a??On a foggy day years ago, when navigation systems were just new, a German car drove into the river Elbe. His navigation system indicated there was a bridge.a??
Since the days of Plato we already know not to confuse the map for the terrain. Although the map may be a fair representation of reality, it is only a representation. Simplified, aggregated, stylized. As silly as the example of the car driving in the river may sound, in most organizations we do the same in our management processes. We mind the scorecard more than the actual work; we run the numbers, and not the business. Here are a few examples:
Pick a number
Setting targets and defining performance indicators is often a somewhat mystic process. Targets are subject to negotiation, through the hierarchic process they get disconnected from the actual resources and activities. And it is only a number. That number is per definition not a??righta??, as you can never know for certain what is going to happen throughout the year. Let me put it like this: everyone exactly a??hitting their numbersa?? have been playing with them. What are the odds you would exactly reach an abstract number?
And while we are at it, what would be more realistic: setting this one stretch target, with a small probability of reaching it, or setting a range where you think you will end, with a high probability of reaching it. Predictability is a highly valued characteristic these days.
Stick to the plan
Thata??s leadership, right? Create a plan, and make sure everyone sticks to it. But one thing is certain, the longer you stick to a plan, the more you get disconnected from reality. After all, it is only a plan. It is better to stick to reality. In order to be successful, it is of course important to stick to your goals, but while you are on your way reaching them, you should continuously ask yourself if there are better, faster or cheaper ways of making it to your goals. As long as the goals are clear, and we agree there is a better plan, we should change it. The budget should never keep you from doing the right thing.
Geronimo!
Aligning the organization towards an aspirational goal is a powerful thing. But things can go wrong as well. As we say in The Netherlands a??if all noses point in the same direction (metaphor for being aligned), who looks left and right when you cross the street?a?? Unfortunately, performance management and risk management are very separate disciplines today. These need to be integrated. I would argue that building a balanced scorecard and using a strategy map to create leading indicators makes you see changes in your environment worse instead of better. Performance indicators can never paint a complete picture of reality and the more performance indicators you define, the less oversight you will have. If there are a 100 things you monitor, aspect 101 will go wrong, if we apply Murphya??s law. Dona??t monitor, but see!
What is the best strategy?
Read this next bit carefully. Read it twice. Here it comesa?| The best strategy is not the strategy that gets you to your goal in a straight line. Reality is never a straight line. The best strategy is the best strategy that gets you there in most alternatives of the future. A sustainable strategy is not built on optimization towards a single goal, but is optimized towards adapting to different realities. I realize this is a rather dense statement, and a blog is perhaps not the best way of fully exploring this. The best book I can recommend on this topic is a??Strategy Paradoxa?? by Michael Raynor.
What does this mean?
My colleagues Jim Franklin and Thomas Oestreich, and myself have been toying with the term a??uncertainty managementa??. Performance management is not about predictability and control, but about anticipation and agility. Uncertainty management is being ready for the future. We dona??t know what is going to happen, and most likely it is not how we thought it would be or how we intended it to be.
An interesting way of dealing with uncertainty, and being more realistic, is to use simulation techniques. We dona??t have data about the future, but we do have assumptions, we think in certain ranges, we understand constraints, perhaps we observe certain patterns. If we simulate different scenarios, we get a feel for different outcomes, and their probabilities. Check out www.oracle.com/crystalball , a great way (and a great tool) to make the difference in your performance management initiative. More realism, less surprises.
frank
