup of anticipated events. Another big part is shifts in demand, which reflect changes in the context of events. This indicates a need for an alternative to process management to serve as the lynchpin of business value.

III.

In the discussion that is most interesting to business people, the working definitions of "performance" pertain to the generation of value versus demand. Business runs on competitively satisfying external party demands -- and it is constantly translating those external demands into demand on its internal constituent organization. In that light, maturing the management processes for events-- which links an organization and its environment -- is a critical aspect of managing improvement in performance.

Yet with management process maturity in place, the unpredictability of demand remains a highly significant type of uncertainty threatening management results. Because uncertainty is a fact of life; organizations must simply take a useful position against it.

Thus, complementing event management, the most critical aspect of deliberate performance improvement will be demand management.

Consider "benefit" in a general sense, as a constructive impact of an event. The effectiveness of management is measured by the benefits delivered, and events deliver the benefits; so we continuously scrutinize how we manage the enablement of the necessary events.

But without at least hypothesizing alignment of events to demand, it is difficult to foresee what "benefits" (if any) will likely be obtained -- thus leaving operations without a significant justification. Demand management represents the "business dimension" of overall operational alignment -- events are planned specifically against the known or expected range and scope of variability in demand.

This makes it clear that "performance" always presumes a capability with a justification -- and that is the most important slant that ITIL has on IT management.

IV.

Being able to foresee benefits is essential to executive responsibilities for planning. With planning, we chart the overall path from capacity to events to benefits to demand. The path must be accurately envisioned as management efforts.

The IT Infrastructure Library (ITIL) documents key principles and practices that organize the IT management path from capacity to demand. In describing how organizational resources are used to conduct the practices, time-tested examples of management processes are offered that show the coordination of distributed assets, utilization controls, and business requirements. Because processes are so important to implementing the management of these factors, process integrity and maturity are enormously important objectives of ITIL's information. Yet often the approach to understanding ITIL is too easily distorted by a competing perspective -- not the necessary one of "implementing management" but instead the habitual one of managing implementations.

The misfortune of this latter perspective is that it significantly discourages understanding and appreciation of ITIL at the organization's executive business level. The key to repairing or avoiding this situation is to understand how ITIL information helps to describe the management of events that characterize the business capability.

Performance Management is an evolving discipline that uses forms of communication and visualization that are strongly suited to mapping the origins of and connections between an organization's assets, functions, events and demand.

To maximize the positive influence of ITIL in the organization, performance management instrumentation can bring two things to executive attention:
- relevant business issues expressed in terms of the ability to impact events; and,
- the improvement of that ability as a consequence of pursuing compatibility with ITIL.

The target effect of the ability is to drive benefits that improve the infrastructure for business functions.

The key is to communicate this ability to drive benefits as more a cultural effect than a merely mechanical one.

With the more conventional "mechanical" view, the active drivers of business benefits (from events) are usually more about linear procedures, assignments, and accounting -- concepts that gain their meaning at deep levels of granularity and organizational segmentation. Their main objective is to establish compliance in the organizational activity, which fosters predictability (a lower risk) and scale (a benefit).

In contrast, by "cultural" we mean that the active drivers of business benefits (from events) are goals, priorities, and agreements -- concepts that need to be collectively meaningful across the organization. The main objective is to establish compatibility within organizational diversity, which fosters agility (a lower risk) and resourcefulness (a benefit) in the focus on demand and progress.

One thing we want to know is whether the two approaches shape different kinds of events in order to deliver benefits in their different ways.

V.

Rather than assume that a given business problem can be solved by differing benefits, we normally assume that the problem calls for a certain benefit and that we can get it, if necessary, from more than one kind of event.

But generally, events are cultivated not only to deliver certain benefits but also to do that with certain characteristics.
.
In driving the benefit, any advantage of the cultural approach over the mechanical would first be researched in how it addresses management's responsibilities for producing three critical delivery characteristics:
- functional excellence,
- quality, and
- economy.

Typically, each one of those characteristics can be framed as a measurable effect of premeditated standards, expertise and efficiency -- factors that go into shaping the events that are the source of benefits. So, what we can consider is how a cultural version of these factors differs from a mechanical version.

Standards, expertise and efficiency are all intended to maximize the stability and continuity of the health of the business by "optimizing" organizational responses (events) that generate benefits. Stability and continuity presume that the way the event occurs should leave the organization in the best shape to both use the benefits immediately and make additional future efforts. However, "management" brings intentional design to the way the event occurs. So, we look for the "optimal" outcome in the effect of the design.

- From a cultural standpoint, "optimal" means that risk and opportunity are in balance.
- From a mechanical standpoint, the "optimal" concern is the balance of cost versus output.

Within either case, the challenge to stability and continuity is fundamentally the same: despite the uncertainty of demand, which increases complexity, achieve an intended balance.

VI.

Optimization is the name of the effort to resolve the complexity. Optimization is not just opportunistic, but instead it follows a model, to logically pursue the highest priority outcomes. Here we have two models from which to choose -- a cultural approach and a mechanical one.

A cultural perspective on standards, expertise and efficiency does not exclude or contradict a mechanical one. Both perspectives emphasizes the idea that managing uncertainty in business is a critical success factor, and they both aim for stability and continuity of the business.

Instead, the cultural perspective argues that both stability and continuity are predicated on goals, priorities and agreements -- and that goals, priorities and agreement require dynamic and collaborative maintenance.

To associate either approach with the needed business benefits, we start by identifying and cataloging the functional expectations and targets that we attribute to them regarding:

Standards -- how they contribute to functional excellence,
Expertise -- how it contributes to quality
Efficiency -- how it contributes to economy

That is, we look at each of those as evaluated from the perspective of:
- business opportunity and risk (cultural)
- execution output and cost (mechanical)

The group of findings generated about the two approaches represent our expectations of them. Those are then immediately set against the logic for creating business benefit. That delivery logic will necessarily include these two components:
- The organization's availability of resources must be sufficient to realize the expectations.
- The combination of resources must amount to the "means" for generating the events that deliver the target business benefit.
Initially, the question is whether the necessary means are evidently "more likely" to be generated and sustained for the cultural or mechanical approach. But shifting demand changes the focus.

Understanding how to deal with demand means acknowledging the challenges of complexity. Complexity features a multitude of moving parts trying to come together to hit moving targets. Generating value from the complexity is tough:
- the organization must be resourceful enough in its diversity...
- to engineer appropriate events in real-time...
- from circumstances that have variability frequently exceeding "best case" or ideal formulas.

Dynamic, collaborative access and utilization of resources may be the only path to meeting a business need -- the path facilitated by the cultural approach.

The difficulty of the cultural approach is that it is more complex and thus is harder to organize and measure in a singular, objective way. Addressing that problem, the evolving discipline of performance management provides a solution that can consolidate these influences in a centrally manageable view.

Given that, the general importance and advantage of the cultural one is that it proves to explicitly relate to a wider range of demand on the business.

VII.

Demand management is staged as a shared responsibility of business and IT.

In planning, monitoring and measuring the coordination of resource diversity and demand variability, executives find that performance management can track and illuminate IT's contribution, position and progress.

In turn, leveraging ITIL should be done in ways that aim to maximize consistency and persistence in coordinating diversity with variability.

ITIL's guidance offers IT and business stakeholders a single way for both parties to see requirements and operations. The alignment cultivated through that common view reinforces expectations that consistency will increase in the Business-IT relationship.

The business intends for that consistency to translate into business capability, but the range of needed capabilities introduces more complexity against the intended operational effectiveness.

ITIL describes ways to resolve the complexity, towards consistency in the IT enablement of business capability.

With IT organizations expected to implement management that cultivates beneficial events, bringing ITIL to performance management helps the IT organization to describe the logic and importance of the difference that it makes -- i.e., "IT's value" against demand.

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November 26, 2005

The Value of Performance

A key threat to an organization's effective capability stems from missing the distinction between managing performance and managing value.

Naturally managers are expected to manage both, and the methods used are expected to generate information on which decisions are made about how to structure and drive the organization. If the wrong information is used, the organization may needlessly change or may change unsuccessfully. Becoming misaligned with the business, or becoming disfunctional through structural flaws, will reduce the effective capability of the organization.

To avoid the misalignment or dysfunction, decisions that provoke change must cause change for the right reasons.

The significance of information taken as an indicator of a need for change derives from a model of progress or a model of success. The model is both a theory and a plan that logically accounts for how progress or success is generated.

In practice, Progress and Success are defined in certain terms for the record, and operational achievement towards meeting those definitions is considered valuable. To be relevant to the model, information must help to account for the generation of valuable achievements.

This viewpoint allows us to understand why value and performance seem synonymous, but the distinction that needs to be made and preserved is a critical one for the relationship of the organization to its clients and hosts.

The target beneficiary of an operation has a need, and the need generates demand. But needs get prioritized without necessarily going away, and demand is generated from the priority. This illustrates that demand is actually not the same thing as need.
Meanwhile, organizational operation is meaningful because it addresses demand, and the way it addresses demand is to satisfy requirements. But different demands can "call for" the same requirement, which illustrates that requirements are not the same thing as demand.

Seeing those facts, we can understand the essential difference that management decisions and their suporting information must recognize and relate:

- Value pertains to the generation of a difference versus needs.

- Performance pertains to the generation of value versus demand.

This establishes the basis for management decisioning: managers are charged with driving and protecting progress and success, and now we know the essential terms by which they recognize and communicate the effectiveness of the management effort.

This view on the general relationship of value to performance clarifies the proper meaning and charter of "performance management". This view emphasizes that the concept of "performance" doesn't really materialize meaningfully until reference points (a model) are provided that both precede any actual execution and that afterwards evaluate the execution. The main goal of performance management must be to synchronize the actual outputs of operations with demand.

In contrast, the concept of "value" doesn't really materialize meaningfully until need is defined and confirmed. This puts planning into proper perspective: since plans by definition commit the organization to one scenario by excluding others, the importance of the commitment must be in its relevance to needs. The main goal of value management must therefore be to synchronize the actual outcomes of operations with needs.

Overall, the challenge presented to management is clearly visible. Since the "operations" effort is built around requirements, it can faithfully address them while actually becoming largely irrelevant to emergent needs. The translations of need into demand and then into requirements must be continuous and as real-time and seamless as possible if the organization is to maximize the effectiveness of its capability.

Information management techniques are developed to provide the visibility necessary for doing, tracking and using the translations. But technical support is not effective if the information is used to solve the wrong problem. For example, confusing value and performance leads management to attempt to address needs with outputs, or to address demand with outcomes -- mismatches that (worst case) leave organizations and stakeholders with false impressions of control and ROI, and with unproductive management agendas that are dedicated to changing things for the wrong reasons.

Such errors might be attributed in a general way to failures in knowing how things actually work. To avoid this very problem, management is saturated with initiatives in "intelligence" and "analysis" but there is then the complication of figuring out whether the intelligence and analysis are of the right type and the right amount.

Management typically puts a lot of attention on monitoring the "components" of a plan. But there are two ways to conceive of components.

In one approach, the plan's assumption is that there are mechanical "parts" -- such as the steps in a procedure or the quality of a particular resource being used -- and that their use is specially necessary to the intended progress and success. It's safe to say that this level of thinking is mainly operational.

But a more critical aspect for management attention concerns the actual reasons why the usage of those components is necessary, and concerns the requirements for their usage in the planned way. These are the success "factors", as opposed to parts, and the attention primarily takes the perspective of demand, not of supply.

Together, the reasons and requirements would determine that the mechanical components are "appropriate" for the organization's attempts to execute its strategy. But the components still do not drive the intended progress or success.

As seen below, the reasons and requirements cross-reference to form a framework for understanding how the organization can operate for performance. In this example application of the framework, a new product is to be reliably supplied to a target customer group. Basic assumptions emerge in the framework, representing a set of defined operational parameters or conditions that are to be managed. These are the success factors.

Now, information management steps in for decision support.
Where intelligence is concerned, if current findings indicate that the framework's success factors are not being met or validated, then adjustments would be justified -- to protect the execution of the plan from any significant divergence from the operational goal of providing relevant outputs towards demand. This would mean that the right changes are being made for the right reasons.

As for determining the right success factors in the first place, analysis is usally the weapon of choice. The framework's dimensions direct analysis at conditions that have categorical relevance to implementing for demand and thus will be about performance.

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November 25, 2005

Optimization, Technique, and the Function of Form

At any given time, "performance" is dependent on execution and it assumes that execution will maximally realize a certain underlying functional design (unless prevented!).

This also dictates a basic truth about performance improvement: if performance is still predicated on a design that has not changed, performance improvement cannot exceed the maximum potential of the execution to realize the design. Improvement beyond that point must be based on the introduction of a superior design.

Ironically, a superior design can produce performance greater than an inferior design even when the execution of the superior design is not as great as the execution of the inferior one. In most forms of organized endeavor, this is the phenomenon of technique. Imagine yourself on the tennis court, where a player with good technique executing only moderately well to intentions will handily beat another player doing quite well at executing poor technique.

The triumph of form over execution is how we know that "optimization" belongs in the realm of execution but may not even be critical to performance improvement. Optimization improves execution by eliminating errors or waste in execution's compliance to the demands of the design. But the issue is that improved execution may not actually improve performance because it can pass the point of diminishing returns and because it does not correct flaws in the design itself.

The "returns" we're looking for are, specifically, the influences of the design on the conditions in which the execution occurs. For example, we may recognize that we want a fire and that we need a certain amount of heat to start a fire. The heat level for ignition is the design element. The execution is the steps we take to produce the heat. Not producing enough heat is poor execution and so poor execution depresses performance. But we might alternatively find a way to start a fire with less heat. This is not an execution change but instead a design change. The reasons why less heat can start a fire are not about how good we are at producing heat, but instead they are about how other conditions combined with heat lead to ignition. Continuous performance improvement would be represented by finding ways to increasingly lower the amount of heat needed for ignition, without introducing new counterbalancing deficiencies. Continuous execution improvement (optimization) would be represented by greater and greater ability to generate just the amount of heat necessary -- something that might even become obsolete if the design for ignition changes.

A designed form is a relationship of components in which the relationships, not the components, do the work of generating the necessary effects. In getting the three-legged stool to stand up, it's not the quality of the third leg that makes the significant difference, it's the relationship of the third leg to the other two that makes the significant difference.

In the June 2005 paper, "Systems Thinking and Performance Improvement", our colleague Olivia S. Herriford, D.M., president of Herriford Consulting, describes the need to rethink management of organizations along the lines distinguishing performance, execution, and the criticality of organizational form. Below, (copyright 2005, Olivia Herriford), Herriford herself discusses the issues.

Systems Thinking and Performance Improvement
Traditional thought regarding organizational performance improvement makes the assumption that the approach is the same for individuals and organizations – that enterprise-wide excellence is simply a matter of scale. If we improve the productivity and effectiveness of people and small teams, we can impact the larger entity by making sure our programs, training, and interventions cover all the bases at all levels. According to Robert Carlton (2005), a leader in the field of Human Performance Technology (HPT), performance improvement practitioners have perpetuated this linear, mechanistic view of organizational effectiveness by focusing on isolated elements of performance – people, jobs, and job groups (processes) – as the means to the end.

The shortfall of this approach is that it has not had the impact on the organizational competence necessary to sustain continuous improvement and high performance. Organizational competence is the degree of versatility in which an organization can carry out its collective activities (O'Connor & Quinn, 2004). An organization’s capacity for leadership and high-performance is strongly related to the patterns of connectivity resident within the organization – the relative interrelatedness of its members. Connectivity creates the means by which members can work together to collectively address the tasks required to meet or exceed goals. To develop this competency requires a fundamental shift in thinking about performance. Systems thinking is at the core of this shift.

Traditional thinking about performance improvement takes a linear, operations research approach.

• Identify the component parts of the performance problem.
• Once the elements are identified, analyze and explain what is occurring at each step of the performance being investigated.
• Take the various pieces that have been identified and analyzed and explain the problem and the solution.

Carlton reminds us that this approach is flawed in having long-term impact because it completely ignores the consequences of the organization’s behavior as a living system. When each part of a system, considered separately, is made to operate as efficiently as possible, the system will not operate as efficiently as possible. A system is a thing that must be dealt with as a whole, not its parts. It cannot be divided into independent parts and each part analyzed. It is a single entity and every part has properties that it loses when they are separated from the system. Therefore, it follows that when we take the approach to performance improvement outlined above, we are eliminating from our analysis the most critical aspects of the problem or opportunity – its systemic nature and its connectivity to everything else around it.

An organization has overall properties that none of its parts have which are its most essential elements. These elements are its competencies and they can not be developed or improved one part at a time without diminishing their capacities. In other words, maximizing the effectiveness of a single department as a separate and distinct project is actually detrimental to the total performance of the organization. Today’s complex situations and challenges call for tasks to be the shared responsibility of many people across multiple groups. Organizations must shift from exclusive reliance on individuals and teams toward a more inclusive focus on connections between these entities.

Making the shift requires synthesis instead of analysis as the initial process of improving performance. The steps of synthesis are:

• Identifying the containing whole of which the component in question is a part
• Explaining the behavior or properties of the containing whole
• Explaining the behavior or properties of the component in terms of its interdependencies within its containing whole.

Synthesis defines the connectivity that a component – an individual, a team, a job, or a process – has within the system. For example if we are concerned with managerial performance improvement, we must first identify and then define the system of interactions that comprise the inputs, processes, feedback, and outcomes of managerial performance. Finally, we describe how management behaves in relation to these stimuli and expectations. Going through this process keeps our efforts in alignment with the encompassing system because they are better informed and cognizant of the impacted relationships.

Taking the systems approach to performance improvement is effective and sustainable because it goes beyond individuals to collectives – interdependencies between individuals, between functions within the organization, between the organization and its external stakeholders (i.e. customers, partners and communities). Over time, systems thinking becomes imbedded in the culture because synthesis and a heightened awareness of organizational interdependencies creates and engages shared meaning – probably the most critical of an organization’s competencies and certainly the one reason why it thrives as a continuously effective and sustaining system.

Carlton, J. R. (2005). HPT: Focused on individuals or focused on the enterprise. Performance Improvement, 44(3), 5-11.
O'Connor, P. M. G., & Quinn, L. (2004). Organizational capacity for leadership. In C. D. McCauley & E. Van Velsor (Eds.), The center for creative leadership handbook of leadership development.San Francisco: Jossey-Bass.

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November 15, 2005

How to Recognize Performance

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

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

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

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

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

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

I.

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

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

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

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

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

II.

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

Assessment -- Discovery, Measurement, Interpretation

Development -- Design, Proposition, Negotiation, Demonstration

Implementation -- Instruction, Scheduling, Monitoring

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

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

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

III.

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

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

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

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

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

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

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

IV.

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

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

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

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

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November 13, 2005

Competency: the Organization's Inner Self

We know a lot about automating processes, and we do it to improve performance. But performance is all about behavior, the best of which is the competency that drives performance. While processes represent ideal behaviors, do we really expect to automate behavior?

The painful lessons learned from earlier efforts such as "sales force automation" may never be appreciated by today's innovators in knowledge management, operational performance management and social networking -- business's new power rock trio -- unless they recognize the secret: technology works when people want to work, and it doesn't when people don't. This gives technology two jobs: one, make people want to work; and two, make the work fit the people.

That looks like something automation can do. The easiest and most prominent example is found in great automobiles. And amazingly, a lot of great automobiles are now fairly cheap. Yes, mileage may vary with the driver, but the drivers nonetheless do what they intend to do more confidently, as they interact with the car, the road, and other drivers.

In the particular context of improving an organization's performance, this precedent tells us how to open and unpack the phrase "automating behavior", sidestepping its hype. Expanded, it means, "automating the support of desirable dynamics." Usually there are two ways of doing this, used in combination. One is to implement design-level support (of behavior) as "structure". The other is to implement design-level support as "programming". Both efforts are aimed at injecting "regularity" (predictability) into the dynamics -- which is why in both the structural and programming designs we tend to search for, or even create, "rules".

Example: while trying to assess organizations in a "performance" perspective, the notion of "behavior patterns" becomes critical. A behavior pattern is at minimum taken as a symptom of the underlying structure and programming in the behavior. Discovering the pattern, especially an unexpected one, is exciting because it gives a persistent reference point for deciding what (if anything) to change. Basically, we want either more of the symptom, or less. For undesirable aspects, we refer to the pattern for exploring underlying modifications; with desirable aspects, we refer to it for exploring underlying automation. Either way, we expect to find that general rules underlie the occurrence of the pattern. We'll then have our "improvement" programming use (i.e. exploit) the rules.

Because of that, the most critical issue is whether we have discovered the rules or merely invented them. The importance of the rules is to set priorities and consistency to the actual activity. In supporting improvement with rules, programming holds our attention first and longer, perhaps because it is easier to manipulate than structure. But the specific importance of programming is to set limits and methods to the potential activity otherwise inherent in the dynamics.

In that approach, automation is just a programming alternative. Normally, maximizing and fortifying the persistence of desirable behavior is covered by training. Still, in large or decentralized organizations there's the idea that process automation somehow directly manipulates what otherwise would have been unmanaged behavior, and that it does so more certainly for our outward intentions.

In fact, thinking in terms of behavior versus process, the typical expectations are as if behavior's "innate" programming and structure is natural, while process is synthetic on both counts. But then, if we see behavior exhibiting the characteristics of processes, we think we can manage behavior through automation just as we would improve a process.

What competes with this is the idea of self-organization -- of behavior that, without other programming, manages itself.

As the pattern that is discovered, self-organization seems to be the tacit or latent organization. Managers are cautioned about it, about the "shadow enterprise" or the "backchannel organization" stealthily constraining or dictating success or change... Predictably, our new performance improvement frontier is in using programming to manage that -- to manage the inner organization towards the outward performance intentions. If this is going to pan out at all, the first thing to attend to is ensuring that we don't set out to solve the wrong problem.

Accordingly, there needs to be a way to distinguish the key components of the organization's performance make-up -- the "what is" of the organization that builds up the "how to" that it exhibits...

So, you're sitting in the coaches office, looking at the videos of the team that just beat your pants off. You're trying to codify what they do, and you're trying to figure out what makes them tick. Play by play, you can see how they do something, but you're seeing it after the fact... You struggle to come to grips with the apparent spontaneity that they used to beat you -- the stuff you didn't see coming. You keep asking yourself, how did they know, during the play, to do that, then?

Deconstructing the opponent's execution requires understanding how their organization gets its capability both from its formations (structure) and from its routines (programming). But no less important is understanding the real difference between what seems to be ad hoc or natural, versus what is planned or synthetic. This much segmentation pulls up discrete factors that are clearly subject to independent changes but will continually interact to produce the observed results. They're the same factors that will describe the organization you are or want to be.

In attending to those factors, improving and leveraging them towards more effectiveness in their interactions, the definitive programming approach emerges -- that we should think first of cultivation, not automation.

Overall, that target effectiveness is, in real-time demand, the competency of the organization. Cultivating competency becomes the label for an objective that might otherwise be presented as "maturing capability" or "automating process".

In general, these different efforts should be complementary, as seen below.

But this model clearly allows for three ways to tackle a single thing. That is, the whole model could be applied to improving a capability in three ways, or a process in three ways, etc. This leaves us to think about why, for example, a process is different enough from a capability or from a competency to result in them being usually associated with different parts of the improvement model.

Meanwhle, as companies begin to look at social networking to discover and leverage their "inner organization", these companies will need to temper their excitement at the discovery of those behavior patterns with a reasoned approach to making use of them. The most obvious challenge is to first understand the communications protocol that is embedded in the social network, which is of course a behavior issue. Moves from behavior to process may or may not prove to be actual, agreed, consistent or preferred. Additionally, exposing a network may provoke it to change or discontinue before it can be engaged in any pragmatic fashion or agenda other than its own. It is therefore very unclear as to whether automation or maturity are even relevant formal management concerns until after cultivation of the network has been identified as a desirable opportunity.

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November 2, 2005

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

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

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

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

I.

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

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

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

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

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

II.

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

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

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

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

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

III.

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

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

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

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

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

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

IV.

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

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

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

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October 29, 2005

Managing "Measuring"

Neil Raden's article, "The Limits of Measurement", bring us to the interesting problem of not being able to see the trees for the forest.

In this case, "performance" is the forest, and the trees are the events and inputs that make up successful explanations for the performance observed.

Measurement looks for data points and then it looks for patterns or "forms". We assume that the points themselves don't tell us what we need to know -- but when data collectively mean something different from the data points, we have to hope that the points are resolved into a focused picture and that the picture means something.

On the other hand, a preconceived pattern or form discourages finding the data points that don't fit. In measuring performance, this can turn into the difference between fact and myth.

I.

We have enough other problems getting accurate data without preconceptions clouding the view... Through interruptions and reprioritizations, ongoing change alters the routines of action that are considered necessary in day-to-day operations. So, by analogy, what if the key points keep moving? Chasing these moving targets, can the picture ever be focused? How far away do we have to get to see a "stable" picture?

Neil's article gives important reminders about the Heisenberg Uncertainty Principle, and they tell us that we have to at least estimate how much our data collection process -- e.g. measurement -- might either lack "accuracy" or exceed a useful amount of it. Otherwise, we risk simply accepting distortion that we created ourselves.

The distortion may be unintentional, like a manufacturing defect discovered only later. But worst case, you know the old saying, "statistics don't lie -- statisticians do."

II.

Furthermore, "accuracy" and "usefulness" are vulnerable not only to the measuring instrument and measurer; distortion can begin with the definition of what is being measured in the first place. These definitions are not absolutely right or good; they are debatable.

Comparing one organization's practice to another's yields proof of this. It's like two contestants in a recipe bakeoff. Two different organizations, pursuing the same outcomes, might have widely divergent definitions of what data comprise the key points that compose the bigger picture. Thus, on the surface, they might be trying to work with "the same" picture -- but they might disagree on the significance of any included point of measurement or of any omitted point.

The competitive ramifications of course make it all more interesting. Even when two organizations work from the same general framework, the diversity and uniqueness of their particulars could mean, as the saying goes, that "on any given Sunday, any team can beat any other team..." That is, the differences are not necessarily advantages, so we might decide that the definitions behind the difference are not the right ones after all...

III.

And finally, won't a different point of view on the data also result in a different picture? Strictly speaking, we'd have to expect a "definite maybe"... and the reason why is that we might not see the same data from a different point of view.

Since our management already leans on ideas like capability maturity, best practices, and other examples of empirically proven improvement, it seems that we already know about the need for measurements to differ according to modes of achievement as well as targets of achievement.

These improvement concepts are also ideas that encourage us to adopt standard answers to questions like "Are the right things being measured?" and "How do we know what the right things are?"

Being essentially scientific discoveries, these standards reach our management as a kind of Newtonian physics, setting an operational baseline and perspective. Our practice of it is then challenged by how sensitive our measuring instruments are. When our measurement sensitivity hits the point of diminishing returns, we want to go beyond. But how?

Beyond that is a different challenge: an alternative, more quantum-physics perspective of multiple concurrent points-of-view.

IV.

In our performance improvement efforts, organizations get pretty good at following prescriptions for action, and although allowing that our measurements interfere with the actions taken, the actions are not significantly varied from one time to the next. We're used to activity being measured within ranges of tolerance. As a result, we think of value from a distance that accommodates variance.

But let's look at this idea of "significance" ... If we bother to measure a prescribed action because it represents a certain value to be generated, we want the action to avoid getting caught in a cloud of varying kinds of measurement, each kind approximating the action from its respective point of descriptive view. Why? Because each perspective's description can virtually propose a different action, and until there is agreement amongst the perspectives then their collective measurement leaves us somewhat unsure about what action really happened.

For example, was a certain higher-than-expected expense a "detrimental cost" or a "beneficial investment"? Was a faster-than-expected delivery an opportunity or a disruption? Such varying views of "facts" lead to uncoordinated organizational responses and reactions that defeat the purpose of measuring things.

This emphasizes the fact that, while management likes precision, it really must have relevance even more -- regardless of precision. A fuzzy (or crude) picture of the right thing is more valuable than a clear picture of the wrong thing.

Having multiple stakeholders means having multiple points of view. This condition will show that interpretation sets the limits of measurement.

V.

A well-worn story related to this problem is the one of Six Blind Men and an Elephant. Touching the elephant, each man relies on his own perception of the part of the elephant he is nearest, and each part touched is very different from the others -- a tusk, an ear, a leg, etc. Consequently no one man figures out that what he is touching is an elephant, instead of a pole, a tent, a tree, etc.

That's an interesting story, but if our problem is to make a better elephant, then the story goes inside out. Instead, if all six men were first told that they were about to touch an elephant, would they each then be able to determine what part they were touching and assess the status of the part? Yes, the information-in-advance mitigates their individual blindnesses to a very important degree, but this works because they were not misdirected -- not told to expect something other than an elephant.

For this reason we can say that an organization's performance is driven more by agreements before-the-fact than it is by measurement after-the-fact. In fact, agreement should create the model from which measures are derived. But then, what we need measurement to do is to feed back and drive future agreement as well, across the inevitability of ongoing change... and this will depend on managing interpretation in the organization.

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October 12, 2005

Meaning-based Management

In the classic bottom-up hierarchy of understanding, made up of Data-Information-Knowledge-Wisdom, we have four distinct sources of "decision-support". Given that automation is very intense at the bottom and very sparse at the top, the trick to picking the right source for your current decision might seem trivial: fast, accountable decision-making would evidently be most supported at the bottom.

Despite that reasoning, lots of corporate and organizational experience shows that the more explicit we make the complexity of decisions, the more difficult they actually become to make -- frustrating both speed and accountability. Whether the complexity problem is a seeming impossibility of integrating multiple massive data stores, or whether it is simply the often unwieldy dynamics of a large committee, final decisions are really most often the result of a "best effort" to navigate uncertainties while not losing sight of a goal. The harder the navigation, the more obscure the location of the finish line becomes.

If we also want to believe that the decision is always intended to be the "best available choice" then it makes sense to examine how we expose the alternative choices along the way. For example, what role does each layer in the hierarchy of understanding play in indicating alternatives?

Data - provides descriptions of the elements and components of situations

Information - provides evidence of associations between data and assumptions (thus proposing and representing states)

Knowledge - provides models of interactions and interdependencies amongst states

Wisdom - provides assessment of the relevance of knowledge to requirements (and thus guidance of the application of knowledge to requirements)

From those influences we usually look for four things: facts, evidence, truth and meaning. Big mistakes lurk for us when we confuse these things with each other and with the four levels of understanding.

For example, counter to our intuition, data and facts are not the same thing; what makes data into fact? Testing. Likewise:

- Information is not evidence; what makes information into evidence? Context.
- Knowledge and truth are not the same thing; what makes knowledge into truth? Agreement.
- Wisdom and meaning are not the same thing; what makes wisdom into meaning? Relevance.

We need to also preserve the distinction between fact, evidence, truth and meaning -- despite the influence of politics, anxiety and habits:

- Facts provide a set of values (like properties and attributes) that correlate highly with the appearance of a designated phenomenon and thus become useful as definitions of the phenomenon.

- Evidence is facts that distinguish the probability of the defined phenomenon's presence.

Truth and meaning are yet something else. (To be continued...)

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September 18, 2005

Aligning Execution and Performance, with Process

Recently the difference between "outputs" and "outcomes" has been a major topic in maturing the management of performance. It is becoming clearer that performance pertains to outcomes while execution pertains to outputs. But if performance depends on execution, then the key question is, how do outputs drive outcomes?

When we say "performance", what differs it from our idea of execution is our intent to talk about how close the impact of execution came to what we wanted and/or expected.

When we say "execution", we're trying to point at the way that things got done on the way to that impact.

But noting the difference, we should also add that explaining the output doesn't explain why it has the impact that it does. We should also ask what makes the impact a probable companion of the output. What we'll find is that the role of a process is to make that probability as high as necessary.

I.

Our most typical perspective on performance assumes that outcomes have prerequisite underlying outputs -- and thus that missing, defective, or incorrect outputs "account for" poor performance.

Solving those problems of omissions, defects and errors takes us to investigating whether the means of execution are properly coordinated. But beyond that, we also need to know whether the conducted execution was aimed in the right direction.

Consequently, solving performance problems, there are two major areas of solution investigation -- both falling under the heading of alignment:

1. Quality: of actual procedural integrations
2. Effectiveness: of actual influence on conditions

II.

Take the "quality" area first. Following the typical advice, procedure investigations would look into the connections between people, processes and technology. In one way, this is intuitively correct thinking; an organization can almost always be described in terms of the way it designs, selects and deploys those three fundamental "resources" for execution. But in more than one way this is a fairly awkward approach unlikely to lead to proper solutions.

One problem is that the three items -- people, process and technology -- are not defined on the same logical "plane". If we were instead to normalize the way they are managed, we would have at least a two-tier set of items with the lower tier being people-events-tools and the upper tier being workgroup-process-system.

The second problem is that execution requires not only "resources" in the sense of items that can be cataloged as assets and "qualified" for duty; rather, execution requires a configuration of resources, which creates the functional environment for execution called infrastructure.

Simply described, infrastructure includes facilities and services for operations. What we've been learning more and more is that infrastructure is an idea that must both shape and accomodate the dynamics of the operating environment, and thus become less exclusively a set of fixed objects and more inclusively a set of controls that direct access and navigation to and amongst facilities and services.

The overview of necessary connections within the infrastructure means that we look at the following configuration and control-related issues:
- people-to-people connections: including workflow and communications
- people-to-systems connections: including applications
- system-to-system connections: including platforms

What this does is to indicate how procedural alignment (and its quality) must be composed for execution, meanwhile making it much more explicitly clear that two organizations with the same "resources" can get drastically different "results" (outputs) from their interconnection and utilization.

III.

Next take the "effectiveness" area. The influence of outputs on prevailing conditions largely depends on how the outputs are actually used. What this means is that it is most logical to understand execution as "production" and then understand the value of that production in terms of how management "markets and manages" the products. Since the value of the products comes mainly from their ability to satisfy important demands, the main perspective of practical use for solving the influence-oriented alignment problem is one of demand management.

What we've been learning about demand is that it must be seen in two ways -- as defined need, and also as defined requirements -- thus the fulfillment of demand is always subject to revision in two directions. The usual situation, though, is that a given party with one need might send that same need to two different parties, and find that each party will differently interpret the need into requirements.

Simply described, demand management by the receiving party defines or discovers demand, assesses it, prioritizes it, fulfills it, and tracks it. In support of that, it includes all the following mechanisms, each of which has an output:
- requests
- analysis
- policies
- routing
- assigning
- monitoring

With the key issue being how those mechanisms are all required to address the particular need, what this does is to indicate how directional alignment (and its effectiveness) must be composed for execution. Meanwhile, those mechanisms all rely on the infrastructure.

As a way of defining the mode of influence that outputs have on outcomes, a process states that "if the need is... then our response will be..." and it organizes the response according to requirements. Meanwhile, by putting that stake in the ground, the process challenges circumstances to prove that other requirements might be necessary or better than these in meeting the need.

IV.

By finding that resources and outputs per se do not determine outcomes, we find that "production" procedures and "product" direction must be managed both separately and together, because they can change independently but must be related for meeting demand. In focusing on their underlying dependencies for the sake of making improvements, we recognize "infrastructure" and "process" as areas in which management creates alignment between execution and performance.

Posted by Malcolm Ryder at 8:00 AM | Comments (0) | TrackBack

September 16, 2005

Justifying Performance - Ambition versus Reality

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

I.

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

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

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

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

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

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

II.

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

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

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

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

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

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

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

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

III.

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

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

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

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

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

IV.

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

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

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

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

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

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

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

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

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

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

Posted by Malcolm Ryder at 11:07 AM | Comments (0) | TrackBack

September 15, 2005

Assessments versus Measurement

In the growing body of literatures regarding performance improvement, the usual recommended starting line is the advice that "you can't manage what you can't measure."

But this allows a troublesome add-on thought, which is that your measurements are going to drive your management mainly in the fashion of "garbage in, garbage out"... The quality of input data is of course a risk, but what about whether the correct kind of data is being absorbed in the first place? Great data of the wrong type will lead nowhere fast, or to the wrong place too soon.

For that reason, picking the right measurements would need to be the logical starting point -- and updated thinking emphasizes that to do that there must be a model or a logic of what matters, not just of what "counts".

What's the difference between what matters and what counts? Observations probably count when they are able to show that they are usually associated with the subject. But showing how their association plays into the importance of the subject at hand is how they mean something. Getting from what counts to what matters means getting from findings to clues to evidence.

I.

As the initial concern of a management process, the notion of "measurement" most top of mind is usually metrics . These metrics are really particular ideas variously used like sculpting tools and fishing tools depending on the circumstances.

But the importance of a higher-level guiding model displaces measurement from that initial position. Metrics gets bumped even a little further away from the starting line by an additional issue as well -- the need to evaluate .

What is the difference between evaluation and measurement?

Typically, measurement determines a state, but evaluation determines the importance of the state. We might determine that it is 28 degrees outside, but having observed the time at which it was true, what does it mean to us? Are we sick? Is it July? Does the temperature matter? How?

But think of it another way as well -- as the difference between a subject and a topic. The subject is what is being talked about; and a topic is a way to talk about an aspect of the subject. Evaluation considers the subject; measurement considers a topic.

II.

Overall, evaluation emphasizes that you not only have to pick the right topics (measurements) for your subject, but you also have to pick the right subject -- which really means to not lose sight of it...

Our friends at the McKinsey Quarterly interviewed John S. Varley, the CEO of Barclay's Bank, who as the new guy in charge had plenty to say to his organization about the difference between what their financial topics appeared to mean versus what they really meant. The short version of the story is that Barclays had fiercely and successfully pursued enviably upward financial results, but largely at the cost of running the company down.

Noting that the organization was managerially unconscious of its "go for broke" mentality, Varley measured the financial performance as positive but he assessed the performance as negative. He saw that the way the big numbers were being hit was actually not sustainable -- in fact, was unhealthy -- for the company.

III.

Assessment takes the broad view of evaluation. It brings perspective to measurements by not allowing them as a topic to overwhelm the subject.

One of the greatest examples of this perspective is Muhammed Ali's famous "Rope-A-Dope" strategy against George Foreman in the 1974 Kinshasa Zaire Rumble in the Jungle. Scorekeeping might have shown Foreman obviously winning round after round on the punch counts, but as the CNN/SI writers put it, "by the eighth round, the 25-year-old champion was running on empty. Ali took advantage to knock out his exhausted opponent..." Ali's bigger picture of the fight, which he'd had at least since the second round, made him the winner.

Another interesting example of the bigger picture is in the Voter Referendum publications in California. Before voting takes place, each issue on the ballot is discussed in printed form with the following points of view:
- arguments for the issue
- rebuttals to the arguments for
- arguments against the issue
- rebuttals to the argument against

For many people, it's a real eye opener to see four different ways to consider the issue. Each point of view is a topic, and each topic is typically fairly persuasive on its own. Taking any one of them, a person might "measure" the ballot issue positively or negatively. But to assess the overall value of the ballot issue (the subject), the four points of view are compared against each other, and so a decision can be made "on balance".

In other words, that assessment model is the key to understanding the real importance of any of the subject's topics.

IV.

When we say that we can't manage what we can't measure, the appropriate response is not simply to start measuring things; the amazing ease of taking things out of context shows that measurement does not equal management.

Instead, by bringing a model to the situation -- one that can define and hold a coherent description of what matters at the subject level -- we get to better observations and decisions using measurements.

It's more fair to say that we can't manage what we can't model -- because without the model, we don't know what is the meaning of the measures and thus don't get a meaningful picture of what we're trying to manage.

All that said, why is it that most times the advice to companies is still to start with measurement?

V.

For one thing, all companies have measures. It's the common denominator. It seems to make sense to "make better use of what you already have..." Often the company doesn't really know another way to talk about its management.

Second, it's a reflection of the need to first actually confirm that a usable picture is obtainable. The real prod there is to investigate how the picture is being taken now. Generally, it's been found that omissions, confusion and inconsistency is significant there, preventing what might be considered a reasonable level of visibility, or producing what might be considered a picture with no apparent composition.

But an even deeper concern of that advice is adherence to the idea that "management" is mainly about efficient production -- one of the top target outcomes of measurement efforts. This is the Frederick Taylor school of scientific management. But the most important difference between 1911 when this school opened, and 2005 well after "hypercompetition" set in, is that the pace of change today is orders-of-magnitude greater and has changed the priorities for measurement -- from accounting for doing the work right, to accounting for doing the right work.

Especially in our era, ineffective efficiency is waste. And that's why deciding what to measure is more important than the measurement itself.

Punchline: in order to manage better, start with assessment. Organizations will find that the key representative concept behind an assessment is an objective.

Posted by Malcolm Ryder at 12:07 PM | Comments (0) | TrackBack

September 10, 2005

Competitive Advantage

As a former athlete, former coach, and older guy occasionally playing against much younger guys, I sometimes get really sick of hearing all the rap about a "competitive advantage". It's too often brought up as something you take into the game instead of something you make during the game.

So much of the time it has the same problem that comes with the chatter about saving costs. You remember the ridiculous business blared across TV advertising of discount sales in the 80's -- "The more you spend, the more you save!" This makes sense only if you were actually going to spend the money on that stuff anyway.

The point here is, what are you willing to spend to get the advantage?

First of all, heads up: that "advantage" that you're most likely to get is probably an advantage only compared to whatever else you were already going to do. The first order of business is to make your next self better than your current one.

But how hard is it to get a competitive advantage versus a top opponent? If you already have one, it's likely because they're not ready for you. If you don't already have one, it's WAY hard. It makes sense to think in terms of maximizing what makes you different from them, and then playing where your difference counts the most. But either way, the difference will be an effect of an ability. Unless you actually create the effect, there's no real difference and thus no real advantage.

Maybe it takes an older guy to spell it out. Here's my favorite competitor, Andre Agassi, talking about playing against Roger Federer (as compared to Pete Sampras) and bringing it to the point:

"There's no weakness to speak of," Agassi said. "You play a bad match against Pete, you lose 6-4, 7-5. You play a good match against Pete, you lose 6-4, 7-5. You play a good match against Federer, you lose 6-4, 7-5. You play a bad match against Federer, you lose 1 and 1."

And Andre has to play Federer, a genius, on Sunday. Given Andre's outlook, he obviously needs a competitive advantage.

Realistically, he needs to be better than he was today or yesterday, taking out Ginepri and Blake. But he just strung a historically epic match of will and technique together with a slugfest. How on earth could he be better?

We can leave that open to speculation, but while Andre's objective is of course to actually beat Federer, he is all too aware that this could be the last time he plays in a US Open Final, and you can bet that he totally intends to not go down 1 and 1. He's looking first for what he minimally needs to reach 4 and 5, AND he's hoping that Federer makes some mistakes.

If he can get those two things at the same time, he could win.

But what is the situation in which having both of those things is likely?

Again, we can speculate: if things go into the fifth and fatiguing set, or if Federer lets the heavily partisan crowd (favoring Andre) get to him, or some such thing, then being good enough to take 4 and 5 games can be hugely helpful to Andre, while making a few mistakes could be hugely detrimental to Federer.

Whatever it is that would likely do the trick, we can summarize its ideal magic like this: Andre needs something to happen that both makes his own good stuff more valuable and makes Federer's bad stuff even more harmful to Federer. If that condition arises, then meanwhile Andre's own efforts to make Federer's good stuff less valuable (by preventing it!)can become decisive, as long as Andre's bad stuff is avoided.

The punchline: Andre knows that what he needs to do is put himself in a position where circumstances can help him enough to win.

Going into the match, Agassi said he plans to do it like this: "You hit it in that corner and that corner and that corner and that corner, over and over again, and you beat him," is how Agassi described the ideal strategy. "But you've got to [actually] do it..."

I'm not saying that execution is the same as advantage. But obviously, getting the right thing done gives you a shot. Staying focussed on the competitive opportunity is what we should be telling people. Enough about advantage. First things first; it's tough enough to manage opportunity.

Posted by Malcolm Ryder at 8:22 PM | Comments (0) | TrackBack

August 31, 2005

When Measurement doesn't help Management

Organizations increasingly manage the support, timing and priority of activities by using metrics. And the activity called "measurement" should not exempt from being managed, so naturally there should be measurements about measurement. This might be a hidden dimension of "management".

If we can't manage what we can't measure, and thus if measurement is a basic component of management, then the performance of our management effort is dependent on the performance of our measuring effort. But how dependent?

In what follows, let's look at how and why measurement is:
- critical but can still fail to support good management; and,
- potentially strategic to good management, if measurement itself is properly managed.

Measurement creates the formal definitions that will be used to identify and track states and events in operations and in the operating environment. So, what we come to "know" about our conditions can be deeply tied to the way our measurement allows us to recognize things.

In the classic hierarchy of data leading to information and information leading to knowledge, definitions generate data, or "facts", that are interpreted by a perspective into information, but information is not knowledge until it is assigned to a class of concepts. (This perspective-driven assignment of information is what we call "context".) Meanwhile, the definition of the concepts is not dependent on metrics, but rather on classification -- a different discipline.

Concepts is where management first stands beyond measurement. At this point, though, what management gains from measurement is the engineering, refinement and/or updating of prior knowledge into current knowledge.

The value of this knowledge then begins with applying it. The two main ways of applying the knowledge are:
- to distribute it; and,
- to use it as a decision-point.

For the purpose of "management", there are two distinguishing keys to applying the knowledge.

The first key is to remember that it is not "information" being applied, but "concepts". We're properly very leery of trying to manage without information; but measurement is only one source of information, and regardless of the source, information is not meaningful without conceptual associations. When information is received and processed, what should be further distributed for management's sake is the concepts. That is, in the next step, communication should drive the simultaneous, interlinked distribution of both the information and the meaning.

The second key to the management-oriented application of knowledge is to see that action is another way of propagating concepts. When actions are classified -- by purpose, impact, and propriety -- they can represent a model of operations that describes how the organization qualitatively distinguishes itself from others. Decisions typically select preferences that in turn select and promote actions. This is what "management" does with knowledge that drives opertional performance. Additionally, it reinforces or proposes the prevailing desired identity of the organization.

Because of what it represents, proposed or dictated action becomes a form of communication in itself. Starting with decisions, management must do a good job of forwarding both the ideas and the actions that matter.

This forwarding or promotion is the second point at which management stands beyond measurement. For many reasons, managers promote things according to preferences and tolerances, not just neutrally or automatically. Whether the driving reasons are psychological, political, tactical, or whatever, promotion can run independently of measurement.

However, when the promoted actions and ideas are then monitored and measured for their timing, compliance, impact, etc., management comes full circle as there will be new data generated about resulting states and events. Recognizing states and events can be facilitated by using the language of measurements, but not all states and events will have already been discovered before: unprecedented effects will occur and will need a way to be identified beyond the current terms of measurement. Research on possible effects should extend beyond the local or immediate management milieu, and measurements should be upgraded to accommodate the newly acknowledged effects.

In review of the above, looking at how definitions, concepts and promotion line up offers the picture below:

How good is your management at getting all the way around the circle? This question asks about the performance of management itself. Seeing that there are at least three major components in the cycle highlights the idea that measurement will be a prerequisite of good management but not necessarily a cause of good management.

The ideal situation would be that measurement is refined to the point where it is not just critical to management but actually strategic. This would mean that measurement should have both methodologies and deliverables that actually make management's overall effort the differentiating factor in generating the value of what is being managed.

We know that poor measurement can be a significant inhibitor of good management, because measurement is critical -- that is, it is a prerequisite whether it is helping or not.

By explicitly addressing tie-ins with knowledge and communications, measurement stages an opportunity to become strategic and not just critical.

Note: The discussion above focusses on characterizing the relationship of three types of "business information" (measurements, knowledge and communications) in a singular management lifecycle. One online resource of many in-depth papers more conventionally discussing measurement is the "TechRepublic" free-membership IT library. A good current example of the available content offered is the whitepaper The Metrics of IT: Management by Measurement from the Enterprise Computing Institute -- reached via TechRepublic membership at this URL: http://techrepublic.com.com/i/tr/downloads/home/metrics_of_it.pdf

Posted by Malcolm Ryder at 6:54 AM | Comments (0) | TrackBack

August 20, 2005

Invention, Improvisation and Innovation

I.

Every day, operations proceed with essential concerns about continuity and direction, within this same basic value-management cycle:

- Can we do it? / What are the outcomes? / Why is that important? / (Repeat) -

At each point in the cycle, operations managers presume that the desirable answer is a logical result of cause-and-effect. Putting pressure on each point, meanwhile, are significant forces (such as, respectively, skills and knowledge, location, and competition) that are tough-to-manage variables affecting the actual answer.

Now, with unexpected or rapid change occurring independently at each of the three points, as well as across them, more and more time is spent trying to overcome complexity in determining the difference and the linkages between intended cause-and-effect versus actual cause-and-effect.

Without this determination, management cannot know whether the most effective operational path to meet currently targeted ultimate objectives is through the existing environment or through a modified environment in the future.

There are many ways to conduct an environmental review that generates both an assessment of the current environment and a design of a future environment. All of them have the purpose of solving the same "You can't get there from here..." problem, by either repairing critical stepping stones or building a new path.

But always just as important as the path itself is how you run on it. For organizations whose management feels (rightly or wrongly) that it is in a known, locked down environment and needs more effectiveness from its activity within that environment, that train of thought is increasingly important. Here is where Invention, Improvisation and Innovation have pushed to the foreground, being additional ways that management can run.

Each option is an idea with important cache that, if abused, will reduce it to a buzzword. To prevent doing that here, let's point out the source of each one's attractiveness --that is, the associations that explain why each merits any attention.

a - invention: relates to products and productivity
b - improvisation: relates to capacity and agility
c - innovation: relates to differentiation and advantage

At a given time, the relative attractiveness of any one of them likely reflects the organization's current estimation of its performance problems. Any week spent reading the management trade mags will bear this out in the columns of strategic advice.

Meanwhile, it also seems easy to indulge the implication that the group of three line up as a "chain" of success factors, a-b-c. Indeed, what often happens in discussion is that the lines are blurred between the three, such that any one of them appears to be a spoke leading to the the same virtuous hub called NEW -- which reduces them to being synonyms for each other, or to being alternatives just requiring some pragmatic prioritization.

Those views are not always the case. But at worst case, misperceptions readily lead to misinterpretation and misuse. For the sake of being more proactively positive and avoiding "lost opportunity", we can look at the way that invention, improvisation and innovation generally get traction, and use that visibility to guide ideas about how to most sensibly incorporate the interest in them, as part of management.

The following diagram illustrates business components and relationships with which managers generate business capabilities. At any of these same touchpoints, management can manipulate capabilities with a range of options including invention, improvisation and innovation. But effective organizations take invention, improvisation and innovation seriously by managing the operational environment necessary to see them through the value cycle of can we do it, what are the outcomes, and why is that important. The high-level view shows infrastructure, goals and culture holding down the three points in the value cycle.

The picture's high-level story is about the complexity involved in the balance to be struck between value and its associated risks, and likewise between requirements and the options for meeting them. Respectively, high-level improvisation and innovation engage those tasks.

Let's look at invention, improvisation and innovation one by one, to start factoring in their opportunity, purpose and effect.

II.

In its literal root sense, Invention refers to "finding something within". Practically, this sense is associated with exploration and experimentation, the two activities that typically host and court the experience of invention.

Because both of those activities can be structured, their practice may be placed on a supporting mechanism designed to make them accessible, accountable, regular and persistent. We can see that underlying mechanism as a combination of methodology and infrastructure.

But once methodology and infrastructure are in place, they become the key constraints on invention. The challenges become to maximize the effectiveness of leveraging them, and maximizing the ability to re-engineer them if necessary. The importance of this is in the need to know whether they are promoting invention more than they are inhibiting it. As we increasingly find in the arena of knowledge management, invention is a fundamental daily activity necessary to site-specific problem solving in the organization. Nonetheless, an equally big challenge is to commit the investment in that methodology and infrastructure to actual invention as opposed to routine production -- otherwise the methodology and infrastructure are unlikely to change towards effectiveness. This commitment is seriously challenged because of the similarity thatinvention has to production activity. The similarity makes it easy for the organization to appropriate the means for one purpose instead of for the other; so invention must compete for priority in order to keep its means:

PRODUCTION
- manage compliance to known causes that effect specifications
INVENTION
- Manage attention to assumed causes that effect theoretical outcomes

If the organization does not have theoretical outcomes representing high mission priorities, then it is less likely to find the fortitude for sustaining use of its methodology and infrastructure to drive invention. This would likely prevent R&D in infrastructure and methodology. With the pace of change in business requirements today, that would be crazy: who was it that said the definition of insanity is doing the same thing over and over but expecting a different result?

III.

Improvisation, in its literal sense, refers to "the unforeseen". From that, it attributes two key characteristics to activity -- unplanned, and extemporary (casually observed as in "the heat of the moment" and "at hand"). Importantly, it involves no lack of understanding of what is to be produced; rather, it is concerned with how the production was organized. Being aimed at a target "effect", improvisation seems to be related to invention. But the real difference is that while invention proceeds according to a plan to make something of undetermined value, improvisation is unplanned but aimed at making something of determined value. The even more important issue with improvisation is that, unlike invention, it occurs under production pressure: that is, an acceptable outcome is already described and targeted, and the means of generating it must succeed within the excited restrictions of available time and materials.

In short, the problem in improvisation is not so much "product" as it is "process". As a shorthand for what could be another whole discussion in itself, let's think here of process as navigation. In this way it is easier to recognize the real significance of improvisation as a production mode -- which is not that it is any less rigorous than following a plan, but that it relies on a different frame of reference for guidance. The star-charts and weather forecasts of the operation's environment -- such as scorecards and dashboards -- must be the basis of decisions about pace and course corrections.

For management, the decision to improvise is challenged mainly by the dual concerns of accountability and risk. Thus, the choice to improvise must be made through prioritizing effectiveness over the expectations of accountability and risk. Deep experience, for example, offers a cognition and frame of reference that allows a manager to abandon what seems to be a failing prescription and improvise instead. We tend to discuss this in terms of "instincts", but for most managers, confidence in actually executing this way requires an understanding of the difference between process and "technique" -- with confidence in technique. Both process and technique are ways of describing "the method of procedure", but the difference is that process is specifically about the method of activity, while technique concerns itself with the method of using available tools and materials. Consequently, the key contrast is between improvisation and construction:

CONSTRUCTION
- organize production procedure around accountability and risk standards

IMPROVISATION
- organize production procedure around resource availability and logic

Usually, for improvisation to take hold, the organization's management must decide that in the face of a construction's projected inadequacy, the consequences of ineffectiveness are too harsh to tolerate. This explains why improvisation is most often considered for issues where unexpected failure looms. But it is also the case that improvisation serves as research for future construction-process improvement. So improvisation becomes an extremely valuable experience for enhancement through re-invention...

IV.

Taken most literally, innovation has the fascinating responsibility of "introduction". In turn, introduction has a core meaning of "to lead into" a position. This accounts for why every vendor touts itself as the "leading" whatever, because the vendor stakes its argument for your attention on the idea that it has "introduced" its particular distinction into some context with which you identify. But if all comers are "the leader" then what matters is what might be new about each one's effect. As noted frequently in content here in the Archestra collection, there are at least three main ways of being significantly "new", and the value of each will obviously depend on how relevant it is to the occasion at hand:
- new solution for a new problem;
- new solution for an old problem;
- old solution for a new problem.

As we know, any of those results might come from invention or improvisation... but to the extent that this is true, it occurs because there is a concept of "solution" that is actually applied to a problem. On the one hand, this application might be speculative. On the other, it might be highly strategic. On either end of that spectrum, motivation levels may be just as important. The issue is to determine the source of the motivation and whether the source remains a catalyst or driver. In short, is the innovation "needed"? The most important context for determining the answer is likely to be one that examines priorities for innovation versus improvement:

IMPROVEMENT
- increases the value of the result by enhancing its current type
INNOVATION
- increases the value of the result by changing its type

The key challenge to management is that innovation creates pressure on competency at an elemental level, possibly interrupting the terms of value already established for resources through their existing configurations. While the point of innovation is to get to a result, the practice of innovation requires that organization and competency are not misaligned through a redirection provoked by innovation.

V.

That leads us to the observation that infrastructure must be balanced against culture if the organization is to "get there from here."

In our environmental diagram (repeated below), this idea is illustrated as components and relationships that management can manipulate, with a range of approaches including invention, improvisation and innovation. Organizations take invention, improvisation and innovation seriously by managing the operational environment necessary to see them through.

Again, the picture's high-level story is about the complexity involved in the balance to be struck between value and its associated risks, and likewise between requirements and the options for meeting them.

At any given time, the current operational environment plays mediator by determining what types and levels of value correspond with given types and levels of risk. Meanwhile, norms (primarily including expectations and standards) usually set the terms on which operational alternatives are committed to requirements.

In situations of potential invention, improvisation or innovation, the broad middle zones of environment and norms are where change (through management) creates the energy and leverage that drive potential results.

VI.

In the diagram, the key change-points can be seen within three perspectives that comprise the environment: infrastructure, goals, and culture.

Strictly speaking, all three are generated by invention -- with the form of invention variously being physical or conceptual, essential or political.

Each perspective includes a characteristic value objective that is associated with a characteristic issue of risk. For example, infrastructure value is essentially expressed through management's ability to assure its availability, but meanwhile the risk inherent in infrastructure is in the configuration that it currently presents, which is also a consequence of better or worse management.

Typically, innovation adopts a new example of the value objective and calls for the risk to be realigned to it through the environmental factor. The major precedents for this have been reorganization and re-engineering, but the main observation that this illustration makes is the layout for integrating a variety of internal innovations. This puts the organization on an evolutionary path to threshold-level ability for producing and supporting a successful external innovation.

VII.

Two facts common to enterprise change also distinguish one organization's efforts from another:
- Direction creates focus; but different cultures have different ideas, which sets or resets direction.
- Competency creates opportunities; but different norms set different tolerances, which motivates or inhibits competency.

Management is working on direction when it tries to link goals to culture. When it tries to link infrastructure to goals, it is working on competency.

Improvisation navigates the potential connections in real time, which is the prerequisite for what the enterprise calls agility. Thus, improvisation works out alignment across the perspectives rather than within them.

However, the horizontal alignment effort that management has usually committed to is process improvement. In the big picture, that helps opportunity, but it only affects things from one perspective. Its relevance to goals and direction is still critical to protect its power to enhance the overall benefit of the operation. Infrastructure must be balanced against culture if the organization is to "get there from here..."

VIII.

A final observation about the model in the diagram is that it is an abstract model, not a literal one. This means that it is "scalable", because it can be applied to a small end-to-end effort as well as to a very large one. Wherever an effort can be described in terms of the related options, norms and requirements, there will be aspects of the effort paralleling "infrastructure" (the means), "goals" (the authorizing target results), and "culture" (the permissions and tolerances surrounding the effort). That means, according to the model, that invention, improvisation and/or innovation may be applicable.

Furthermore, since small efforts combine to complete larger efforts, we can see in a logically abstract sense that, for example, an innovation on one scale might be a component of improvisation on a higher scale.

Is this meaningful? As an example of "yes", consider that an innovation in infrastructure might enable an improvisation in business process -- one way to describe the architecture of a breakthrough to agility.

Posted by Malcolm Ryder at 7:51 AM | Comments (0) | TrackBack

August 15, 2005

Truth-based Management and a Single Version of the Facts

I.

Performance measurement has stampeded onto the scene in even casual literature discussing management.

The force of its impact is hardly about measurement per se, however. Measurement is not new. Rather, the buzz is all about what "performance" means.

Scholars, consultants, analysts, vendors and managers alike are aggressively exploring the scope of the term, searching for standardization of both its philosophy and its application in practice.

The resulting range of perspectives, from scholars to managers, is so sweeping that it often appears we could discuss nearly anything at all under the umbrella of "performance".

Despite this, much of the discussion now centers around a handful of ideas that appear with renewed urgency in many perspectives.

The two biggest of those ideas are:
- you can't manage what you can't measure; and,
- to manage effectively you must have everyone on the same page.

What makes those two the kings of the hill is that they each address the top problem in management today: operational complexity.

But -- what makes them such frustrating goals is that they each run counter to the "natural" probabilities of how management is exercised...

II.

Complexity is simply unavoidable. Business organizes its performance expectations around capabilities that actually require complexity to exist; and then it brings those capabilities into a game that features constant change. But at that point, ironically, the two most attractive characteristics sought of operations are simplicity and repetition.

Knowing that the knot of complexity should not really be untangled, management at least needs to reduce the number of significant variables crowding its moment-to-moment thinking, and improve the signal-to-noise ratio by deciding which ones to keep and which ones can be left out.

The normal strategy for this is to divide up and distribute responsibility for what must be thought about, so that fewer things must be attended to by anyone in particular. But naturally this brings the challenge of agreeing how to divide things up, and soon afterwards, how to overcome the many silos of information that result.

To recover from that, management usually brings a serious determination based on two resolutions:
- fact-based management; and,
- a single version of the truth.
In the typical management scenario, measurement is relied upon to "establish the facts", and decision-making relies on those facts to establish the type and priority of changes that will provoke improvement of performance. Interestingly, this approach makes it clear that measurement is a form of discovery -- and as the philosophers note, we tend to see what we're looking for more than we see what is there. Analysts further point out that the discovery instrument we use predetermines what can be discovered. Consultants note even further that the instrument is only as useful as its user is skilled. And so on... What emerges is a fairly definite realization that these "facts" -- born as they are through selection and invention -- are simply ideas that find agreement amongst the group of users who are considered to matter. But meanwhile, the discipline used to eliminate arbitrariness from "facts" is nothing other than competition from other facts!

Once we see that facts are actually propositions, the need for management to rely on them must move its focus from the facts themselves to the mechanism that validates the facts. When validation stops, the occasion signifies that the group intending to "stand by the facts" considers them to be "truth" -- and only at that point does management actually use the information to make decisions. In other words, the norm is truth-based management.

III.

Managers are responsible for deriving that truth. But managers everywhere have suffered from and battled information overload and inconsistency. That very experience is what has led many of them, whether politically astute or not, to acknowledge that "truth-based management" has been the reality. And, as the management of business operations has itself been segmented into different component departments or functions, the competition amongst different resulting versions of the truth drives executives crazy.

Hence the call for "a single version" of the truth. What this is supposed to mean is a single set of facts that represent the state of any subject or object to the highest degree of undisputed accuracy. The usual expectation is that this accuracy is practically indistinct from the validation that we've just discussed. But why is this expectation incorrect?

The answer is that the call for the single truth is driven by only one thing: the need for confident interpretation. This need presumes that with "one truth" there will be no contradiction in the meanings that can be drawn from the facts. Contradiction is a strong word, but within its literal definition of "speak against", it simply means that there is more than one way to describe something. In business, that variety is usually the desired rule, not the exception.

Naturally, when there is more than one way to see something, there is an underlying reason. The main reason in management is because management itself is distributed. Having different views of the same facts is justified by the same thing that justifies distributing management in the first place: the need for multiple points-of-observation. That does not conflict with the idea that facts should be accurate -- management should pursue a single version of the facts; and yet because they will be interpreted in various ways, the emphasis should be on the objective of the interpretation, not on the results of every available metric.

IV.

And that brings us to today's circumstances. But what does it have to do with measuring performance?

Performance refers to the degree of achievement towards a predefined target pursued in a predetermined way. Due to operational complexity, it is increasingly difficult to determine the extent to which achievement levels are the result of the predetermined activity path. If achievement levels are too low, too inconsistent, or too brief, then underlying chains of cause and effect must be identified to reveal the mechanism needing adjustment.

But the next thing that management has to do in that investigation is decide what it is that must be assessed about the "performance" mechanism. The assessment problem stems from confusing "performance" with other issues such as "value", "quality", "efficiency" and "execution". The common fault is that one of these issues crowds out the necessary visibility on the others, and poses as the whole story of performance.

In managing the business, each one of these issues is a mandated interpretation of circumstances -- one that results in more and more data being cultivated in a search for more precision in their respective explanations of what's going on. The challenge becomes to select from each perspective only what is necessary to construct a logical end-to-end account of the causes of achievement levels (effects).

The second thing management must decide is what degree of precision is necessary to basing the assessment on measurements. The third thing is then to decide what to do about the results of the assessment. Differences between the apparent chain of causality and the desired chain will have to be rated for their entrenchment and criticality. If the chain is altered, management may need to follow suit...

Most businesses have operated with the assumption that precise interpretation by a manager is the higher responsibility. But complexity is forcing us to realize that the base level of effective interpretation likely lies across management perspectives, not within them. Meanwhile, the higher responsibility within a given perspective is accurate but judicious observation.

V.

In an environment where complexity is the rule, performance is a concept that must be articulated across multiple perspectives. Performance is not just an event; it is the outcome of a competency that navigates diverse opportunities to direct activity towards goals. This often means seeing a single event in multiple ways, to find the chance of making it mean the most in terms of value.

A classic example of a single-fact with multiple interpretations is from the customer service world, where telephone support is expensive by the minute yet building customer relationships is the source of long-term profit. In this situation, the average length of a support call should be determinable with high accuracy and little debate. But the impact of that call length can be assessed in several dimensions. One point of view on a 10 minute call can be that 10 minutes is a high dollar cost. But another view is that the information exchanged in the ten minutes might increase the strength of the customer's efficiency thus loyalty and likelihood of buying again. Or it might signify that the support agent has now finally mastered a range of skills sufficiently to take the full range of issues in a call and resolve it without transferring it (even more expensively) to some other agent. These different dimensions are important to acknowledge and assess, but what should not be in dispute is the fact of how long the call was. Meanwhile, support costs need to be calibrated such that they enable impacts that drive the development of business value for as long as necessary. Since there is that important relationship between time, costs, and impact, the relationship must be managed, not just the parts, if the goal is to "improve levels of achievement against target levels through that means" -- that is, to improve performance.

VI.

In managing performance through measurement, the challenge is to first have an agreed model of performance that is comprehensive enough to address the important multiple dimensions; this is the "truth" aspect, the same page. Meanwhile, within any dimension of interpretation, consistency in point of view should be a goal; that is the "fact" aspect, the measurement foundation. Therefore, a mechanism must also be established to conceptually share "facts" across dimensions.

VII.

The biggest point of complication is where the interpretation of facts is also required to generate new data that must be used as "facts" in another dimension. Experience has shown that the classic way of doing this -- namely, hierarchical rollups of reports across management levels -- must be supplanted by information translation across dimensions.

This means nothing less than that a framework must be in place to provide an architecture of development and interpretation of facts. The framework is used by all management perspectives and levels. It provides a standing logic that explains the nature of the information needed to account for performance -- thus relieving anxiety about levels of accuracy and precision without discouraging them. Without this framework, performance measurement always risks merely replacing, at no reliable benefit, one kind of complexity with another.

Posted by Malcolm Ryder at 7:35 AM | Comments (0) | TrackBack

August 13, 2005

Business-IT Alignment: Three Levels of Change

It's most commonly said that the alignment of IT and Business focuses on the way that IT "delivers business value". Because of the pace and intensity of change within and around the business, the alignment effort emphasizes the need to define and protect both the deliverables and the integrity of the delivery path.

Said more carefully, IT delivers support of the value-capture modes of the business. This clarification points out that business value is not just "created at the IT point" and then run through a gauntlet of business issues on a delivery path.

But even that should be put more precisely. Instead, interlinked value-creating modes in a "value chain" are managed by the business, and IT is managed distinctively at each link, thus affecting the way that business value is ultimately realized.

Viewing that value chain as a hierarchy of dependencies lets us associate certain changes with different depths or levels of intervention, while still seeing that changes can simultaneously and independently occur on all levels. The challenge of alignment is to identify and coordinate these changes.

From the business point of view, change in the business affects the integrity and performance (i.e. success) of that "value chain" on three general levels.

One change level involves the definition of the basic components that are used to construct the business's production tools and procedures. Change alters the quality of the components.

Another and higher level involves the arrangement of the components into the various forms of facilities, resources and locations that the business uses in daily execution. Change alters these forms.

The highest level involves the agreements and expectations by which the business executes its activity towards goals, opportunity, and stakeholders. Change redirects activity and the demands it makes on underlying levels.

The following tabular diagram illustrates the active business elements in the management of the value chain versus change.
- A software application is taken as an example of IT being managed for alignment.
- As shown by the far left column and the center arrow, management expectations drive and constrain the cultivation of value at each link or level.
- These business expectations bear particular ways that IT functionality is developed into business resources.
- In turn, the effectiveness of those approaches is leveraged through operational management that works to confirm and conform the IT utilization to the business expectations.

Alignment must be seen as a business success factor if change across these levels is going to be strategic instead of merely opportunistic. Because the different levels and types of change are each independently sensitive to the strengths, weaknesses, opportunities and threats of the organization, management must continually view and assess the benefits and risks that various changes present to the value chain -- specifically, lowering the risk of driving benefits to the business bottom line.

Posted by Malcolm Ryder at 8:20 AM | Comments (0) | TrackBack

August 10, 2005

Distinguishing Effectiveness from Performance

First of all, why on earth would anyone care about this difference?

Simple definitions can quickly point out why:

- Performance is a measure of the actual level of achievement compared to the target level of achievement.

- Effectiveness is a measure of the actual level of impact compared to the target level of impact.

The relationship between the two is also logically simple: operations are managed on the basis of achievement generating impact.

For example, an operation might be run on the basis that creating 10 units of something will result in 100% customer satisfaction. But let's look at some possible results:

- If the operation only creates 9 units, it's performance is less than targeted.

- If it creates 10 units but the customer is still not satisfied, then the operation's effectiveness is less than targeted.

We know that these kinds of things happen, and we at least want to be intolerant of them if we can prevent them. So to put a fine point on the significance, let's look at how we respond to those realities.

The pressure point in this comes from the idea of "managing by results". Many management issues are so closely related to "improvement initiatives" and/or to "problem resolution" that it is necessary to know when responsibilities and accountability are being correctly placed or not.

In reacting to situations, error or confusion here can easily lead to counterproductive or even destructive efforts that mismatch the solution approach and the objective. In addition to mistaken responsibility and accountability, using the wrong person, process, or tool to respond to shortcomings generates inefficiency and possibly even collateral damage.

In diagnosing situations, confusing performance and effectiveness can simply, but profoundly, lead to attacking the wrong problem. Let's call this the "shoot the messenger" syndrome. We want operations to be effective above all else, but when effectiveness is lacking, is it because the performance missed its mark, or is it because the defined customer requirements turned out to be unreliable indicators of the true terms of satisfaction? On the other hand, what if effectiveness was sufficient, but performance had actually missed its mark? Let's call this the "house of cards" syndrome. Does the effectiveness mean that the performance mark (i.e., the assumed requirements) is unnecessarily high, or was the occasion merely one of luck?

Again, the pressure on all of this comes from the perspective of "managing by results".

- If the intent of defining and assessing "results" of operations is to drive the next cycle of operations to meet needs and standards drawn from those results, it is important to carefully distinguish when impacts are being specified as opposed to achievements.

- Then, the implied causality of performance driving effectiveness must be frequently reviewed and re-validated.

- Finally, it is crucial for executives and managers in charge to know that they will neither "shoot the messenger for delivering an undesirable message"...NOR build the business as a "house of cards".

Posted by Malcolm Ryder at 10:26 AM | Comments (0) | TrackBack

August 6, 2005

When your Objective is to define Objectives

One of the best sets of definitions I've seen to distinguish goals, objectives and actions is a Planner's Guide having nothing to do with IT or business strategy but simply with organization. Getting to the point immediately, the guide states, "Objectives are more concrete than goals. They represent results we want to achieve within a specific time-frame."

It's seemingly a simple, efficient definition, but looking into it carefully, there are several points worth elaboration.

For one, the idea that "we want" means agreement amongst all parties. It is assumed, furthermore, that the relevant parties have some form of authority. The interesting question to ask here is, which came first -- the relevance, or the authority?

For another, the idea of "results" must be defined. This is most often where things get really confusing unless some standard or categorization is in use. For example, either of the following could be seen as the path to results we want to achieve:

- meet a specified requirement (would be "agreed", but could still be arbitrary)

- satisfy a critical dependency (would be logically mandated by a model, but the model might be hypothetical)

Although those two paths can account for virtually all instances of "results" we might consider, they both typically leave plenty of room for debate or negotiation amongst stakeholders about how important the result is to each stakeholder's perspective on fulfilling the ultimate purpose. Why is this the case? Because the truth is that depending on the active perspective, all "requirements" are not necessary, and many "dependencies" may be unknown or overlooked.
This points to the need for first reaching agreement on what the meaning is of the stated ultimate goal or purpose. From there, defining objectives is a step that begins to build a model of fulfillment for that purpose.

The general experience of practical science is that many phenomena are observed before they are understood. When a mechanism has been observed that succeeds at fulfillment, it tends to be adopted as the model until something else appears to do the job better. Comparing the dynamics of the two different approaches can yield an explanation of why one works better than the other. If obtained, that explanation typically becomes adopted as an "objective" of the fulfillment effort.

Modeling fulfillment is an exercise that runs in two directions -- analytic (diagnostic) and synthetic (inventive). But in management, based on the example above, more objectives are likely to be iteratively discovered than theoretically conceived -- because in management, "good enough" is largely dictated by "on time." In business, this means further that it is typically less expensive in the end to do trial-and-error based on known precedents.

Analysis is a method of attempting to discover precedents in order to make them known; this is generally called "business intelligence". In this way we can see that defined objectives may be the result.

A famous example of this is the original "Chaos Report" from the Standish Group in 1994, which studied the performance of project management in fulfilling the goal of "successful project". A standardized working definition of the goal -- "success" -- was applied for all projects studied. Projects were evaluated for success or failure. Then, reasons for failure were catalogued. Since the moment that the information was published, the "failure-reasons" have been dealt with as project management "success factors" -- where avoidance of failure is predicated on meeting the requirements of eliminating those errors that lead to failure. The Chaos Report ranked these success factors in order of highest criticality to lowest:

Project Success Factors
1. User Involvement
2. Executive Management Support
3. Clear Statement of Requirements
4. Proper Planning
5. Realistic Expectations
6. Smaller Project Milestones
7. Competent Staff
8. Ownership
9. Clear Vision & Objectives
10. Hard-Working, Focused Staff

So -- are those ten items "objectives"?

As an experiment, let's group those items into a smaller number of categories.
- Buy-in: items 1, 2, 8, 10
- Stakeholder Communications: items 1, 3, 5, 9
- Technical competency: items 4, 6, 7, 10

It's not difficult to imagine that timely, persistent buy-in would result from successful communications about relevant capabilities. Since that logical interaction is a way of modeling support of projects and thus adding assurance to the project's potential fulfillment success, then are the three categories "objectives" ?

The answer is Yes, from the perspective of "project support"...

But how about from the perspectives of "project control" and "project development"? Those are two equally important aspects of project management. Each aspect may need a respectively different group and grouping of success factors, which might lead to differing higher-level requirements or dependencies being identified.

But in any case, this generally suggests that a diagnostic approach to performance will yield success factors that roll up into objectives, with objectives being categories of desired effects.

In quickly surveying (via Google and Teoma) a history of related terminologies, the term CSF (Critical success factor) is generally synonymous with "Objective", while the measurable execution of action and events underlying the CSF is typically referred to with the concept of KPI (Key Performance Indicator).

Yet the problem persists that a logical distinction of underlying issues largely depends on what "goal" is considered to be the top-level starting point and who sets that point. How do we bring a standardized discipline to branching or cascading from the starting point, regardless of where it is?

An important related observation fitting the bulk of those here in Archestra's content is a simple one: acts and events underlie execution, and execution underlies performance. Said another way: behaviors have effects, and effects change states. Objectives are typically concerned with important states. In parallel to that:
- the ten sins of project chaos that Standish uncovered would be seen first as execution items (KPIs, effects) needing better underlying behavior (operational success factors);
- and the three derived categories of effects are performance-level success-factors (Objectives) representing positive states or conditions needed for success.

For another extended discussion of this issue, visit BPMMag.net

Posted by Malcolm Ryder at 12:37 PM | Comments (0) | TrackBack

August 5, 2005

Communications in Performance Management

The number one problem in managing performance is not a matter of correct processes but rather a matter of knowing what is currently really going on. Therefore, a proper solution offers an integrated management communications platform that allows all members of the organization to:

- continuously observe and immediately understand the context and implications of operational events;

- communicate the issues pertinent to the observations and understanding, and appropriately collaborate on timely follow-up decisions and actions that create or restore critical alignment of activities to the directions of strategic and tactical goals.

Observation becomes meaningful when the items within view have definition. In performance management, the importance of communications is to indicate the impact of events, but this cannot be done unless both events and impacts are specifically and suitably defined. Events are defined within the mode of monitoring, and impacts are defined within the mode of interpretation.

Understanding is accomplished when the definitions allow relationships of events and impacts to be determined and classified, and when those relationships can be used to account for the status and dynamics of circumstances both present and future. Typically, this understanding is represented in a degree of compliance to rules and plans that are intended to control the status and dynamics by force of design.

As imagined in the diagram above, the performance management solution must bring practical visibility to the fact that any of the terms of the operations environment, and any of the values in the management context, may change at any time.

Changes will affect the events and impacts observed, thus their relationship can change and take on a different meaning. Ultimately, what the "manager" must attend to is the need for orchestrating the changes in order to direct affairs in a logically calculated way towards the desired meaning. Given the number of variables involved, the role of "manager" may be executed collaboratively; therefore, a major purpose of the communication is to assure that the currently desired meaning is known to all parties in the management collaboration.

Posted by Malcolm Ryder at 7:20 PM | Comments (0) | TrackBack

August 3, 2005

ROI: The Echinacea of Change

The trial results are in. The University of Virginia most recently confirmed what has been repeatedly determined in earlier testing: that the most popular non-pharmaceutical remedy for the common cold simply doesn't have any scientifically evident positive effect.

Key commentators on the new results pointed out on NPR that because of the way colds work, there's no difference between the way a cold subsides with echinacea versus without -- and it won't subside any sooner. So, why do people take it anyway?

Clearly, some "benefit" is being obtained. It's just not the particular benefit that people use to "officially" justify their use. For the most part, people actually take echinacea because:

1. it's important to them to take action -- specifically, to do something therapeutic that they control themselves but that must therefore be low-risk;

2. their judgement of credibility about what to do is largely driven by the credibility that they attribute to people ("act-ors") who they personally know or identify with -- which includes friends who use the stuff;

3. and here's the zinger: they hear about people using it, so often that they have become suspicious of what it would mean to not try it.

What we know about the sum of these influences is that people will likely keep taking echinacea as long as it does not become inconvenient and does not prove to hurt them. OR... until something else comes along that fits those three conditions even better than does echinacea. (Likely, however, it will take equally successful "viral marketing" of the upstart challenger, to actually alter their preference.)

Of course, it's great when that cold you had finally goes away; and when it's over, it is easy to attribute the relief to whatever you were taking during the malady.

And right there is the lesson for business. In business, when confronting change, the top self-therapy has been "ROI", although over and over again it turns out that as a medicinal it has little to no impact on surviving a business change. The change commences, and progresses how it progreses, ROI or not. In the culture of a very high percentage of sustainable businesses, accepting and executing a controversial proposal is like catching a cold.

Why? Because, we treat it that way. Excepting when we already know we are being hurt by current conditions, we naturally resist change. But what testing proves is that ROI is frequently an attractive "additive" to change, like echinacea is to a cold, not because it "cures" the stressful situation but because it cures the anxiety about the situation.

This might not be such a bad thing, though. One could argue that feeling better about having a problem helps other parts of the recovery mechanism to be more effective. The biological benefit of lower distress is that valuable energy is not diverted from the mechanisms that prove to be directly critical to improvement. This is what the approval process is all about in business: stress reduction. And ROI's role is to improve approval.

So what's the harm? Well, as the famous saying suggests, give some people a hammer and they think all problems look like nails. If the use of ROI crowds out the use of what is really needed to solve the problem, then the real problem is not being solved.

The danger in mis-use of ROI is in applying it as if it was a measure of performance to distinguish competing opportunities. To show why this is true:
- begin with a definition of what "opportunity" means
- describe the difference between what life is expected to be like if the opportunity is realized versus not
- rate the probability that executing towards the opportunity is any harder than executing towards a different and no less interesting alternative

What comes out of that is:
- a direct consideration of how competency and scope relate to each other, and...
- a direct awareness that the viability of the opportunity only exists within those terms. These are not formulated by ROI.

For managers, the punchline here is that ROI should not be used to describe why it is important to do one proposal versus another. Instead, ROI should be used only to provide incentive to parties who might support proposals that need to be executed. As incentive, ROI can be a "success factor" -- but the actual value of doing the proposal is determined by how important it is to achieve the changed circumstances targeted by the proposal -- that is the true value of the proposal's objective.

With competing proposals, Choice A may have lower ROI than Choice B, but Choice B may still be more important! Said somewhat loosely for dramatic effect, it is Value, not ROI, that solves the problem. The challenge is to determine how to measure and represent value; stopping at ROI misses the point.

But what about that viral marketing for the newcomer? Look no further than Performance Management.

Posted by Malcolm Ryder at 7:50 AM | Comments (0) | TrackBack

July 29, 2005

Understanding the Value of Quality

Why do we care about quality?

Another way to go at this is to point out that quality is important only if someone cares.

That makes the opening question, "Who cares about quality?"

As a business issue, we go right to the stakeholders to start working this out. A producing organization provides a product, and it does so to a lesser or greater degree of quality. But what does quality mean to the stakeholders of the production and the product?

In every stakeholder's case, quality is a characteristic that satisfies what the stakeholder needs the most. In the following diagram, we quickly catalog what this means. In general, value is a distinction that the perceiver holds in highest priority. Quality is an enabler of value. That allows us to understand quality as the "success factors" of value, making quality definable and even measurable.

Probably the most overlooked aspect of the above is not that there are, according to the role involved, different elements of perceived value that "quality" should support. Rather, the neglect is of the fact that often a single party has multiple roles simultaneously. When multiple roles are active concurrently, it is far more likely that the party will express needs that are some blend of numerous success factors but a somewhat random blend. If quality is to be managed to support value, this blend will need to be sorted out so that the proper set of responsibilities and constraints can be identified with (and assigned to address) each factor.

Posted by Malcolm Ryder at 8:47 PM | Comments (0) | TrackBack

July 28, 2005

Why performance evaluation must precede cost reduction

"Vision" and "Mission" intend to continuously guide organizations to a position and stance that is considered "optimal" for the business.

As defined by Princeton's Wordnet, optimal means "the most desirable possible under a restriction expressed or implied".

Certainly, companies consider "excessive costs" to be an expressed restriction -- but worse a restriction that actually represses desirable outcomes.

To understand how costs amount to a repression, cost must be seen in a variety of contexts.

Investments that create resources build capacity; capacity creates opportunity to respond, and response creates the differentiating impact measured as "value".

- But expenses that deplete resources or capacity or responsiveness risk altering the potential impact and can therefore erode or prevent value. (This might be expansions or alterations of property or systems that increase use by some but provoke inhibiting problems for most other users.)

- And excess capacity carries costs that are therefore unavailable as investments in other uses. (For example, consider funds that are allocated to maintaining systems that are not being used.)

- Likewise, expenses that intend yet fail to create capacity hold potential alternative investment hostage, decreasing opportunity to respond. (Here, think of projects that fail, or purchases that acquire the wrong thing.)

Since value is defined both by type and by level of impact, the question brought up by those circumstances above is this:

- Given the demonstrable use of current capacity, does the organization consider the value actually currently expected, which is the real value at stake, to be "the best possible position" ?

If the answer to that question is no, then what is the proper correction?
- Should managers concentrate on removing the risks to higher levels of that expected value?
- Or instead is there some other type of value (that is, some other differentiating impact) that should be installed as the target?

Although we can see that one of those choices should be taken, neither decision necessarily lowers costs!

Meanwhile, the only way to rationally answer either question requires that first we validate the currently targeted type of value as the correct type.

This brings up the issue of mission. A mission is simply a definition of an intent to produce a certain differentiating impact. If current capacity does not support a likelihood of succeeding at the mission, then the value promised by the mission is clearly at risk and potentially impossible.

When capacity mismatches mission, the only two corrective choices are to change the mission to fit the capacity or to increase the capacity.

The chief obstacle to those correctives is a contract or other formally binding agreement that does not allow adjustments without an additional expense that outweighs the related cost-benefit of making the adjustment.

Whether literal or metaphorical, the oneous "switching cost" can raise the cost of a capacity correction beyond practical acceptance, while leaving the capacity imbalance unresolved.

Further, in that way, the consumed-to-date portion of investment in the mismatched capacity becomes "sunk" cost, and the prevention of capacity reorganization increases the effective cost of some potential alternative opportunity (i.e., "opportunity cost").

Overall, what this means is that cutting costs is an action that actually needs to generate a return on investment greater than or equal to the amount of costs cut. Oversimplified, this says that a ten-dollar cost-cut needs to target a twenty-dollar gross benefit. Why? Because if the saved ten dollars is needed at all, it should become an investment working to earn its own way.

This "ROI of cost-reduction" will not materialize except through renegotiation of the agreements underlying the switching costs. Wherever the renegotiations don't offer stakeholders equivalent-or-better benefits compared to what they already have, the mission of the organization remains potentially compromised by stakeholder resistance.

This illustrates that change management is a prerequisite to the success of cost-reduction.

Then, to understand what must be changed and thereafter derive a cost strategy, stakeholder roles in the proposed new configuration of capacity must be mapped out such that their performance under the new agreements will logically produce a mission success suitable to replace the old (mismatched) mission results.

By comparing the proposed performance logic against the bases of current performance, change requirements emerge, and costs related to the changes surface, which allows adjustments of current costs to be made more rationally. Punchline: cost reduction is not an action: it is an effect.

Posted by Malcolm Ryder at 11:34 AM | Comments (0) | TrackBack

July 27, 2005

Performance Improvement requires Change Management

Performance Management is a concept best defined by business solution developers. That is, it is based on a definition of a problem called performance, and by focusing on a theory of the problem it derives many approaches and components of "solution"...

In a comparison of myriad definitions from vendors, analysts and industry journalists, the working common denominator appears to be "management of the alignment of people and technology to improve the effectiveness of their run-time support of business objectives."

One of the more significant notes about that consensus is that it does not include "processes" in its grasp. This might be for any of several (debatable) reasons, such as:
- business process management (BPM) is thought to be a peer of performance management rather than a part of it
- solving process problems is not thought to improve the solution of performance problems.

While both of those notions seem unlikely to be true, what makes them provocative is the way they force us to defend our theory of the "performance" problem. Indeed, since process management has already had intensive attention for years through automation and reengineering initiatives, the current idea that the "performance" problem has remained unsolved lends credibility to the sense that a focus on process is at best necessary but insufficient. The suggestion, then, is that a focus on performance is at least more important than, if not actually an alternative to, process management.

Put as simply as possible, the difference between process management and performance management is, respectively, the difference between "how to" and "how well"...

Defining the performance problem as "how well" readily explains the collection of interests addressed by performance management.

At the core of the problem theory, there is a set of target levels of activity impact or event impact.

The impacts are meaningful in any of several ways (contexts):
- financial
- legal
- operational

Standards or benchmarks are established and adopted to set impact targets in any of those contexts.

The compliance of operational outcomes with the impact standards is continuously monitored, which provides alerts and data for supporting further management decisions.

The fundamental issue is therefore how to manage impact targets and manage impact compliance.

This two-pronged management requirement means:
- deciding on what specific examples, mechanisms, and evaluation models to implement regarding targets, and
- doing likewise regarding compliance to the targets.

Given that perspective, it isn't surprising to hear lessons learned such as that offered in Intelligent Enterprise by former corporate planning chief and Hackett Group cofounder David Axson:

"you can put all sorts of policies and processes in place to try to achieve compliance, but if [that] doesn't change practices and behavior, your investment in compliance [initiatives] is of marginal value..."

And why is this a predictable outcome?

While policies deliver explicit guidelines and definitions to identify priorities and permissions, their effect is essentially environmental, leaving inhabitants with the politics and preferences of adapting to the environment -- in other words, with the latitude to not comply.

And while processes prescribe the rules of activity, they don't set the motivation. And the more complexity exists in the design of a process, the more opportunities there are for motivation to vary from what is minimally required by the process to meet its execution requirements -- in other words, to not meet the "standards" for support.

The punchline is that if "performance" is essentially the degree to which execution meets impact targets, and execution is a variable phenomenon driven by behavioral issues, then there is a two-tier prerequisite to performance improvement:

- successfully managing performance (to meet targets) will be critically dependent on deliberately managing the changes that affect behavior; and...

- successfully changing the impact targets (to define "improvement") will specifically require managing behavioral adaptations to the perceived opportunities and risks of the "working landscape" offered by the new environment that compliance prescribes.

So what about technology? How does that play into the situation?

The two dominant ways that technology affects the situation are procedural automation and communications. Typically, business requirements for speed and accuracy in work flows mean that people depend on the efficiency gained through technology to "effectively" initiate, intervene and interact. However, leveraging technology functionalities offers appropriate impacts when in the right hands, and risks inappropriate impacts in the wrong hands. What makes this particularly important is the pervasiveness of the technology. Consequently, the secret to technology's role in its alignment with people is in how the administration of the technology allows the organizational structure to drive value by meeting targets. That is, technology is a critical environmental factor of organizational behaviors, affecting behaviors while also asking for behaviors to adapt to it.

Posted by Malcolm Ryder at 5:36 AM | Comments (0) | TrackBack

July 20, 2005

Managing versus Measuring: IT's Value to Business Performance

At CIO Decisions Magazine, Thorton May serves up results of an excellent survey of approaches being used to understand the value of IT to the business.

In general, the results indicate that the practicing managers of corporate IT range hugely in their established opportunity and intent for representing the way IT impacts business performance.

The survey does not investigate what lies behind the opportunities, so we don't get into the availability of time and tools that create the "business-perspective" visibility on IT. However, it is axiomatic that the way you look for something determines most of what you can see. In that regard, "formulas" that represent IT influence are more important than the tools and time used to apply them.

The four most important "takeaways" of Thornton's discussion are:
- IT is pervasive in the business the same way that management is pervasive, so it may be illogical to try to isolate "IT value" as a single global variable except in the various specific contexts (occasions) of IT usage.
- There is a difference between "value" and "performance"
- Measurements representing IT influence are not always numeric.
- Too much measurement is more bad than good.

One possible cause of the persistent confusion about value in IT is that the effort to connect IT Value to Business Performance doesn't make sense until after the connection of IT Performance to Business Value has been established.

If IT outputs are first associated with conditions that the business defines as important to the business, then a logical representation of "IT performance" exists. IT execution can be measured in those terms of performance, thus a picture emerges of when, how and why IT contributes to the enablement threshholds that the business agreed are needed for business functions to have their shot at meeting business goals.

Thus having the "business value" of IT performance defined, managing IT execution is a straightforward effort to have IT performance meet business needs. As a start, this is exactly what should be represented by a service level agreement (SLA).

Then, the performance of the business is nothing less than the results obtained from the business's execution of functions enabled by IT's performance. Presumably, the business has some functional targets to hit, which will be how business execution will be rated for its value to the business.

The biggest issue emerging from this is the need to separate the business's achieved capacity of enablement from the business's achieved competency of capacity utilization. IT can provide the capacity of enablement, but (contrary to the mythology of automation) IT simply cannot make the business use the enablement wisely.

If the business does not have working definitions of those two things, that furthermore unfailingly distinguish them from each other, there is no reason to believe that IT's influence on the business performance can be logically designed, tracked or analyzed. Naturally, this also means that no attempts to determine ROI are actually meaningful; instead, they are simply sophisticated statistical fictions prone to being evangelized or rejected by company politics.

The only exception to that assertion is the case of IT actually preventing a business function from being executed -- a huge issue driven by the way that the business relies on IT. In this case, we think in terms of a "negative contribution" -- one that is usually either unexpected or not officially tolerated. But in this case, what is important is to not suddenly have a double-standard of measurement methodology. If the contribution measurement philosophy is based on describing how IT relates to intended consequences, then the description must also neutrally cover how IT relates to unintended consequences. As we do this, it is important to neutrally separate IT's relation to desirable consequences and undesirable consequences.

This neutral and comprehensive perspective, which prevents arbitrariness in political tolerances, forms the basis of understanding otherwise neglected issues such as opportunity costs incurred by the influence of one IT implementation versus another. Since the business is responsible for deciding on those tradeoffs, it is clearly a matter of management and strategy more than of IT per se. When "negative contributions" occur, they must be defined and recognized -- as the results of:
- either bad decisions or bad enforcement that should not be politically written off;
- or bad luck (such as natural disasters or external attacks) that probably should be politically written off.

Posted by Malcolm Ryder at 8:11 AM | Comments (0) | TrackBack

July 19, 2005

Management Performance versus Performance Management

All businesses want a return on their investment, and ROI considerations nearly always begin with a valuation of the assets to be consumed.

However, one of the key themes amongst items posted here at Archestra is the idea that an "asset" is not the same as a "resource" -- and that it is the value of the resource that needs to be managed, not the value of an asset.

In this view, an asset becomes a resource when it is given and maintained for a certain assignment; in a performance perspective, the value of an asset without an assignment is "undetermined"... So to the extent that people, processes and technologies are dealt with as resources, the whole ROI situation rests on the competency of the managers who turn assets into resources, and the performance issue has to do with the results of management.

This always makes me sort things out by thinking in terms of "management performance" rather than "performance management" -- and it differently organizes the thinking about what kind of things really need to be measured for their "results" (outcomes).

The claim here is that management outcomes, not asset inputs, are the building blocks of what is referred to as "performance", and the value that is associated with assets can never be separated from the way they are managed -- except when the assets are simply being bought or sold "on the market".

Industry analysts characterise the practice of Performance Management as one in which alignment of people, processes and technology to common objectives is the lever for generating the desired value and effectiveness of those people, processes and technologies -- while the motivation for the alignment is to improve "business results". It is noteworthy, we think, that business results might be measured differently from its components' value and effectiveness, but perhaps annoyingly we have to be able to do so since we know from experience that both luck and "winning ugly" do happen and also that best practices don't always cause best results but rather merely allow them.

Parsing that within the perspective of assets versus resource management means seeing things as follows:
- execution is the utilization of the resource,
- alignment is the compliance of the execution to objectives,
- performance is the outcomes of the execution
- value is the significance of the performance

This ultimate focus on value (as defined here) replaces the typical narrowness of "financial impact" and allows "strategic impact" to come full force into the picture. Likewise, it broadens the concept of "returns" on the investment into a set of concerns that more accurately and comprehensively describe the realities of what allows a business to be successful -- not just arbitrarily in the moment such as at quarterly report time, but over the life of the business as represented by the sequence of positions in the market that it could (and did) hold. This is where "significant" things such as risk mitigation, change management, quality improvement and other critical business enablers and sustainers come into play as goals.

Also pushed aside is the narrow definition of "assets", since identifying resources is more important and we know that things such as time, relationships, knowledge, permission and position are all resources along with money and labor (skills and tools). This goes a long way towards explaining why a concern with performance management sprouts in so many different occasions and sectors of the enterprise.

The punchline, though, is that what really must be attended to is the effectiveness and value of management, and the logical target payoff of so-called performance management is not a return on assets but a return on management.

Posted by Malcolm Ryder at 7:44 PM | Comments (0) | TrackBack

Fast, Pretty, and Cheap

Bob Evans over at Information Week wrote up the importance of HP's new CIO Randy Mott to its strategic needs. Mott is the mastermind behind Wal-Mart and Dell superiority in IT enablement of business performance.

Is strategic success portable? Evans points out that, "During the five years Mott was CIO at Dell, the company's revenue grew more than 60%... among Mott's biggest contributions were helping the IT team set strategic priorities and putting in place global standards... At Wal-Mart, Mott specialized in cutting latency out of the supply chain and ultimately increasing customer intimacy by helping to ensure that the seller was offering what the buyer wanted, when the buyer wanted it, and at a price the buyer accepted. As a result, in the six years that Mott was Wal-Mart's CIO, the company's sales almost tripled..."

Clearly Mott is a guy who knows how to get things done. But let's recap that: Mott focused his (IT) operations on three things:
- speeding up the runtime throughput of operational processes
- aligning IT's support of the business to its clarity about buyer's requirements
- making that sustainable and affordable in a way that allowed continuous progress over several years.

In a nutshell, he made operations fast, pretty and cheap.

The official joke about fast-pretty-cheap is that you can pick any two of them but you can't have all three. But evidently, getting all three really is possible, and when it happens you become Number One in your niche.

So, what's interesting to think about is how those three impacts rely on each other. In general, we're looking at how the operation establishes a fit with (a.) its environment, (b.) with the prospective customer/beneficiary, and (c.) with the market. When productivity feeds quality and quality feeds acceptance, you get a winner.

Faster operational throughput presumes that the chain of inputs and outputs that link functions and processes together is "streamlined". That is, the functions and processes all know what is the right direction to go in, and they offer little resistance to the environment they are moving through. "Efficiency" is an easy way to refer to minimizing resistance while strengthening direction, but policies and standards actually go directly to the problem in a more profound way. By reducing the number of operational variations that will be attempted in the first place, policies and standards reduce the volume of necessary downstream corrections and distractions, while making it easier to recognize when recurring activities are actually generating benefits or risks.

Clarity about the impacts of activity underlies operational quality, and quality is pretty. Impact clarity means that the downstream benefits and risks of most importance can be targeted more accurately and confidently. As a result, quality promises can be made more rationally and certainly, which increases the customer's interest and attraction.

Customer requirements come from the perspective of the customer's needs, and the greater the need is, the more valuable it is to satisfy the need. But meanwhile, the usual laws of supply and demand apply. The availability (supply) of that satisfaction is a strong lever in prices. But the customer's need (demand) can also range in two ways: from critical to merely discretionary, and from few people to many. So, the smart business wants to focus on the most valuable "sets" of requirements. By tailoring the fulfillment operation to quality for a particular importance and volume of need, economy of operational scale is easier to determine, and improvement there allows more attractive pricing and coverage for customers. Then, of course, what finally makes quality inexpensive to produce is better sales that readily pay off the investment in quality.

So the fast-pretty-cheap trick is not about which one of them to leave out. Instead, it is about how to order and align them. This also reflects CIO Mott's approach when he first arrived at Dell. His first steps were to reduce the number of planned projects by 90%, leaving only those most important to business capability for making products more marketable and sellable. Recognizing that cost is always a critical issue, his initial emphasis was actually on prioritization and focus, not on cost. As Bob Evans quoted him saying, "once we got our priorities set, we were able to be a lot more effective." And we know that both Dell and Wal-Mart are price leaders as a result of their effectiveness. It looks like the best way to reach "cheap" is to stop wasting effort, and do the right work.

Posted by Malcolm Ryder at 7:55 AM | Comments (0) | TrackBack

June 27, 2005

More on "Great Management versus Great Strategy"

Recently, in so many words, I posed the question, "what good is strategy without great management?" However, my not-at-all ulterior motive was also to question whether management knows what it is doing if it is operating without a strategy.

Results rule, we can usually assume -- and they come with or without strategy. But whose results count? Certainly, there are stakeholders and shareholders whose view of things is all about their own respective benefits; their stubbornly dominant perspective on management is quite tolerant of "collateral damage" (namely, to other stakeholders) in pursuit of what is called "performance". The question of delivering gains gets strategic for these stakeholders mainly when they wonder if they should stick around for a while, exposing themselves to the same risk they ask of others. "Can management deliver gains twice in a row? Will management sacrifice me twice in a row? Somebody show me the plan!"

That triggers scrutiny of management. Plan the Work and Work the Plan has been a "performance" mantra for decades, and managers are hired to make sure that it is followed. Inside the company, their efforts are rolled up into an idea of "performance", but often not until after their impacts have been rolled up in a different way outside of the company.

The external focus on impacts is unavoidable, but ironically it can readily make internal performance an avoidable topic or make its evaluation arbitrary. To counter this, we keep internal management in the foreground by asking:
- what is the importance of managing internal performance?
- what are the critical factors of the manageability of internal performance?

These are not new questions, but now there is "buzz" around the idea that "execution is more important than strategy", and performance management is exploding into view as the biggest new "must-have" since CRM. This makes it feel like the labels management, performance, and execution are all the same thing.

Well, look at life from the manager's point of view: with a modern business's relentless pursuit of cross-functional operations, too many managers can't really say that they had enough control of either execution or strategy to be held accountable for it. Sitting in the hot seat of being evaluated, managers want to know how to protect themselves, and now they have the solution for that -- performance management.

Arguing and establishing the A-to-B connection, between (a.)internal compliance to plan and (b.) external compliance to impact targets, is certainly not a new activity. A quick run through Google Scholar picked up "performance management" references from 1988 and real enthusiasm by 1999. But perhaps what really is new is the idea that the effort-to-impacts connection would be continuously attended and continuously evaluated, rather than just occasionally or incidentally. In effect, the change of attention is from being reactive to being proactive -- even moreso as a mentality than as an activity.

So what does this have to do with strategy? The main point worth making is that the suspicion or proof of a performance connection is not the same thing as the preference for or value of that connection. For example, what does it mean to be really good at doing the wrong thing, or doing the right thing badly? Comprehensive management makes for doing the right things right. A judgement call backed by action.

Strategy is a management discipline that attends to the responsibility for formulating a logical vision of deriving benefit from conditions carrying risks. Managing strategy is about ensuring that this vision is logically strong instead of weak, and highly usable instead of irrelevant. A strategy is an input to operations. It might even be enforced in a way that makes it a cause.

Then comes management's responsibility for effects. The "opposition" to clarify is therefore not about strategy versus execution, but instead between two aspects of results: performance and value.

This is not a complicated distinction. In a situation of multiple stakeholders, where benefits are not equal for all, a given performance has a different value for one stakeholder versus another. Even when there is only one stakeholder, a given performance at one time may have a different value than the same performance has at another time.

Strategy helps set terms in value management. By making the relationship of multiple values explicit in a variety of ways (priority, timing, context, etc.) strategy helps to establish the criteria and points of view that will be used to manage values with and against each other for designated stakeholders. (For example, an obvious manifestation of this is a portfolio derived from a strategy, with the portfolio being the main instrument for ongoing value management.) As a result, typical signs of strategy's influence are policies and initiatives. Imagine trying to manage without those!

As opposed to value management, performance management focusses on the means and modes of progress. The accountability for progress is defined in a model of progress -- different from a model of value. Because a model is made available, it can be used both prescriptively and descriptively. The progress model -- usually a scorecard -- presupposes that values have been determined, and it does not attempt to change them. However, it provides the opportunity to examine how the means and modes in use are most associated with the paths towards the value. The stepping stones of the path are usually "key" conditions expected to be necessary for the value to be obtained. The typical manifestations of managing the means and modes are operational processes and practices, but what is the primary influencer from which the scorecard is derived and which processes and practices manifest?

Probably half of the time or more, real-world testimonials answer that strategy, again, is the influence. Count on two-thirds or more cases citing either "strategy" or "mission". But understanding the difference between value and performance gives a strong clue that such cases, examined carefully, would actually show evidence of a difference influence found common to all scorecarding instances: a competency framework.

The company's idea of its competency is equally important as strategy because it brings the notion of what the company should be able to do, while strategy brings the notion of what the company needs to get done. Understanding that strategy is about management engaging values, while performance is about management engaging competency, the semantic confusions of management-vs.-strategy or execution-vs.-strategy dissolve.

For many companies, perhaps the excitement of the "execution" problem is that the business environment has brought the challenge of constant change deep into the organization, changing competency from something like trained muscle memory into something a lot more like the nervous system. Learning to do the right things, on time, renews competency as the frontier of performance.

Posted by Malcolm Ryder at 9:33 AM | Comments (0) | TrackBack

June 24, 2005

A Purpose Driving a Performance

The triple-take I did today when reading through InformationWeek might have come from not paying enough attention to the headline of Stephanie Stahl's Editor's Note on CIO priorities, Customer Focus Promotes Growth; but on fourth thought, I think not!

A lot of us are accustomed to hearing that customer focus is a strategy. And although the idea that strategy promotes growth has lost some cache in the age of Execution, there are those who still believe it. Certainly there's momentum still behind thinking of growth as "good performance". Thus, the argument that strategy stokes good performance.

But according to the article, Michael Treacy of Gen3 Partners had recently warned the audience at the Optimize CIO Summit that "The best management team beats the best strategy every single time." And the followup advice: commit everything you do to customer value.

Take One: okay. When is a "strategy" not a strategy? What Treacy seems to be doing is drawing a competition between commitment (organization? action?) and planning (ideas?)... By saying the Best this or that, he hasn't given any company a leg up on any other, since every company must be managed. So instead, how about great management beats not-so-great management -- and the real question is, what makes management great? Is it the guidance received from a strategy, or is it the guidance from something else?

Take Two: What if the purpose of strategy is actually NOT to drive "performance" ?? One thing we know about strategy is that when you do have one, you have a consistent, goal-oriented perspective from which the running states and events of the business are evaluated. But the perspective is a hypothesis, essentially, about how things work to your benefit, and the point of the strategy is to encourage a pervasively consistent logic in decision-making. Reality keeps testing that hypothesis, though, and eventually you find out if the hypothesis was "correct"... Is Treacy saying that management is about doing something that connects with a reality that is more influential than strategy? (Sidebar: I'm reminded that Columbus had a theory about how to find what he was looking for. His theory was wrong, the world's not flat; but he "managed" reality, and wow, look what he found. The question is, what's the chance he could count on a payoff like that twice in a row, using a bad theory? Let's just say, with our excellent 20/20 hindsight, that we'd let him cruise a small planet, but we wouldn't put him in charge of the space station rendezvous...)

Take Three: If pervasively consistent logic can be had from something other than strategy, is it the management team that is the source? If yes, maybe what's being put up front is Leadership, which is not the same thing as strategy. Meanwhile, I can't help but notice that strategy and leadership are both forces of Alignment.

But being customer-focussed does not magically "turn managers into leaders" -- and if growth comes from customer focus, maybe it's because (and only when) leadership is strong enough to draw growth from customer focus...

Which leaves me with three thoughts:

First, what the heck would make a strategy a "best" strategy if there was not correspondingly great management available to back it up?

Second, certainly there are leaders who mainly try to draw growth from strategy. For those who see customer-focus as a strategy, they're also likely engaged in using great management to draw growth from the strategy. Maybe a "contest" between strategy and management is only happening when the leader feels it and feels like one of the two must change.

And third, once again, what makes great management great? Well, just try to find a great management team that doesn't have great communication. And what do they talk about? The same things that a strategy would ask them to talk about... Why is this so interesting? Because one of the top reasons that senior managers and executives voluntarily leave their positions is that they feel their views are not being taken seriously. And what is the focal point of reconciliation of divergent executive views? Strategy.

Posted by Malcolm Ryder at 4:04 PM | Comments (0) | TrackBack

June 22, 2005

Managing the Productivity of Knowledge Work

Co-founded by a group of organizations including Accenture, Microsoft and Xerox, the Information Work Productivity Council drives a sustained collaboration intended to build a framework that measures productivity in "the information-centric business environment of the 21st century."

Early research released from the Council stresses the importance of some evolving ideas for understanding productivity in "information work and knowledge work" through a combination of lessons learned from manufacturing and I.T.

However, Accenture's Institute for High Performance Business emphasizes that a definitive reference model for measuring this productivity is still not on the horizon. And the IWPC itself states, "Although recent surges in productivity have been attributed to the use of IT, we still have no effective way of measuring or verifying its impact on information work."

In no small part, according to Accenture, this is due to ongoing debate about what to include in the kind of work being scrutinized for productivity, even including a sense that the popularity of the term "knowledge worker" might be missing the point by arbitrarily discouraging attention to equally important issues of information-based productivity.

But while Accenture makes those comments with a view on the internal needs of a given single business organization, I think it is absolutely necessary to step beyond that and propose that the "industrial" landscape of 2005, compared to the landscape of 1985 or 1965, quite loudly demonstrates increased "productivity" in the form of 2005's awesome diversity of types of viable business attributable in the main to business IT adopted in the last few decades. Proposed more simply, IT productivity really manifests itself at the market level moreso than at the enterprise level. Likewise, "knowledge productivity" manifests itself at a higher level than operations, in the form of a sustainable diversity of fully viable business capabilities. Discuss...

The intensity of the "productivity" investigation is certainly not at all in doubt, but the majority focus is on a somewhat different point, as both executives and academics are going "all out" to credibly factor the business reliance on information work (including knowledge) into the equation for business value and business valuation. That effort (and accompanying debate) would account for how knowledge work affects the conventionally measured productivity of a business's company.

Nothing strikes me as more certain to inhibit the effort as would a failure to unravel semantic confusions that inspire solving the wrong problem. Credit IWPC for stepping on that same stone, but in my view what follows from that point is a brief sprint down a course of resolution different from IWPC's -- not to a necessarily different or further endpoint, but in an alternate direction at least for the time being. My premise: there should be a view of the productivity of the actual work itself, providing a precedent baseline logic establishing why and when the work contributes to the productivity of its consumers and beneficiaries. In particular, I'll focus on knowledge.

1.

To begin, let's presuppose the reason behind our certainty about the criticality of knowledge in the modern business.

The fundamental operational issue for the business is to maximize opportunity at minimal risk, and to convert the opportunity into necessary benefit at minimal cost.

Correspondingly, utilization of knowledge is needed to, and proven to, impact opportunity in three essential ways:
- accelerate its development;
- differentiate it; and
- secure it.

Meanwhile, utilization of knowledge enhances the foresight and awareness of risks and costs pertinent to the opportunity.

The elaborations of that utilization are seemingly infinite, if accounted for by the organizational variations of one company to the next. However, the principles for the utilization do not change from one company to another, which means that there is a common reference regardless of the commonality of practices.

2.

The next presupposition, however, is the most critical one to my direction -- namely, that the term "knowledge worker" is NOT a synonym for "information processor".

IWPC's namesake distinction of information from knowledge is an important precedent for including "information work" beyond "knowledge work", signalling the belief that really meaningful talk about productivity requires an expanded field of terms. But a more fundamentally important observation to make is that "processing" is work, and that knowledge workers are process managers.

The key question is, what processes do knowledge workers characteristically manage? What's necessary here is to answer the question the right way, assessing the activity being conducted instead of the department (e.g., marketing or finance) commissioning the work. And this activity can be assessed in terms of knowledge, without the expansion into "information work", as follows.

This next short list highlights the distinction that is most relevant to the business issue of knowledge work productivity. These processes have outputs, and the business challenge is first to understand the significance of the outputs and second to understand the practical options for optimizing the generative processes:

(1) Strategics: a term coined here as a placeholder, this is mainly the interpretation of projected conditions with the goal of modeling their relationship to objectives.

(2) Heuristics: this is the use of a hypothesis as an instrument of iterative examination.

(3) Diagnostics: this creates and applies systems of identification and classification to distinguish the constituent elements of conditions and entities.

(4) Forensics: this discovers and determines items as relevant elements of a proposition that is a candidate "fact".

Then, the important consideration is the matter of how those activities are proceduralized, such that their respective underlying methodologies become portable to other workers. Logically, this is one of the responsibilities of the individual knowledge worker: initially adapting the activity's methodology to the real environment for operations. This adaptation is the basis of the activity's effectiveness. But the adaptation can also be assisted and formalized, to increase the efficiency of applying the methodology by the given worker. Any external assistance can be considered an "input" to the management of the processes.

Here, another distinguishing point emerges regarding direct measurement of knowledge work's productivity. The person identified as a "knowledge worker" could be evaluated as a "resource cost" -- but that type of evaluation is likely arbitrary without comparative benchmarks that describe the same activities and assists applied to substantially similar circumstances. In effect, the "resource cost" view presents the "knowledge worker" as a kind of function, for which availability and quality are actually the key measurable characteristics. But in that case the productivity issue derives from the manageme