In case you didn’t see this, the U.S. Census Bureau issued a Facts for Features release in observance of The Fourth of July 2008.   My favorite statistic from the release is that North Dakota produced 42 percent of the U.S.’ baked beans in 2007.  I wonder if this is because North Dakota has the highest percentage of church-going population and the most churches per capita of any state.

Useless information, you say?  Not as useless as these:

Nutmeg is extremely poisonous if injected intravenously.
Diet Coke wasn’t invented until 1982.
The first police force was established in Paris in 1667.
The shortest war in history was between Zanzibar and England in 1896.  Zanzibar surrendered after 38 minutes.
Donkeys kill more people annually than plane crashes.
During an average lifetime, a man will spend 3,350 hours removing 9 yards of stubble.
No President of the United States was an only child.
You burn more calories sleeping than you do watching TV.

Happy 4th of July.

Some thoughts on several recent postings to kick off your hoiday week.

 (A) Barry suggests Four Questions To Ask When Building Your First Strategy Map:

1.  What’s the advantage that differentiates us from our competitors?
2. What are the three most important things we need to measure to drive that advantage?
3. What are the three most significant gaps or barriers that keep us from leveraging this advantage?
4. What are the three things we can pursue to close the gaps, overcome the barriers and positively influence our three most important measures?

Good points but I would have liked to have seen a focus on setting strategic objectives, before beginning to measure

(B) Stuart echos the controversy over SMART objectives by pointing out How Being SMART Isn’t Always the Right Objective.  He believes that SMART fails the what’s-in-it-for-me test and suggest that we look at the problem from a different lens, aka a PRISM.

PRISM is an acronym for Personal, Realistic, Interesting, Specific and Measurable.

I worry that Personal will feel disconnected from the greater good and lead to increased lack of alignment.

(C) Suresh worries about metrics without management and tells how Trent Limited, the retail arm of the Tata Group, used the Balanced Scorecard to sustain dramatic performance increases over long periods of time.

If you want to reap real benefits from BSC, be prepared for the long haul. If you are looking for an organizational “ruler” - an instrument for one-time measurement - maybe you should look elsewhere.

All very interesting but I think that management without measurement can be useful.  Ask Sarasota County.

Over at Intelligent Enterprise, Mark Smith of Ventana Research has an article titled “How to Get to Better Planning and Budgeting” that provides five questions finance organizations should ask:

1. Is the planning and budgeting process as strategic as it could be?

2. Are the budgets as accurate as they should be?

3. Does your planning really help increase your company’s agility?

4. Could your process provide deeper insight to more people?

5. Is the process itself of high quality?

The questions — and the following advice on what to do next — are reminders that performance management is still in its infancy at many companies.  A companion study shows that less than half of companies are at a mature “strategic” or “innovative” state and 20% at a primitive “tactical” state.  As an industry, we have a long way to go.

The article also reinforces my supposition that budgeting is not the same thing as planning. In Ventana’s words:

Recognize that planning and budgeting are not the same. While these two activities are related, there are important differences between the two. Planning is about creating a program for action; it’s part of an overall design to achieve specific objectives. Budgeting is about creating a statement of the financial position of an organization for a specific period of time based on estimates of revenues and expenditures. Planning is about things such as activities, people, resources needed and time spent. Budgeting is about money. Ventana Research believes that companies spend too much time budgeting and not enough time planning.

The rest of the article is worth a read as well.

While I don’t know if I’m “Smarter than a Fifth Grader”, I assumed that I was smarter than a goldfish.  But when I read Contrarian Goldfish’s “Smart Goals are Stupid”,  I began to wonder.  After all, I wrote about the usefulness of SMART objectives.  So, let’s investigate:

1.    Specific

CG says “you cannot predict the future and you need to be flexible to change course as circumstances change”.   I agree but think that’s missing the point.  Objectives are destinations, not paths to get there.  If there’s too much traffic on a road, you should be free to try a different street.  And yes, you should have the flexibility to update your objective as execution influences strategy.

2.     Measureable

CG says that the best goals are closely tied to very strong feelings and emotions which you can’t measure.  I think he’s confusing quantitative and qualitative measures.  If you want to know how people feel, ask them.  Surveys can measure lots of things.

3.    Achievable

CG says that “achievable goals will not inspire you, and you will give up because the end result is not motivating enough for you to go the extra mile”. I say that objectives should have multiple stretch targets over time so that 85% attainment at any given point should be rewarded.

4.    Realistic

CG says “competition is much higher for realistic goals” and that we should stretch for unrealistic ones.   We should definitely set stretch targerts (see my comment on Achievable).  However, I think the ‘R’ should be Relevant, as in individual objects should support team and organization objectives.

5.    Time-Bound

CG says “it is more important that you make progress towards your goal each and every day than to set some arbitrary date for achieving your goal”.  Good news.  We agree on one.

Regardless of whether they are SMART or something else, be sure that people understand the objectives before your start measuring them. 

It’s been a while since I’ve blogged a book but on the plane back from Germany I stumbled on an email that Nenshad sent me back in Feb with an excerpt from Chapter 9 of “Beat the Odds: Avoid Corporate Death and Build a Resilient Enterprise” by Robert A. Rudzki.   In a section called measure only what you want to achieve, the author cites several measurement missteps, including:

One U.S. manufacturer that will go unnamed began focusing on the wrong kind of measurement. The company had been going through a protracted period of downsizing.  Over time, management seemed to adopt the view that head count reduction was synonymous with improved bottom-line performance. In fact, one of their most talked-about, measured, and reported “objectives” was head count. Indeed, the managers were so experienced in achieving head count objectives in successive waves of downsizings that they received benchmarking requests from major companies that were starting their first rounds of staff cuts.  

 

Almost too late, the company began to notice examples where its effectiveness to accomplish important business functions had been eroded. It had become an example of “corporate anorexia.” The objective and measurement of head count reduction (efficiency) had almost superseded the factors to which management should have given prominence in its performance measurement process (measures of effectiveness).  

Like me, the author also counsels against having too many measures for fear of diluting focus. And to the individual manager who claims that their business is too complex and must measure a large number of factors, he replies:

The monitoring of other factors by individual managers is fine, as long as it does not conflict with the organization’s focus on the preselected “super metrics.” To say it another way, each manager has full flexibility to acquire and evaluate all sorts of data for diagnostic purposes, but he or she must not let those metrics dilute the organization’s focus on the few key objectives that have been determined to be strategically important. Monitoring of other factors serves the organization’s overall purposes when it is used to gain insight and trigger relevant questions about what is happening internally and externally – and to get at the root cause of issues. 

Sounds like a book that I should read.  Maybe on my next trip.

Bernard Marr must be a believer in my theory that catchy headlines promote increased readership.  How else to explain that the long-time performance management guru resorted to the titillating title “Performance Anxiety” for an otherwise solid article on the potential perils of poorly implemented performance systems?

Bernard observes that “performance management initiatives were often so mechanistic and number-focused that it prevented organisations from achieving the desired improvements. It could even lead to unintended behaviour.” Indeed.  Remember the story of the hospital that kept patients in ambulances outside the emergency room so that they could improve their ‘waiting time limit’ KPI?

As I’ve frequently observed, the problem with the phrase “what gets measures, gets done” is that people invariably measure the wrong thing.  They measure what’s easy to collect or mandated by others.  Bernard’s survey finds that 92% of the respondents admitted that many of their KPIs were neither relevant nor meaningful.   Cue my favorite line: “not everything that can be counted, counts, and not everything that counts can be counted.”

It gets worse.  The survey also reports that more than 70% participants admitted that people in their organizations occasionally fabricated their performance data. Talk about a lack of trusted information!  I suppose I should feel better that they only occasionally fabricated data but I have a sneaky suspicion that they weren’t turning green KPIs to red.

Bernard does cite some organizations who are using performance management properly and even suggests some best practices.  I’ve seen similar exemplary deployments but, sadly, they seem to be the exception, rather than the rule.

That really does give me anxiety.

This week at SAPPHIRE Orlando I was deep in conversation with a customer about how to make scorecards more actionable when he said something like:

I understand that I should focus on KPIs that are red and trending down but, honestly, I don’t trust the data.

This is perhaps the true Achilles Heel of Performance management.  If end users don’t trust the information they receive, they are unlikely to take any actions – and performance won’t improve.

The customer isn’t unique.  A survey of C-level executives by the Economist Intelligence Unit showed that less than 1 in 10 believes they have the information they need to make critical business decisions and only 1 in 2 believe the information they do have is reliable. The result is management by intuition rather than management by facts.

Turning raw data into trusted information is the domain of Enterprise Information Management (EIM).  True EIM is more than just data integration and data warehousing.  True EIM focuses on three areas:

• Lifecycle management – from source, to consumption, to retirement
• Unified information – structured transactional data typically associated with BI but also unstructured data like text in call center notes and master data typically associated with customer or products
• Data lineage – exposing the user of information to where it came from, how it was computed, and when it was updated 

Adopting EIM can help with lots more than just having executives trust their scorecards.  It allows everyone in the organization to make better business decisions.  For example, imagine a PC manufacturer that receives an order from a consumer for a disk drive that is out of stock.  With trusted information, they can compare the fully-loaded cost of back-ordering the drive (including the cost of a separate shipment) with the cost of delivering a larger drive without charging more to the consumer. In many cases, the second option is financially preferable, even though the raw material is more expensive.

It may be counter-intuitive but it’s good business.  And probably helps with customer satisfaction.  Performance Management needs trusted information.   Welcome to the family, EIM.

There hasn’t been enough debate on this blog in a while so I’m hoping that this post will stir things up a bit.

Over at the other guys, Frank has a post titled EPM and Strategy Management that I had to read four or five times to understand.  Even now, I’m not completely sure what he’s getting at.  My confusion starts with the very first sentence:

Enterprise Performance Management is usually seen as a tool for strategy management.

Huh?  Most people would say that strategy management is a tool for enterprise performance management. EPM also includes planning/budgeting, financial consolidation, and profitability management.  Choose your favorite analyst. (Examples: IDC, Gartner, Forrester)

He then goes on to say:

Strategy formulation and strategy management are seen as two separated disciplines.

In reading the rest of the blog, I think he’s trying to distinguish between developing the strategy and tracking the strategy.  But the latter is an incomplete view of strategy management.  True strategy management emphasizes strategy articulation and answers the question that most employees have: what does this strategy mean to me?  Cascading blurs the line between strategy formulation, strategy articulation, and strategy execution.  Strategy management can’t exist without cascading.

Since I’m so confused, I could be misinterpreting this sentence:

A more modern view on strategy formulation is to see this as a continuous process, based on “grow as you go.” […] unlike the old way of working the way how to go there is only sketched in broader terms.

Certainly strategy shouldn’t be static; real-life execution should incrementally impact our objectives.  Isn’t that why we’ve been talking about closing the gap between strategy and execution for 5+ years?   But I’m troubled by the second sentence. Organizations need clear decisions on which freeway they are going to drive on to get to their destination.  They just need the flexibility to change their minds when they hit a traffic jam.

In the end, I think this one sentence sums up why Frank and I can agree to disagree:

A balanced scorecard strategy map becomes a living document.

Why would it ever be dead?  A true strategy map is live, interactive and constantly changing.  That’s the whole point as to why it’s not a document on the shelf.

Welcome to the 21^st century.

Before I took my current job, I used to get annoyed when people used the term performance management to describe budgeting.  Budgeting doesn’t manage performance, I used to argue.  It manages financial numbers.  And I didn’t stop there either.  Budgeting isn’t the same thing as planning, I claimed.  Budgeting is how you’re going to allocate resources to reach some objectives.  The plan should describe the objectives – what you want to accomplish, not how.

Interestingly, this seemingly semantic debate isn’t really settled yet.  Many people talk about sales planning vs. headcount planning vs. trade promotion planning vs. financial planning. The latter is the only one they really refer to as budgeting however.  And many people now distinguish between financial performance management, workforce performance management and other operational performance management.

While I suppose I might feel a little vindicated, I am in fact actually worried.  I don’t think we really want these sub-disciplines. We want integrated planning that includes sales, headcount, trade promotion, and lots of other operational issues.  And we want (adjective-deleted) performance management that considers finance, customers, operations, and employees.

We want what we do to be the same as what we say we want to do.  Unfortunately, it rarely is.  Therefore, as Scott Adams might say, that causes us to resort to Leadership by Words:

Avisen certainly intrigued me with a post called The Achilles heal (sic) of Performance Management.  It’s widely agreed that many performance management projects deliver less value than originally promised.  The issue is so endemic that a colleague once asked me “Does performance management have any value?”

Imagine my disappointment when, after wading through nearly 1000 words of flight delays and mini stories, the Achilles’ heel was described as follows:

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.

Communicate objectives, not just measures.  Align incentives to objectives.  Focus on the process, rather than the system.  No offense but these are not novel or earth shattering. 

They are good advice however so the messages bear repeating.  Unfortunately, I doubt the average reader would make it that far.  Which is perhaps the real Achilles’ heel of both blogging and performance management:  if you can’t engage your audience quickly, you aren’t going to have a significant impact.