Performance Management Defined

17 09 2009

Last week I asked Jonathan Becker of Manage by Walking Around blog and Gary Cokins of Closing the Intelligence Gap blog to argue the definition of Performance Management and what it might look like…and in all fairness, I need to also share mine:

Performance Management is composed of three distinct disciplines, Strategy Management, Operational Performance Management, and Financial Performance Management. It is a systematic and standardized management and communication process to proactively enhance performance gaps.

  • Strategy Management – to set direction, foster alignment, and communicate priorities
  • Operational Performance Management – where we execute our goals and objectives by creating customer value along with our core processes.  This is also the most widely defined as each industry handles this somewhat differently, but how we manage it should be integrated with a common process.
  • Financial Performance Management – to provide insight into what resources we have and how best to use through monitoring and reporting upon the budget.

In addition to this we need to use within the same system our enabling support structure.  This includes managing technology, culture, people, etc.  Each element needs to be improved upon based upon strategic need, thus helping to eliminate personal politics and squeaky wheels.  Below is my Performance Management framework.

PM Framework Master

Gary makes a great point that most people create a framework that is intentionally incomplete to enhance their offerings (and I completely agree).   I built the above framework with the goal of a complete framework.  It is not perfect, but I feel provides a strong starting point to assess our process improvement gaps.

In the end, management is just a process, albeit a very important one.  It needs to be enhanced and improved to leverage the most of the management talent.





Supply Chain Profits

7 07 2009

In terms of delivering goods or services to the consumer, the supply chain is not created equally.  More often than not, one part in the chain controls the bulk of the profits.  How did they get there?  They most likely earned it (though there are some interesting examples of other methods).  They have the power in chain to manipulate and control the negotiations.  They are the perceived value provider.

  • Where do you stand in terms of delivering value to the consumer?
  • What do the other parts in the supply chain offer in terms of value?
  • Can this chain be altered either from someone in the chain, or perhaps a whole new value chain?
  • What are your relations with the people in control, or with the entire chain?

Depending upon your business model, this could be a potential opportunity or threat.  We need to understand our position in the supply (or value) chain and if the position is changing.  We may not need to do it constantly, but we need to make sure someone owns the process and it is built into an ongoing management discussion.  At the very least it should be part of the strategy development plan.





Going Green

17 06 2009

There are a number of ways companies are “greening.”

  • Some are creating green initiatives and tasks
  • Some are creating green strategic objectives
  • Some are merely applying green make up

In all likelihood, the success will be based upon the level of seriousness and commitment the organization applies.  This is a fad, and leaders will emerge.  Those leaders will reap enormous benefits, the others will be average.

Traditionally, we have talked about 3 business focuses:  Product Leadership, Customer Intimacy, and Operational Excellence.  In each of these cases, you could link “green” strategic objectives, initiatives, and policies into each of these categories.  You could also create a 4th category to trigger discussions about priority and focus of the organization.  A great example here is Patagonia.  They live their commitment to evnironmental stewardship as they understand their clients playground is the environment.

Patagonia Strategy Map

Sample Strategy Map - designed from public documents

During the 2008 Presidential race, Sarah Palin created a great amount of buzz for a number of products.  Patagonia bucked the trend in support of their beliefs:

“Patagonia’s environmental mission greatly differs from Sarah Palin’s,” Patagonia rep Jen Rapp told the WSJ. “Just wearing the clothing of an environmental company does not necessarily make someone an environmentalist.”

  • How committed are you to the success of your green programs?
  • Are you ready to forgo revenue today, for sustainable benefits?
  • Is green an executive agenda, a marketing initiative, or grass roots initiative?




Scorecarding – Getting Started

18 05 2009

Scorecarding, or Strategy Management, is a journey.  It is more important we get started and learn and adapt as we go.  One reason why scorecard projects stall is that organizations expect immediate maturity.  It takes time to understand the different stages, and the different stages are important and valuable points of learning.  

  • Start small and focused with a team that has a well defined management process.
  • Don’t make changes every month, give the concept a quarter to learn.  Then meet to make the changes.
  • Use the concept to facilitate conversations about what creates value.




Clarity – Pick One Voice

17 05 2009

A few months ago during the Presidential inauguration, a concept I have kicked around a bit presented itself in a vivid example.  What stuck me was all the pomp and circumstance, all the background noise.  Did I really want to hear the opening prayer, the closing prayer, all the singing, and the poetry?  No, I wanted one thing – to hear the message this President was going to deliver on how he was going to set up his presidency.  Everything else was in a way, distraction.

As organizations, how often do we set a clear and concise goals for the organization and the individuals?  How many times do we repeat what someone else just said?

When we design KPIs for the organization, do we create a single measure for a goal and use other analytics for support?  Or do we create a number of ways to view the goal?  If we create many definitions, we allow for people to pick the one they want.  Use KPI design as a way to gain clarity of a goal.  Use Scorecard design to gain clarity of purpose.





Is Strategy top of Mind

10 05 2009

I recently read a few blogs from Jonathan D. Becher and it reminded me of a couple of stories.  I did a couple of webinars a year or so ago with the lead in being a question about how well do you know your corporate strategies.  What I consistently found was that 80%+ of the respondants could not cite the strategy off the top of their head.  This is clearly not new research as their are a number of people/companies that cite very similar numbers.  

I think there are a number of factors at play here:

  • Corporate Strategy has no lasting communication vehicle.  It is often discussed in conference calls and writen on walls, but we have no effective, living tool.  We need to build a communication plan around articulating strategy.  Here is a reference to an older blog of mine on Strategy Maps that touches on this subject.
  • We often lack a consistent framework for Strategy (or a single version of the truth), so we end up with a number of different frameworks for defining strategic objectives.  Corporate uses one framework, the business units another, and then each department creates something new as well.  What we end up with is too many messages and no clarity into priorities.  All of this becomes to difficult for anyone person to understand, so they just go about their day doing the things that want to do or that are easy to do.
  • We also have unstated strategic objectives, or as Oski refers to them in a comment on this blog post, “shadow strategies” where the organization says one thing, but actually does another. 
  • There is also personal politics and empire building that is probably more widely used than anyone would care to admit.  I have seen too many examples where people talk more about how big their team is than provide the value their team creates.  If this is what is top of mind, it is probably an indicator of their motivation.  
  • We don’t have a strategy management process.  Strategy is done independently from budget, or we hire some consulting firm to develop it and then the binders and reports are placed in an archive.




Business Math – Drivers and Levers

28 04 2009

I once listened to the VP of a services business unit describe the levers available to him to drive the business.  Here is his formula.  While I agree with him about the formula, it was clear that we need to understand the difference between levers and drivers.  

old-formula

If these were all just levers, would we not be justified in pulling the levers as quickly and as hard as we can?  If we make a small adjustment to the formula, we can take the argument another step farther.

revised-formula

If we breakdown Average Deal Size into its components of hours and rate, we identify the one item that can probably be used as a short term lever – Rate.  We can lower or raise our rates much easier than the other items.  The other items require longer term programs.  We need to train our sales force on new ways to improve winning percentages and shorten sales cycles.  We need to create marketing programs to find new opportunities.

It is one thing to understand the drivers of the business, but we usually need to build programs around the levers to understand how they impact the business and how/when they should be used.  If we are not actively managing the levers, they are really just mathmatical drivers.