INTEGRATING A

SUITE OF PROVEN
METHODOLOGIES
(Chapter 2)
“Nothing else in the
world...not all the
armies…is powerful
as an idea whose
time has come.”
- Victor Hugo
PERFORMANCE MANAGEMENT
● Performance management (PM)1 is translating plans
into results—execution.
● It is the process of managing your strategy. Strategy is
of paramount importance and is senior management’s
number one responsibility.
● For commercial companies, strategy can be reduced
to three major choices:
1. What products or service-lines should we offer or not
offer?
2. What markets should we serve or not serve?
3. How are we going to win?
● As Figure 2.1 illustrates, imagine PM as a wheel with three elements
or arcs: focus, communicate with feedback, and collaborate.
● The figure also shows how fact-based managerial accounting data
and operational data provide input to the PM wheel.
● The basic premise of the wheel is this: Employees can effectively
implement a strategy only when they clearly understand the strategy
and when they clearly see how they contribute to its achievement.
That sentence encompasses a lot.
● It also supports why a mantra of the middle arc (“communicate”) is
the powerful question that all employees and managers should be
able to quickly answer:
“How am I doing on what is important?”
PERFORMANCE MANAGEMENT ELEMENTS
OR ARCS

1. Focus. The process of managing strategy begins with making choices

and focus. There is never enough money or resources to chase every
opportunity or market on the planet. We are continually limited by scarce
and precious resources and time, so focus is key—and strategy yields
focus.
●In this important initial step, senior management defines and
continuously adjusts its strategy.
●Next, by mapping cause-and-effect relationships, it selects and defines
strategic objectives and higher-impact action steps and projects that will
achieve those objectives.
●Strategy maps are the key tools for developing focus.
PERFORMANCE MANAGEMENT ELEMENTS
OR ARCS
2. Communicate with Feedback. The process of
managing strategy continues with communication. This
context is reserved for senior management articulating to
its employees its strategy.
●Along with articulating strategy comes the all-important
feedback to employee teams. Remember the mantra,
“How am I doing on what is important?”
●A scorecard is the key tool for reinforcing
communication of the strategy.
●Think of scorecards as the drive gears of the strategy
map.
PERFORMANCE MANAGEMENT ELEMENTS
OR ARCS

3. Collaborate. The process cycle of managing strategy ends with

collaboration.(The cycle never actually ends; it is a continuous iterative
loop.)
●By aligning various strategies among business units, the organization
taps into the collective knowledge of its employees and unleashes each
person’s potential.
●The PM process truly makes executing strategy everyone’s job.
●Collaboration in this sense is all about collective dialogue.
Management is not equivalent to control—management is coaching
people for continuous improvements
 PEOPLE AND CULTURE MATTER

● Business schools tend to divide their curriculums between hard

quantitative oriented courses, such as operations management and
finance, and soft behavioral courses, such as change management,
ethics, and leadership.
● The former relies on a run-by-the-numbers management approach. The
latter recognizes that people matter most.
● The quantitative approach applies Newtonian mechanical thinking as if
the world and every thing in it is a big machine. This approach speaks in
terms of production, power, efficiency, and control, where employees are
hired to be used and periodically replaced, somewhat as if they were
robots.
● In contrast, the behavioral approach views an organization as a living
organism that is ever changing and responding to its environment.
 THEORY VERSUS PRACTICE

● PM is not a theory, and it does not require a graduate

degree to figure out how to get an organization to
perform.
● However, without a set of tools and principles, it is
difficult to see what is going on, interpret what it
means, and prescribe what to do.
● Things change quickly today and constant change is
now the norm.
● A consequence is that proven methods of the past
may not solve today’s problems because the problems
have changed.
PERFORMANCE MANAGEMENT IS BASED
ON BUSINESS MODELING

● Business modeling has been defined as “the representation or model of

how an organization works and functions, created in a way that it can
productively be used as a means to simulate the real world.
● Business modeling is central to the PM solution suite.
● It is senior management’s primary role to define and continuously adjust
the strategy.
● That is why they are paid huge salaries and have large corner offices.
● With effective business modeling, organizations can now test the
executive’s proposed strategic initiatives against a model to replace
uncertainty with a range of calculated risks.
PERFORMANCE MANAGEMENT IS BASED
ON BUSINESS MODELING
● When using PM business modeling, senior managers
can verify the feasibility of their proposed new
programs in the computer rather than in the school of
hard knocks.
● The business models from PM provide for the basics
that every manager wants:
 To identify business problems.
 To uncover opportunities to improve, and then to size
their impact if successfully improved.
 IS PERFORMANCE MANAGEMENT OLD
WINE IN A NEW BOTTLE?
● Some view the successful coordination and integration of the suite of
PM methods and tools as simply old wine in a new bottle, meaning
we are no longer inventing radically new solutions.
● Instead, managers may have already been exposed to these
concepts in an MBA curriculum or a year of paging through popular
business magazines.
● Many of these solutions or methods concentrate on a single topic
with great intensity but also in isolation and out of context with other
aspects of managing.
● Some solutions and methods cause confusion with competing
theories.