The Achilles Heel of Performance Management

My personal journey…

 

The joy of commuting from Rotterdam to London: planes and weather. When I saw the weather forecast Sunday night I knew bad news was bound to happen: a storm coming over from Ireland to the UK, moving towards mainland Europe…

 

The 8am had an unknown delay, so the laptop was started to get some work done. Re-check-in for the 12:40 as the 8am was canceled at 10:30 and back to the lounge for some more work while hopefully waiting for a departure. The next cancellation came in at 1pm, time to go home and wait for the 18:20.

 

Pressure was building up: while today was just annoying, I had to be in London tuesday, I couldn’t affort the 18:20 to be cancelled as all flights for tuesday morning were fully booked. Time for a change of strategy: do everything needed to get to London today. Checking the internet told me I could get to London by train in about 5 hours. Late, very late arrival but it would get me there…

 

Back to the airport to leave the car for my return flight, and get a refund for the flight I was about to trade in for a train ticket. At 14:50 my luck started to change at the customer service desk: “How’s the status with flights to London please?”. “Well sir, we’re boarding a flight in 5 minutes”.

 

While the flight was bumpy, including a missed approach on water-surrounded City airport, I was happy to walk into the London office at 16:45. As my day had not been as productive as desired it was late before I settled down in the hotel restaurant. While waiting for the meal to come (a lovely duck breast) my mind wondered off thinking about the blog topic for today….

 

The Achilles Heel of Performance Management

 

They have been around for decades: Executive Information Systems, Decision Support Systems, Balanced Scorecards, Business Intelligence systems. The names keep changing, they all have the same function: provide information to better manage a system, usually an organisation.

 

There are many successful implementations of these Performance Management Systems (as we call them these days). However, there are also too many examples of implementations with “room for improvement”: one system replaces the other, many times not fundamentally doing something different.

 

Why is this, why does it seem so difficult to come up with something good and stick with it?

 

Sure, there are drivers that require a measurement system to be adjusted from time to time, but that doesn’t necessarily justify the need for a full replacement. Changing strategy is a driver for adjustment: when an organisation decides to focus on new markets/products/customers an adjustment to the measurement system is needed to reflect that change. By the way, this is a fundamental requirement in the first place: the measurement system must reflect and be aligned to the chosen strategy, not an easy task in many implementations.

 

A change in organisational processes can be another reason for adjustment of the measurement system: a re-shuffling of departments and people require the system to change in order to reflect the new situation.

 

In some cases adjustments to the measurement system are mandated or regulatory; I think the mere mentioning of the words Sarbanes-Oxley and IFRS is enough said.

 

New techological possibilities can justify an updated version of the measurement system, surely the graphical capabilities, functionality, processing power of large amounts of data, delivery capabilities via the internet etc. have changed the technological landscape considerably over the years.

 

But still, why have we seen so many failed (or rather: perceived to have failed) implementations over the years?

 

I believe the following is a typical example: after implementation the system was delivering the “single version of the truth” to the organization: all key performance indicators, metrics and measures were delivered to the people across the organisation via dashboards and reports in a timely and relevant fashion. So why was this one person still downloading the standard report to Excel, change the Revenue numbers around and gave it to his manager to be used in the management meeting?

 

Imagine my surprise when the answer was: “Yes we know this is the corporate definition of Revenue. However, the measurement and incentives for our department are based on a different definition of Revenue.”

 

So while the system was intended to bring alignment and consistency, it still inherently promoted working towards local optima, not working towards the goal of the organization (hmm, Goal and local optima, those words trigger another very interesting topic for a next blog).

 

In my mind that’s the Achilles heel of Performance Management: too many times the intention and underlying drivers of a measurement system are not clearly communicated to the people in the organisation and the reward system is not aligned to drive towards the intended behaviour. Successful implementation of a measurement system correctly often requires a fair amount of change management which is unfortunately too often neglected.

 

When keeping this in mind on your next implementation the chances of success increase significantly.

 

PTW