ASMI Speaks with Performance Management Expert
Bill Barberg recently signed on to co-host Performance Management 2008. ASMI sat down with him this month to learn more about the average organization’s perception of performance management and the common pitfalls they face when trying to incorporate a performance management framework.
Q: What is the common perception you receive from organizations when you inquire about their knowledge of performance management? What tends to be the reality?
A: Many people we talk to feel quite comfortable with one or two performance management tools—such as analyzing sales rep performance, tracking budget variances, or conducting employee goal-setting and appraisals. But being too comfortable with some of these operational performance management tools—assuming, for example, that the budget process is what performance management is all about—can hinder learning about other valuable performance management concepts and practices. We often find that different people in the same organization have very different concepts of what performance management involves. And even when organizations strive to excel in those different elements of performance management, there is often a limited understanding about how various operational performance management tools could best work together to maximize strategic organizational results.
Breakthrough improvements often require an inter-related set of changes. Focusing on localized or functional views of performance management will rarely lead to the best overall results. It is very common to find a lack of strategic alignment among performance management efforts in organizations. For example, significantly improving the performance of salespeople may require aligned changes in marketing, service delivery, product quality, sales training programs and a host of other factors. Simply measuring sales rep performance versus targets without aligning performance improvements in the most critical supporting areas will lead to results that are significantly below what could potentially achieved. In some cases, overly narrow views of performance management can actually be counter-productive. For example, putting too much emphasis on budget-centered management can create inflexibility and inhibit strategic change and agility.
Strategic performance management—which emphasizes strategic focus, alignment and organizational change—is less understood and less developed in most organizations. It often represents the biggest opportunity for improving performance and for enhancing the value of the other performance management tools. There is a growing set of powerful strategic performance management practices that have formed around Kaplan and Norton’s Balanced Scorecard (BSC) methodology. There is a lot more to the Balanced Scorecard methodology than most people realize. The most successful practitioners in strategic performance management usually build their scorecards around strategy maps and put more effort on the process for improving alignment and strategy execution than they do on trying to pick the ideal set of balanced measures for a scorecard.
Q: For organizations looking to turn towards a strategic mind-set, what advice would you give them as a first step to take? Are there signs an organization should look for when deciding the time is right to take a stronger approach towards implementing for instance, strategy maps or the Balanced Scorecard?
A: There is no one way to move down the path to being strategy-focused. A lot depends on where the organization is starting from. For many businesses, an initial question is whether or not they have a clear differentiating value proposition and a strategy for how they will improve and better deliver on that value proposition. If not, they may want to take advantage of some time-tested strategy clarification exercises and tools—such as strategy profiles—to make sure the leaders are unified on the value proposition they are striving to improve and deliver. Then we recommend a cross-functional process that builds consensus and clarity on the key strategic choices and changes (defined as strategic themes) that will drive the improved delivery of the value proposition. Those themes become the basis for developing strategy maps. Once there is agreement on the strategy maps, then powerful strategic measures can be developed and managed.
Other organizations, however, may start from different points. For example, a company may have a pressing need to streamline an existing performance measurement program and then evolve it to become more strategic in the following years. In this scenario, the appropriate use of software may yield rapid benefits and provide a platform for evolving to a more strategic approach to measurement. This may be preferable to replacing it with a completely new measurement approach. Organizational culture and opportunities to gain early wins are important in choosing where to start improving alignment and strategic performance management.
As far as symptoms of a strong need for embracing a strategic management approach, I’d look for any of the following:
- A new strategic plan has been developed, but people throughout the organization lack a clear understanding and confidence in what they need to do differently to execute the plan.
- People are stressed because they lack clarity on the organizations priorities and their “line of sight” on how to best contribute to accomplishing those priorities.
- The organization suffers from “half-built bridges” where people work very hard on what they believe is an organizational priority but other changes that would be necessary to achieve major performance gains are not implemented.
- People feel overwhelmed with measurements. The potentially important measurements are lost in the multitudes of other less-critical measures.
- Most performance goals are financial in nature without the clarity of how the organization needs to align and execute the critical changes to meet those financial goals.
- There is too much fragmentation in the organization’s performance management and measurement efforts—different spreadsheets, different uses of terms, and a lack of consistency in how measures are defined undermine the value of those efforts.
Some organizations may quickly identify with one or more of those points. Others may consider conducting a quick employee survey or some informal focus groups to gauge if the degree to which these are problems. If they are recognized as problems, efforts should be taken quickly to embrace strategic performance management practices. The cost of poor alignment is far higher than most organizations realize.
Q: From your experience, when communicating strategy to the organization, have you felt more resistance from upper-level management (including board directors) or contributing staff?
A: There can be resistance at any level, and a lot depends on where the strategic management program is being driven from. In the ideal scenario, it is being led by a unified executive team, but most organizations are not fortunate enough to have that from the start. The key in any case is to build broad support for the effort. Executives, boards and staff typically require different kinds of engagement to embrace the journey to become a strategy-focused organization. Each group has natural reasons for resistance as well as highly-desirable benefits, and the key is to make sure they appreciate the “WIIFM” (What’s In It For Me) of the changes. Front-line employees and managers may resist strategic change if they fear it could jeopardize their jobs, but they are likely to appreciate being actively engaged in bringing about positive strategic changes. For people whose roles may be eliminated, they can be much less resistant if they see how they can “trade up” to work on things that create more strategic value.
Senior executives may primarily want a way to efficiently keep their arms around the business and may resist the time required or the need to make choices to flesh out a plan for strategy execution. However, as they see the value of improve alignment (or the cost of poor alignment), they often become more willing to invest the necessary time.
We consistently find that there is much greater acceptance of a strategic performance management program is it is presented as a means for improving alignment, teamwork, and results rather than being a measurement and accountability program.
Q: Once an organization has a strategic system in place, what obstacles do they face in maintaining it?
A: The biggest obstacle is “Out of Sight, Out of Mind.” So, just as communication is essential for getting a strategic management system in place, and it continues to be a key factor for sustaining it. Senior leaders have the biggest impact with how they communicate the importance of both the strategy and the strategic management system. If they incorporate it into their meetings on a consistent basis, the rest of the employees will quickly realize that they need to pay attention to it also.
A second obstacle is the failure to link in and align the various operational performance management tools. Once the strategic foundation is laid, the other tools should also be systematically aligned with the strategic management framework. There are excellent techniques for integrating the budgeting process with a strategic management system. Similarly, employees’ goals and the appraisal process should be linked in to the cascaded objectives that are developed in the strategy maps. And data analysis tools—such as sales analysis or customer satisfaction data analysis—should be tied in with the strategic measures and objectives that are supported by that analysis.
Another possible obstacle to sustaining a strategic management system is the burden of trying to maintain a manual system as deployment expands. If there is too much overhead in creating spreadsheets, E-mailing measure information and trying to manage the information involved with a good strategic management system, people can either neglect to keep it current or actively resist it.
Having a broadly-deployed software system can be a great help in overcoming all of these obstacles. It not only increases the visibility, value and usability of the system, it reduces the burden on individuals for trying to maintain a manual, spreadsheet-based system. Well-designed software can also reinforce the underlying concepts of the Balanced Scorecard methodology and give people a simple interface augmented with a variety of intuitive drill-down options to gain insights on supporting details.
Bill Barberg is a leading presenter for conferences and workshops across the globe, specializing in topics that include Balanced Scorecard methodology, strategic management and Business Intelligence. He is President and founder of Insightformation, Inc. His expertise stems from experience in working with organizations such as Medtronic, St. Mary’s/Duluth Clinic Health System, Susan G. Komen for the Cure and Carlson Hotels Worldwide.
Join Mr. Barberg and Mr. Mark Friedman for Performance Management 2008, a hands-on program that will cover everything from Strategic Mapping to Performance Reporting.
