Archive for July, 2010

smartKPIs.com Performance Architect update 30/2010

Ethical leadership and performance management

Managing performance is about achieving desired outcomes, fulfilling the purpose of an entity. Oftentimes it is a complex journey requiring a diverse set of abilities. One of the most important prerequisites of organizational success is strong, committed leadership. And even more important is being guided by ethical leaders. What is an ethical leader though?

Leadership is the ability to mobilise a group and guide them towards the achievement of a shared purpose. Ideally this would be a positive purpose, contributing to the betterment of both the group and humanity in general. However, there are many instances when the outcomes of leader’s actions were negative for both the group lead and the society overall. Even when the purpose followed is positive in nature, the means to achieving it are sometimes in contradiction with the values of the group or the leader, affecting them negatively or even outweighing the value added by the achieved outcomes.

An ethical leader is a leader that is not only driven by the achievement of positive outcomes, but also is employing a set of positive means to achieve them, striving to achieve a balance between the interests of the group lead, the personal interest of the leader and the one of society in general.

Leadership starts with a destination, a desired state in the future that the leader believes in and strives to achieve. To an ethical leader this vision of the future should reflect a wide panorama of images, that reflect not only the state of the group being lead, but also of the various entities that may be affected by the achievement of this vision. If for example the leader of a mining company is interested in expanding the operations by starting a new exploitation, in evaluating the merits of such an enterprise, he should consider not only the potential revenue generated for shareholders, but also the impact of the exploitation on the local community, the habitat, employees and the humanity overall. Such a calibration would ensure that one of the fundamental ethical principles: “the greatest good for the greatest number of people” is followed.

Establishing a destination that is in harmony with the interests of the variety of parties affected by it is an initial step. An ethical leader would follow it by ensuring that the journey towards this destination is completed by following the same principles. It is important not only to reach the destination, but also to get there by following ethical principles and ensuring a rewarding journey. In an organisational context this rewarding journey means, ensuring the members of the organisation not only contribute to the achievement of a shared purpose, but in doing this they grow professionally, learn, feel a certain degree of fulfillment, as they realize that their efforts have meaning and are in line with their values. Showing a genuine interest in all these aspects of the journey and finding a balance between them and the achievement of the purpose is not easy. Leaders face pressure from a number of directions and in dealing with these they have to make difficult decision. This decision making process is a key aspect of what differentiates a leader form an ethical leader. In this process an ethical leader respects not only his values, but also the ones of the parties affected by the decision, and seeks to protect the interests of all parties following utilitarian ethical principles.

A key characteristic of an ethical leader is the set of values that inform his actions. Having a deep respect of nature and its diversity is to me one the most important. Many of the challenges Planet Earth faces today are generated by the humanity. Greed, cruelty, pride, anger and disrespect are all contributing to them. An ethical leader is the one that is not only uncharacterised by them, but actively seeks to eliminate such behavior both within the group lead and in society in general.

Certainly this is a big ask, especially in the business world. This is why perhaps ethical leaders are difficult to find. Nurturing them is challenging in today’s world, however there is hope for the future, especially with a renewed interest in systems thinking that is complementing more and more the command and control thinking that dominated administrative science for centuries.

Another characteristic of ethical leaders is continuity and consistency in living their own values and of the group they guide. Aligning their actions across a variety of roles is important. Such roles cut across various facets of the life: parent, partner, worker, community member and citizen among others. Ethical leaders align their actions across all these roles so that they are guided by similar principles. They might not be leaders in all of these roles, however their behavior should reflect that they know not only to lead, but also to follow, that they are genuine not only at work, but also at home and in the community.

Clarifying what is not an ethical leader would also help in understanding the term better. Is a leader of an organisation that behaves unethically in a business context, achieves great success while doing this and makes large contribution for humanitarian purposes with the revenue generated an ethical leader? What about a leader whose success in an organisational setting is opposed by an unhappy, broken family, disrespect for the community and for nature in general? Sometimes it is difficult to draw a line. Still, the use of the term “ethical leader” should be selective enough to reflect the true essence of humanistic, leaders dedicated to the good of the society and nature overall.

Perhaps the simplest answer to the question is formed of three words: a good person.

Stay smart! Enjoy smartKPIs.com!

Aurel Brudan

Performance Architect
www.smartKPIs.com

Walker, Rob 1992, “Rank Xerox – Management Revolution”, Long Range Planning, Vol. 25, No. 1, pp. 9 to 21

smartKPIs.com Performance Architect update 29/2010

Separating strategy formulation from execution questioned in Harvard Business Review

One of the surprise articles in the July-August 2010 edition of the Harvard Business Review (HBR) is ‘The Execution Trap‘, written by Roger L. Martin, Dean of the Rotman School of Management at the University of Toronto and Professor of Strategic Management at the same school. Its publication comes as a surprise as traditionally, HBR has been favoring articles promoting strategy execution and the separation between formulation and execution. The support of the publication in promoting Kaplan & Norton’s ideas over the last 15 years was an important contributor to the ascent of strategy execution as a “buzzword”.

The article clearly states the author’s position right from the tagline: “Drawing a line between strategy and execution almost guarantees failure”. It reviews the recent history of the separation idea, mentioning names of proponents such as Jamie Dimon (now CEO of JPMorgan Chase) and Larry Bossidy (former AlliedSignal CEO). The phrase that encapsulates best some of the challenges in today’s management thinking is: “…[the] doctrine…is as flawed as it is popular. That popularity discourages us from questioning the principle’s validity.”

The pressures of concept marketing in today’s management thinking are illustrated by tracing back the integration idea to 1971, when Kenneth Andrews wrote in his book, ‘The Concept of Corporate Strategy’: “Corporate strategy has two equally important aspects, interrelated in life but separated to the extent practicable here in our study of the concept. The first of these is formulation; the second is implementation.” Gradually the push of the paradigm that separates strategy formulation from execution has gained grounds, pushed not always by sound data from the field, but also by marketing hype.

Two metaphors are used to illustrate the opposing views regarding strategy execution. The mainstream approach is built around the metaphor of the role the mind has in coordinating the human body. Similarly in organizations “thinkers” come up with the strategy and doers “execute”. The alternative metaphor proposed by Martin is the one that compares the organizations with a white-water river, where choices cascade down from upstream to downstream in the organizational hierarchy. This approach would enable more freedom to adapt decisions to the specifics of the environment in which each organizational level operates, all within a larger framework and direction given by the strategy (the river). To me these two opposing views can be associated with mechanistic, command and control thinking in the case of the military execution paradigm and with organic, systems thinking in the case of the interrelated, integrated view of strategy.

A second idea that emerges in the article is recursiveness, the replication of the same structure and approach at a lower level, of the component of the larger system:

“The employee is now not only the brain but also the arms and legs of the organizational body. He is both a chooser and a doer. Workers are made to feel empowered, and the whole organization wins.”

Other elements of systems thinking and the importance of learning can be traced in the article:

The choice-cascade model has a positive-reinforcement loop inherent within it. Because downstream choices are valued and feedback is encouraged, the framework enables employees to send information back upstream, improving the knowledge base of decision makers higher up and enabling everyone in the organization to make better choices.”

Overall, the article is a valuable contribution to the debate surrounding the benefits of employing a strategy execution paradigm, either at lexical level or management theory level. Due to its constructivist nature, management theory is continuously reshaped by such debates. What stimulates progress is challenging popular beliefs and assumed truisms by continuously analyzing them in the context of contemporary environment characteristics. To me, organizational performance management and performance architecture are more neutral integrating concepts that reconcile the differences between preponents of strategy formulation / execution separation. By raising questions about ideas considered as given, articles such as this one open the door to a reshape of thinking that marked strategy management literature for the last 20 years or so. Martin’s final thoughts at the end of the article are eloquent:

“It’s time to revisit and revise our upstream theory. The business world may be utterly convinced that better execution is the path to greatness, but in truth, a better metaphor would be much more helpful.”

Indeed, it is time.

Stay smart! Enjoy smartKPIs.com!

Aurel Brudan

Performance Architect,
www.smartKPIs.com

References

Andrews K. R 1971, The Concept of Corporate Strategy, Homewood, Ill., Dow Jones-Irwin.

Bossidy L, Charan R 2002, Execution: The Discipline of Getting Things Done, Random House, Crown Business, New York, New York.

Martin R. L. 2010, The Execution Trap, Harvard Business Review, July-August, pp.64-71.

Walker, Rob 1992, “Rank Xerox – Management Revolution”, Long Range Planning, Vol. 25, No. 1, pp. 9 to 21

smartKPIs.com Performance Architect update 28/2010

From performance management for control to performance management for learning

The following is an excerpt from a conference paper presented at the 2009 Performance Measurement Association Conference in Dunedin, New Zealand. An edited version of the paper was published in the Measuring Business Excellence Journal in 2010 (vol. 14, No. 1), under the title: “Rediscovering performance management: Systems, learning and integration

Traditionally, organisational performance management has been concerned with control, by setting and monitoring achievement of targets at strategic, operational and individual levels. Measurement has its benefits as it provides valuable information and measuring in itself stimulates higher performance. The Hawthorn effect and the Westinghouse effect or “Observer’s paradox” (Cukor-Avila, 2000) demonstrate the delicate nature of the measuring process and the impact that measurement itself has on the results.

At strategic level, senior management supported by management accountants and finance professionals focus their efforts in translating organisational objectives in quantifiable targets. These objectives and targets are delegated to functional areas for implementation. Compliance with set targets is checked on a regular basis. These strategic objectives are then aligned with operational objectives and individual performance objectives. However, empirical evidence shows that the focus on the measurement and control in the context of performance management has started to diminish in the 1990s, driven by the increase in popularity of the Balanced Scorecard (BSC), Knowledge Management and Systems Thinking. Even the BSC was first presented in 1992 as a measurement tool promoted by the management accounting school and having roots in the quality movement. However it evolved quickly to become a complete management system supporting strategy implementation as a core competency. As a performance management concept, the BSC enables not only measurement and control, but also communication and learning.

This shift is supported by proponents of the knowledge management/intellectual capital school of thought who argue that “the main problem with all measurement systems is that it is not possible to measure social phenomena with anything close to scientific accuracy” (Sveiby and Armstong, 2004). They invoke Heisenberg’s uncertainty principle to illustrate the inherent imprecision in measurement that exists even in “exact” sciences such as physics. The principle states that uncertainties, or imprecision, always turn up if one tries to measure the position and the momentum of a particle at the same time (Cassidy, 1993, 1998). Neils Bohr famously stated that “Accuracy and clarity of statement are mutually exclusive” (for further details see Pais, 1994).

Measurement for rewards leaves room for interpretation in the process of setting targets and measuring results and quite often leads to abuse. Using targets for control and linking the achievement of these targets to individual performance has the risk of staff members manipulating the system to their benefit and the expense of other teams and even the entire organisation.

The alternative proposed to measurement for control is measurement for learning, as illustrated by the table below:

Characteristic Measurement for control Measurement for learning
Measurement drivers Management Employees
Measures development Top-down commands Process-oriented bottom-up approach
Measurement role Measuring and managing work in functional activities. Measuring and managing the flow of work thought the system
Measurement focus Productivity output, targets, standards: related to budget Capability, variation: related to purpose
Results communication Restricted Open
Target driven by Budget/political aspirations Understanding achievement versus purpose
Follow-up to results Rewards, punishment and action to improve results Dialogue and improvement
Learning cycle Single loop Double loop learning
Link to rewards Link to individual rewards and recognition system Group rewards, based on improvement

Table: Measurement for control compared to measurement for learning, Brudan, 2010

A mechanistic view on performance management, focused on measures and targets in isolation, pay-for-performance, control and rhetoric leads frequently to unoptimized results. Opposed to this is a Systems Thinking based view on managing performance, that coupled with the emphasis on learning, highlight the need for an integrated approach to performance management. Effective performance management requires more than measuring and reporting in isolation, more than control and rewards. It requires an organic performance architecture, that values more performance management for learning is informed by a more humanistic performance philosophy.

Stay smart! Enjoy smartKPIs.com!

Aurel Brudan

Performance Architect,
www.smartKPIs.com

References

Brudan A.N. (2010) “Rediscovering performance management: systems, learning and integration”, Measuring Business Excellence, Vol. 14, No. 1, pp. 109-123.

Cassidy, D. (1993) “Uncertainty: The Life and Science of Werner Heisenberg”, W. H. Freeman, New York, pp. 226-246.

Cassidy, D. C. (1998) “Answer to the Question: When Did the Indeterminacy Principle Become the Uncertainty Principle?” American Journal of Physics, Nr. 66, pp. 278-279

Cukor-Avila, P. (2000) “Revisiting the Observer’s Paradox”, American Speech, Vol.75, Nr. 3 pp. 253-254.

Pais, A. (1994), “Niels Bohr’s Times: In Physics, Philosophy, and Polity”, Oxford University Press, Oxford, England, pp. 304-309.

Sveiby, K. E. and Armstrong C.(2004). “Learn to Measure to Learn!”, opening keynote address at the Intellectual Capital Congress Helsinki, 2 Sept 2004.

Walker, Rob 1992, “Rank Xerox – Management Revolution”, Long Range Planning, Vol. 25, No. 1, pp. 9 to 21

smartKPIs.com Performance Architect update 27/2010

Lexical rivalry: “Strategy Execution” versus “Strategic Performance Management

Over the last few years, the use of the term “Strategy Execution” witnessed a dramatic increase in popularity in the business environment, mainly in the language used by consultants. Decomposing it reveals two terms commonly used in administrative science, both with military roots:

Strategy – plan of action

Execution – the act of putting a plan in practice

Together, they express the idea of implementing strategic plans in practice, achieving desired outcomes through sustained effort towards them, or performing as per expectations.

In essence … managing performance. In terms of meaning, each of these alternative options would be suitable as replacements of “Strategy Execution” to express the same set of ideas. If the meaning is not affected, what are the advantages and disadvantages of using the term “Strategy Execution” over “Strategic Performance Management”?

On the use of the term “Strategy Execution”

The first issue with the term is its mechanistic connotation. One of the reasons it is preferred by its proponents is that it illustrates the importance of delivering as expected, or getting things done. However, as both terms have military roots, they remind of the phrase “executing orders as instructed” and the strict discipline of military organizations. This gives the term “Strategy Execution” strict connotations of implementing strategic plans as instructed, without variation, same as “executing orders”. In an environment that is continuously changing, strategic plans are often outdated the moment they are printed. And executing outdated plans can be a risky enterprise. Sure, strategy execution is presented as including a process of continuously renewing strategic plans, which sometimes happens, sometimes, not. There is however a contradiction with the military sense of the term, where orders are in place until their execution and it modifying them based on intelligence from the agent or operator in the field doesn’t happen often.

Besides the issue of how strict the discipline of executing should be, a second issue of the term is its lack of humanistic view regarding the members of the organization. The use of the term “execution” is inferring their contribution is only at the implementation level, without much input to the planning level. They are not there to think or plan, they are supposed to execute as instructed.

On the other hand, the term “Strategy Execution” is interesting, exciting and marketable. It stands out from the multitude of publications on performance management topics, and provides an excellent differentiation platform. It also builds on the basis built by names such as Ram Charan and Larry Bossidy, who published as early as 2002 a book on the topic of execution, laying the ground for a new wave of management books on the topic. In a way it is not surprising that most of the proponents of the term are American authors, as they many have mastered the principles of concept marketing, the marketing of management concepts and ideas to obtain support and attract followers.

On the use of the term “Strategic Performance Management

Often times the term “Performance Management” is used to illustrate activities related to the achievement of desired outcomes at individual level, by the staff members of organizations. In a way, it is safe to say that this use of the term has won the popular vote, as it is the most common use of the term. However, “Performance Management” is much more than that. If we are to imagine the term “Performance Management” as a cube, the use of the term at individual level would be only one facet of the cube. There are a multitude of other facets that complement the individual level, such as:

• Strategic (organizational)

• Operational (functional are)

• Team (at staff community level)

The essence of the term “Performance Management” remains the same across each of these facets. This is both an advantage and a disadvantage. Many authors prefer avoiding the term as using it is likely to lead the reader to conclude it refers to individual performance management, a topic that is for many neither fresh nor interesting. In term of the marketability of the term, its disadvantages are that it expresses many things for many people and publications face of risk of getting lost in the variety of existing publications on such topics.

At the same time, this variety is also an advantage. Performance Management as a discipline is informed by a variety of other disciplines such as Strategy Management, Operations Management, Human Resource Management, Project Management, Finance, Marketing and Communications, among others. It is in the unique position to act as an integrating management discipline, linking together elements from others, for improved clarity and alignment. The use of the term “Performance Management” reinforces the message of integrating disciplines not only at components level, but also in terms of the approach. Similar performance management principles can be applied at multiple levels in an organization, so why call them differently?

The 20th century was marked by analysis and decomposition of elements. In the 21st century, further benefits can be realized in terms of advances in management by reintegrating elements into a unified body of knowledge and not by continuing the trend of creating new “blends and trends”. New thinking is required and that is informed by integration and not isolation.

“Strategy Execution” versus “Strategic Performance Management”

Some prefer to use more fancy terms such as: “Strategy Execution” instead of “Strategic Performance Management“, or “Operational Excellence” instead of “Operational Performance Management“. As management as a discipline is a democracy, with its advantages and disadvantages, ideas promoted by a louder voice and by supporters triumph, sometimes at the expense of ideas more timidly expressed, though of the same quality, if not higher.

The lexical preference of “Strategy Execution” over “Strategic Performance Management” is such an example. What is not clear is whether the preference is informed by weighing advantages or disadvantages such as the ones illustrated above, or if the terms are used just because they are popular and the “management gurus” use them.

Ultimately it might not matter, as long as results are achieved. However, in terms of credibility of management concepts in the eyes of the public, there might be unintended consequences of such choices, such as the loss of credibility and reticence regarding management rhetoric.

Overall, “Strategic Performance Management” is a more humanistic, learning oriented and integrating term that provides a more vivid panorama of achievement. Put some blinkers on and what you are left with is “Strategy Execution”.

Stay smart! Enjoy smartKPIs.com!

Aurel Brudan

Performance Architect,
www.smartKPIs.com

Notes:

For more details on lexical rivalry see: Hofstadter D. R. (2001), Analogy as the Core of Cognition, available at: http://prelectur.stanford.edu/lecturers/hofstadter/analogy.html

Walker, Rob 1992, Rank Xerox – Management Revolution”, Long Range Planning, Vol. 25, No. 1, pp. 9 to 21

smartKPIs.com Performance Architect update 26/2010

Vision statements as strategic management tools – Historical overview

Etymologically, both the words “mission” and “vision” have their roots in religion. Most religions, from Taoism, to Christianity and Islam have used the term vision in their religious texts for thousands of years. In these texts, the term “vision” depicts a sacred encounter which results in a view of the future or specific advice on how to approach a situation. Gradually, “vision” has started to be used initially in general and subsequently in business literature, to depict mental images related to the future.

The use of a vision statement in business organizations can be traced far back. As its inherent meaning refers to what organizations want to achieve in the future, it can be argued that any company statement that clarifies this aspect can be considered a vision statement, even if not explicitly labeled this way. In recent history, Sony was one of the first companies reported to have used the vision beyond a simple declaration, to drive organizational development and strategic decision making (Lyons 1976, Morita 1987, Nathan 1999). Another famous early adopter in the late 70s-early 80s was Apple Computer (Swanger and Maidique 1988, Schoemaker 1992). Initial literature on vision statements has associated the concept with leadership, as imagining the future is considered an attribute of a leader (Mendall & Gerguoy 1984, Sashkin 1988, Westley & Mintzberg 1989). One of the earlier definitions of the vision statement in a business context was offered by Kouzes and Posner (1987: 85), who defined it as “an ideal and unique image of the future”.

1990s represent the heyday of vision statements as strategic management tools, with a wave of articles promoting them (Filion 1991, Ziegler 1991, Larwood, Falbe, Kriger & Miesing 1995, Collins & Porras 1991, 1996). This wave of articles was followed by studies analyzing their evolution (O’Brian, Meadows 2001) and impact (Baum JR & Locke EA 1998, Raynor 1998).

Towards the end of 1990, the interest of both researchers and practitioners focused increasingly towards exploring the use of integrated approaches that link strategic management concepts related to corporate identity: mission, vision, values and capabilities or competencies (Raynor 1998, Stuart 1999).

A 2008 survey conducted by the management consulting company Bain & Company ranks Strategic Planning as the second most popular management tool after Benchmarking, while Mission and Vision Statements are on the third place (Rigby and Bilodeau 2009). Of the nearly 10,000 respondents 67% indicated that Strategic Planning and 65% indicated that Mission and Vision Statements are used by their organization. In terms of satisfaction, the same report lists Strategic Planning as the tool which users are most satisfied with (having a rating of 4.01 out of 5), while Mission and Vision Statements (with a rating of 3.91 out of 5) are ranked third. A review of the results of this annual survey conducted since 1993 reveals that the use of Missions and Vision Statements declined from 88% in 1993 to 70% in 2000, followed by an increase to 79% by 2006 and a further decline to 65% in 2008.

Despite the variance in research interest, usage in practice and the confusion with mission statements, vision statements are one of the most important strategic management and business performance management tools. They represent a much needed mental image of the future state, inspiring and motivating leaders and followers towards a common desideratum. In doing this, they facilitate alignment and decision making. While they vary in format and usage, vision statements generally represent a good balance between the efforts invested in development and the impact their usage has on results.

Stay smart! Enjoy smartKPIs.com!

Aurel Brudan

Performance Architect,
www.smartKPIs.com


References

Baum JR & Locke EA (1998) A Longitudinal Study of the Relation of Vision and Vision Communication to Venture Growth in Entrepreneurial Firms, Journal of Applied Psychology, 83(1):43-54.

Collins JC & Porras JI (1996) Building your Company’s Vision, Harvard Business Review, September-October: 65-77

Filion LJ (1991) Vision and relations: Elements for an entrepreneurial Metamodel, International Small Business Journal, 9:112-131.

Kouzes JM & Posner BZ (1987) The leadership challenge: How to get extraordinary things done in organizations, San Francisco, Jossey-Bass.

Larwood L, Falbe CM, Kriger MP & Miesing P (1995) Structure and meaning of organizational vision. Academy of Management Journal, 38: 740-769.

Lyons N (1976) The Sony vision, New York, Crown Publishers.

Mendall JS & Gerguoy HG (1984) Anticipatory management or visionary leadership: A debate, Management Planning, , November-December: 28-31.

Morita A (1987) Made in Japan: Akio Morita and Sony, London, Fontana Paperbacks.

Nathan J (1999) Sony: The private life, London, Haper Collins Business.

O’Brian F & Meadows M (2001) How To Develop Visions: A Literature Review and a Revised CHOICES Approach for an Uncertain World, Journal of Systemic Practice and Action Research, 14(4):495-515.

Raynor ME (1998) That Vision Thing: Do We Need It?, Long Range Planning, 31(3):368-376

Rigby and Bilodeau 2009, Management Tools and Trends 2009, a Bain and Company, Inc. publication, accessed at http://www.bain.com/bainweb/PDFs/cms/Public/Management_Tools_2009.pdf on 29 June 2010.

Sashkin M (1988). The visionary leader, Charismatic leadership: The elusive factor in organizational effectiveness, In J. A. Conger & R. N. Kanungo (Eds.), pp. 122-160), Jossey-Bass, San Francisco.

Schoemaker PJH (1992) How to Link Strategic Vision to Core Capabilities, Sloan Management Review, Fall: 67-81.

Swanger CC, Maidique MA (1988) Apple Computer: The First Ten Years, Strategic Management of Technology and Innovation, Homewood, Illinois, Irwin, pp. 288-320.

Stuart H (1999) A definitive model of the corporate identity management process, Corporate Communications: An International Journal, 4(4):200-207.

Westley R & Mintzberg H (1989) Visionary leadership and strategic management, Strategic Management Journal, 10:17-32.

Ziegler W (1991) Envisioning the Future, Futures, June: 516-527.

Walker, Rob 1992, Rank Xerox – Management Revolution”, Long Range Planning, Vol. 25, No. 1, pp. 9 to 21