Performance Management is one of the most dynamic business disciplines today. Its evolution accelerated over the last 20 years and due to the large number of concepts it employs and unstructured body of knowledge, having a comprehensive big picture view of the topic is rather challenging. One way of achieving this is by reading a lot and doing a critical review to the various ideas proposed. Another option is by monitoring the pulse of the discipline as reflected in studies and survey reports covering performance management topics.
Listed below is a random list of relevant statistics published in performance management studies over the last few years. It is interesting to put them together as pieces in a puzzle, to create a picture of the state of the discipline. This is the plus. On the other hand, each study used different research tools and varied in rigor, so the results need to be analyzed in the context of the survey as illustrated in the original report.
Overall they form an interesting read and while the degree of accuracy for their findings may vary, they can be useful in understanding the thinking and direction in Performance Management research and practice:
- ” …the most growth in BI [Business Intelligence] tools to support performance management has been in operations (51%), finance (50%) and customer management (49%) ” (Ventana Research, 2010)
- ” …more than half of participants (53%) said that they are only somewhat confident or not confident at all that their BI [Business intelligence] technology meets the needs of the organization”…. with only 9% being “very satisfied with their organization’s BI efforts.” (Ventana Research, 2010)
- “…lack of resources (60%) and lack of a budget (43%) are the two most common barriers to improving BI and performance management…. The top two people issues are lack of awareness (36%) and lack of executive support (26%)” (Ventana Research, 2010)
- “…41% of participating organizations evaluate performance data and 29% are assessing metrics or measures to do so.” (Ventana Research, 2010)
- “…two thirds (66%) of organizations are planning to evaluate new technologies for BI and performance management.” (Ventana Research, 2010)
- Balanced Scorecard is the sixth most used management tool all over the world. (Bain & Company, 2009)
- 53% of the surveyed companies use a Balanced Scorecard, with an overall satisfaction score of 3,83 from 5. (Bain & Company, 2009)
- “ On average, 84% of employees at Best in Class organizations were rated “meets” or “exceeds” performance expectations…” (Aberdeen Group, 2009)
- “… An [Enterprise Performance Management] EPM system with strong reporting capabilities is a critical enabler for the Best in Class (companies) by enabling leaders and managers to make better decisions…” (Aberdeen Group, 2009)
- “Most of the companies agree that systemically deriving KPIs from their strategy and effectively communicating that strategy are crucial to ensuring strategic objectives are met” (PricewaterhouseCoopers, 2009)
- “….only 33% have implemented strategy maps. Nevertheless 67% of the companies use strategy development tools such as value chain analysis.” (PricewaterhouseCoopers, 2009)
- ” While many companies say they derive KPIs from strategy (61%), a smaller number indicate that they have been through the process of defining strategic value drivers (54%) to break strategy and identify relevant KPIs.” (PricewaterhouseCoopers, 2009)
- “On a scale of 1 (not integrated) to 6 (fully integrated), 73% of the companies rate their [Performance Management] process integration as a 4 or above.” (PricewaterhouseCoopers, 2009)
- “…many companies focus on classic financial control measures. 81% stated that they use KPIs concerning profit or loss, liquidity, profitability and operational business.” (PricewaterhouseCoopers, 2009)
- ” …along financial indicators, 51% of the participating companies explicitly indicated non-financial measures like customer satisfaction or quality of delivered services as KPIs in use” (PricewaterhouseCoopers, 2009)
- “On average more than 80% of companies think their [Performance Management] PM processes need improvement…the planning, budgeting and forecasting processes seem to be especially problematic” (BARC, 2009)
- ” ..the number of people involved in performance management processes has increased over the last years with an average of 30% across all [Performance Management] PM processes.” (BARC, 2009)
- “ Corporate performance management (CPM) is the highest priority in business intelligence (BI)…” (Gartner, 2008)
- ‘’….through 2011, at least 50% of companies implementing CPM will simply automate existing finance oriented processes and fail to improve performance management processes across the organization.” (Gartner, 2008)
- “……organizations that allowed their finance function to lead a CPM implementation were on average 25% less mature in their use of CPM than organizations that had an equal partnership between finance, IT and Key business users in their CPM project.” (Gartner, 2008)
- [Global Market] “….financial measures still dominate. In every country, financial measures are the most frequently measured and over half of those surveyed report that over 50% of their measures are financial” (Neely et al. 2008)
- [Chinese Market] “… 89% reported that they had adopted a formal structure for their enterprise performance management system.” (Neely et al. 2008)
- [Japanese Market] “According to data over 60% of Japanese companies have now adopted performance management frameworks such as the balanced scorecard.” (Neely et al. 2008)
- [U.K. Market] ” … only 17.3% believe they have the right number of measures, while 38.6% have concerns about the quality of their data.” (Neely et al. 2008)
- [U.S. Market] ” Despite the abundant literature on mapping strategies, the majority of the respondents, 62%, do not visualize their strategies.” (Neely et al. 2008)
- [Australian Market] “…65.5% of the respondents claim to have a balanced scorecard….. no other framework for enterprise performance management design being prominent in Australia, with 39.3% of respondents preferring to use their own basis for designing their enterprise performance management system.” (Neely et al. 2008)
- Measuring performance against goals and tracking KPIs occur in 80% of companies. (SAS, 2007)
- “8 in 10 organizations in this research are engaged in measuring performance against goals, ahead of summarizing and consolidating information. Three-quarters are tracking key performance indicators (KPIs)”:
• Performance measures against goals - 81%
• Summarized reporting of financial performance information on department level - 78%
• Key performance indicators tracked - 76%
• Decision making based on understanding of which measures drive the business - 64% (SAS, 2007)
- Benefits achieved based on performance management activities
• Competitive advantage: up to 63%
• Agility: up to 56%
• Compliance/Governance: up to 50%
• Budget/plan aligned with strategy: up to 47%
• Revenue growth: up to 47%
• Innovation: up to 44%
• Strategic alignment: up to 44%
• Response to market threats/risks: up to 41%
• Resource alignment/optimization: up to 38%
• Financial transparency: up to 38% (SAS, 2007)
- “In an evaluation of their budgeting, forecasting, and reporting processes, an astonishing 60% of companies surveyed exhibited limited adoption of [Business Performance Management] BPM best practices, 36% showed ‘some adoption’ while less than 4% showed strong adoption.” (Active Planning, 2006)
- “Across all companies, 78% of respondents are still using spreadsheets as their primary budgeting and forecasting tool…..only 41% are using graphical dashboards or scorecards in their reporting processes…..and fully 76% have not rebuilt their planning model in over a year” (Active Planning, 2006)
- “Average companies include nearly nine times too many metrics, focus heavily on historical finance data and not enough on forward-looking indicators.” (Hackett Group (2004) as cited by PMA, 2005)
- “Less than 20% of all typical companies have mature balanced scorecard implementations in place that are generating business value.” (Hackett Group (2004) as cited by PMA, 2005)
- “…..world class companies are 159% more likely….. than typical companies to have mature balanced scorecards” (Hackett Group (2004) as cited by PMA, 2005)
- “…companies report an average of 132 measures to senior management each month (83 financial and 49 operational). This is nearly nine times the number of measures suggested as appropriate when the concept of the balanced scorecard was introduced in 1992″ (Hackett Group (2004) as cited by PMA, 2005)
Same as in Performance Management, “seeing beyond figures” makes the interpretation and use of such results more balanced and relevant.
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- Aberdeen Group 2009, Research Brief, SuccessFactors: Addressing the Pillars of Employee Performance Management Success, available at http://www.aberdeen.com/aberdeen-library/6253/RB-employee-performance-management.aspx, accessed 18 May 2010
- Adaptive Planning 2006, Press releases: Mountain View, CA, December 11, 2006, Business Performance Management Survey Reveals 60% of Finance Departments Have Not Adopted Best Practices - available at http://www.adaptiveplanning.com/news/company_press_121106.php, accessed 18 May 2010
- Bain & Company 2009, Management Tools 2009. An Executive’s Guide by Darrell K. Rigby, available at http://bain.com/management_tools/tools_balanced.asp?groupCode=2, accessed 18 May 2010
- Business Application Research Center (BARC) 2009, Performance Management - Current Challenges and Future Directions. A global survey, available at http://www.barc.de/en/marktforschung/performance-mangement-survey.html, accessed 18 May 2010
- Gartner 2008, Press Releases: Egham, UK, February 6, 2008 - Gartner Survey shows Corporate Performance Management is the highest priority in Business Intelligence in Europe - http://www.gartner.com/it/page.jsp?id=597910, accessed 18 May 2010
- Hackett Group Research, Performance Measurement Association (PMA), 2005 Perspectives on Performance, Volume 4, Issue 1, pp 3, available at http://www.som.cranfield.ac.uk/som/research2/centres/cbp/pma/PoP%20vol4%20iss%201%20A4%20-%20complete.pdf, accessed 18 May 2010
- Neely, A.D.; Yaghi, B. and Youell, N. (2008) “Enterprise Performance Management: The Global State of the Art”, Oracle and Cranfield School of Management, available at http://www.ifm.eng.cam.ac.uk/people/adn1000/, accessed 18 May 2010
- Neely, A.D.; Cuganesan, S; Yaghi, B. and Youell, N. (2008) “Enterprise Performance Management: The Australian State of the Art”, Oracle, Macquarie University and Cranfield School of Management, available at http://www.ifm.eng.cam.ac.uk/people/adn1000/, accessed 18 May 2010
- Neely, A.D.;Yaghi, B.; Dietrich, R. and Youell, N. (2008) “Enterprise Performance Management: The US State of the Art”, Oracle, Fisher College of Business and Cranfield School of Management,available at http://www.ifm.eng.cam.ac.uk/people/adn1000/, accessed 18 May 2010
- Neely, A.D.; Yaghi, B. and Youell, N. (2008) “Enterprise Performance Management: The UK State of the Art”, Oracle and Cranfield School of Management. available at http://www.ifm.eng.cam.ac.uk/people/adn1000/, accessed 18 May 2010
- Neely, A.D.; Shimizu, T.; Yaghi, B. and Youell, N. (2008) “Enterprise Performance Management: The Japanese State of the Art”, Oracle, Waseda University and Cranfield School of Management, available at http://www.ifm.eng.cam.ac.uk/people/adn1000/, accessed 18 May 2010
- Neely, A.D.; Yaghi, B.; Zhijun Wang, Z. and Youell, N. (2008) “Enterprise Performance Management: The Chinese State of the Art”, Oracle, Peking University and Cranfield School of Management, available at http://www.ifm.eng.cam.ac.uk/people/adn1000/, accessed 18 May 2010
- PricewaterhouseCoopers 2009, European Corporate Performance Management Survey, available at http://www.pwc.com/gx/en/finance-consulting-services/euro-cpm-report.jhtml, accessed 08 June 2010
- SAS 2007, The Truth About Performance Management - A Report of Survey Findings, available at http://www.sas.com/ci/whitepapers/102716.pdf, accessed 18 May 2010
Koalas are small tree-dwelling, herbivorous marsupials found only in Australia. Phascolarctos cinereus is the scientific name, coming from the greek words for leather pouch, bear and ash-coloured.
* Average weight ranges between 11.2 lbs.5.1 kg and 26 lbs/11.8 kg. Males are around 20% heavier than females
* Life span - 13-18 years
* Gestation period - 34-36 days
* Spend 3 of their 5 active hours each day eating and rest for 16-18 hours a day
* Diet is based on eucalyptus leaves (toxic to most other species), on average 0.5Kg (18 oz) each day
Koalas are rather inactive, spending most of their time in trees, resting or eating. There are many examples, though, when in extreme circumstances they pursue human interaction. The picture below depicts a Koala in a residential area, seeking relief from the heat after a week of 40+C (110+F) temperatures in 2009.
Source: Resident of Maude, South Australia
A simple answer is over-reliance on measurement and its merits.
Since ancient times, humans had a fascination with measurement. In discovering the natural universe, measurement has its merits and one might say it is indispensable. Evaluating the physical properties of the world around us, we have gradually developed a rather objective and accurate way to determine distance, weight, density among others.
In administrative science things are different, tough. Measurement is done by humans and results are used by humans in a much more subjective environment, conducive of errors. It is not something new, and it will not be easily addressed, if ever.
Protagoras of Abdera, who lived between 480-410 B.C. famously said: “Man is the measure of all things”. His words have deep philosophical meanings that reverberate deeply in a performance measurement context. The implications are on one hand at a practical level, as ancient Greek measurement systems used in construction and architecture were based on the dimensions of the human body. On the other hand, at conceptual level, it underpins some of the human evaluation dilemmas that has been in place for centuries.
A relevant example of this dilemma is the practice of conducting individual performance evaluation. The precise origin of performance appraisals is not known but the practice dates back to the third century when the emperors of the Wei Dynasty (221-265AD) rated the performance of the official family members (Banner & Cooke (1984); Coens and Jenkins (2000)). Fairness of raters was questioned since the third century by the Chinese philosopher Sin Yu who reportedly criticized a rater employed by the Wei Dynasty with the following words: “The Imperial Rater of Nine Grade seldom rates men according to their merits, but always according to his likes and dislikes” (Patten (1977) as cited in Banner & Cooke (1984)).
Fast forward a few hundred years and at the turn of the 20th century a performance measurement revolution is announced and driven by Harvard Business School researchers. Eccles published his famous manifesto on 1991 and Kaplan and Norton seized the opportunity to give the world the tool to drive change, fueling it with an equally famous article in 1992 that promoted the Balanced Scorecard as a performance measurement tool. They have quickly realized that measurement is not the key and shifted their efforts towards strategy and performance measurement overall. However, as a result of the growing popularity of the Balanced Scorecard as a strategic performance management system, the efforts of many researchers and practitioners focused on the measurement side of things, trusting that performance management is taken care of. Thousands of articles and books on performance measurement were written in the 90s, many addressing questions such as:
- Why to measure?
- What to measure?
- When to measure?
- Who should measure?
- Where to measure?
- How to measure?
By the beginning of the 21st century, the attitude towards Performance Measurement as a discipline was similar to the one towards Physics a century ago, when Lord Kelvin said: “There is nothing new to be discovered in physics now. All that remains is more and more precise measurement.”
Fueled by advanced in technology, accelerated rate of change in the environment in which many organizations operate and the enthusiastic momentum of the 90s, performance measurement continued dominate the Performance Management research and practice agenda. The fascination of the measurement promise is similar to the one in Physics. There seems to be an attitude that there is nothing new to be discovered in Performance Management now. All that remains is more and more precise performance measurement. As in Physics this view is far from being accurate. There are two major flows with is:
- It is not the data that matters, but what you do with it and the impact. Having a very accurate set of data that is used incorrectly and leads to the wrong decisions is worse than having a less accurate set of data, but used smartly in leading to the correct decisions.
- We should not discount the possibility that data accuracy in human administration is an elusive desideratum. Coming back to Physics, Nield Bohr’s statement gives food for thought: “Accuracy and clarity of statement are mutually exclusive”.
One of today’s tragedies provides the scene to put things into context. We might never know exactly the amount of oil that leaked in the Gulf of Mexico as a result of the The Deepwater Horizon incident. What matters more is not the exact quantities and linking them to bonuses for cleaning or penalties for the accident taking place. Learning the right lessons from such an incident, changing attitudes and behaviors and making a positive impact on both recovery efforts and the future operations of the company, response teams, the industry, local community and the regulators is what matters.
Performance measurement puts too much value on measurement. And as Benjamin Franklin once said “I conceive that the great part of the miseries of mankind are brought upon them by false estimates they have made of the value of things.”
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Banner, D.K., & Cooke, R.A. (1984). Ethical dilemmas in performance appraisal. Journal of Business Ethics, No. 3, pp. 327-333.
Coens,T., & Jenkins, M. (2000). Abolishing performance appraisals: why they backfire and what to do instead. San Francisco: Berrett-Koehler Publishers
Eccles, R.G. 1991, “The performance measurement manifesto”, Harvard Business Review, Vol 69, No.1 January-February, pp. 131-137.
Kaplan, R. S. and Norton D. P. (1992, Jan-Feb) ‘The Balanced Scorecard - Measures That Drive Performance’, Harvard Business Review, Vol.70, No.1, pp.71-79
Patten, T.H., Jr (1977), Pay: Employee Compensation and Incentive Plans, pp. 352 Free Press, London.
3 interesting details about the Australian Dingo:
1. considered the biggest terrestrial predator in Australia
2. arrived on the continent around 5,000 years ago
3. has its origins in domestic dogs that accompanied Austronesians in their voyages to Australia
Performance Management case study: Balancing on-time service and pay-for-performance in urban public transport
Delivering urban public transportation services today is a challenge due to the slow process of upgrading infrastructure and the general trend of population increase in large cities. Finding a balance between service delivery and punctuality requires careful planning and active monitoring of results. The case study illustrated below highlights some of the challenges and trade-offs that have to be explored by each operator.
Urban public transportation operator.
While in many cities the local public transport is operated by the government, a trend that gained momentum over the last 15 years is the outsourcing of the operations of the infrastructure. This way the government becomes a customer of a separate entity responsible for the service delivery to the wider public. The arrangement as benefits for both sides. The government shifts some of the pressure from citizens regarding the quality of the public transport services towards the operator, limiting a sensitive issue at election time. The operator manages a monopoly or in some instances is part of an oligopoly of service providers.
Operate a safe and reliable public transportation system, delivering quality services for the public.
To stimulate the improvement of services, Service Level Agreements clarify responsibilities of both parties and outline performance standards that the service operator needs to meet. A common element in such agreements is a pay-for-performance arrangement that rewards or penalizes the operator based on the achievement of set targets.
Some of the commonly used KPIs in such agreements are:
% Planned services delivered (monitoring if services are operated)
% Punctuality (monitoring if the set schedule for each stop is followed)
These two KPIs are key to evaluating the customer experience. The first outlines if the routes planned to be serviced each day were delivered at all, while the second monitors how well were these routes serviced in terms of punctuality.
One afternoon, a passenger on the way home from work gets on a bus, validates the ticket and takes a seat, waiting for the bus to arrive at the desired stop, the second last of the line.
At the fourth stop before the end of the line, the bus driver announces all passengers that he has been requested to finish the route early at that stop. Everyone is invited to get off the bus and once the bus is empty, it skips the last three stops of the route, continuing with the return service.
Our passenger has paid the travel fare, expecting in return the arrival to destination, as planned. The early termination of the route by the public transport operator resulted in diminished utility of the amount spent and in an incomplete journey.
* What is the relationship between the KPIs used to track service performance and the decision to change the route of the bus?
* How is the estimated impact on customer satisfaction of such actions?
* Why aren’t customer satisfaction KPIs used as widely as service delivery KPIs in transport operator SLAs?
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Performance Management case study: Ford Pinto – business ethics and performance measurement
Ford Motor Company
In late 1960s, Ford was facing increasing competition from domestic carmakers and Japanese imports.
In June 1967 Ford started planning a new model that would outdo the competition. Lee Iaccoca, Vice-President and head of production at the time championed the project that was meant to deliver what was nicknamed “Lee’s car”. lee formulated a set of performance indicators with specific targets to define the parameters of the new product: “The Pinto was not to weigh an ounce over 2,000 pounds and not cost a cent over $2,000″ (Dowie, 1977).
- December1968 – Project “Phoenix” obtained the approval of Ford’s Product Planning Committee for Pinto’s basic design concept (Schwartz, 1991)
- January 1969 – Ford’s Board of Directors, chaired by Henry Ford II gave his approval for Ford’s first domestic sub-compact: Ford Pinto. (Schwartz, 1991, Consumer Guide Auto, 2010a)
The product objectives were listed in Pinto’s “Green book”, “a manual in green covers containing a step-by-step production plan for the model, detailing the metallurgy, weight, strength and quality of every part in the car” (Dowie, 1977).
1. True subcompact
2. Low cost of ownership
• Initial price
• Fuel consumption
3. Clear product superiority
• Ride and Handling
The main targets were (Dowie, 1977):
# Weight of the car – Target: under 2000 lb (907kg)
$ Cost – Target: under $2,000.
# Time from conception to production – Target: 25 months (At almost half of the average of 43 months, this was estimated at the time to be the shortest production planning period in modern automotive history).
The achievement of the main targets was as follows (Consumer Guide Auto, 2010):
# Weight – Actual: 1,949 lb (884kg)
$ Cost – Actual: $1,919
# Time from conception to production – Actual: less than 20, as it was launched on 11 September 1970 and the first delivery took place on 13 September 1970
Major design problem
At rear-end collisions of over 30 miles/hour (48km/hour), the rear-end of the car would buckle and the fuel-tank would break and burst into flames. Ford did 11 rear-end crash tests, averaging a 31-mph impact speed, before Pintos went on sale. Some records reveal that rear-end collision tests on the Pinto in took place in December 1970, months after it was already in production (Consumer Guide Auto, 2010). Regardless of the date, out of the 11 tests at 31 miles/hour, only three cars passed the test with unbroken fuel tanks.
Replace the fuel tank with the one used in Ford Capri. It would have been located over the rear axle and differential housing, with much better protection from rear-end impacts.
Decision: Option disregarded due to the impact on trunk space.
During the analysis process a Ford engineer stated: “But you miss the point entirely. You see, safety isn’t the issue, trunk space is. You have no idea how stiff the competition is over trunk space. Do you realize that if we put a Capri-type tank in the Pinto you could only get one set of golf clubs in the trunk?” (Dowie, 1977).
Three alternative solutions analyzed pre and post production (Consumer Guide Auto, 2010)
• A plastic insulator fitted on the differential that would keep the bolts from ever making contact with the fuel tank. Cost of this item was less than $1.
• The use of a rubber bladder/liner produced by the Goodyear Tire and Rubber Company, at a unit cost of $5.08 per car.
• An extra steel plate attached to the rear of the car just behind the bumper, at a unit cost of up to $11 per car to install.
Decision: Options disregarded due to the impact on costs.
A cost-benefit analysis was conducted to determine the costs associated with implementing such solutions versus the benefits generated by avoiding possible lawsuits resulting from accidents where the gas tank position played a role in injuries or fatalities.
The Pinto went on sale without the gas tank issue being addressed and however meeting all the targets outlined in the green book.
Financial and market outcomes for Ford
* The first domestically produced Ford passenger car with a four-cylinder engine since 1934.
* The segment market share of imports was reduced from 15.2 % in 1971 to 14.8% in 1972
* Made an important impact on Ford’s profits during the 1974 OPEC oil embargo. As the most fuel efficient model Ford produced at the time more Pintos were built (544,209) than the sales for full-sized models taken altogether (461,000) (Consumer Guide Auto, 2010)
* 2,924,773 Pintos built between 1971-1980 (Consumer Guide Auto, 2010)
Reputation and ethical outcomes
* 500 burn fatalities of people who would not have been seriously injured if the car had not burst into flames (Dowie, 1977). National Highway Safety Administration records place this figure at 27 fatalities (Schwartz, 1991).
* In September 1978, Ford issued a recall for 1.5 million 1971-76 Pinto sedans and Runabouts, making it the largest recall in the industry up to that time.
* Millions of dollars in lawsuits were filed and won against the automaker, including the largest personal injury judgment ever.
* In the 1979 landmark case State of Indiana v. Ford Motor Co., Ford notoriously became the first American corporation ever indicted or prosecuted on criminal homicide charges. Ford was found not guilty in March 1980 (Schwartz, 1991).
1970 - Lee Iacocca, the “father” of the Pinto became President of Ford Motor Company
1977 - “Pinto Madness”, an article revealing the story behind the Pinto to the public was published by the Mother Jones magazine. It went on to win a Pulitzer Prize.
1978 – Lee Iacocca was fired by Ford Motor Company. His relationship with Henry Ford II, chairman of the board and chief executive officer (CEO), became tensed as a result of the Pinto scandal.
1979 - Chrysler Corporation recruited Lee Iacocca as their President and CEO, where he served until his retirement in 1992.
1991 – “The myth of the Ford Pinto’s case”, an article revealing some of the inaccuracies in the Pinto scandal was published by the Rutgers Law Review. It concludes with: “ If the Ford Pinto case did not exist, law professors would need to invent it: for the case raises essential issues about both the form and the substance of modern products liability doctrine” (Schwartz, 1991).
From a Performance Management point of view the set targets were met and the desired financial outcomes were realized. However this case raises questions regarding both ethics, risk management and the purpose of using objectives and targets.
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Dowie, M 1977, Pinto Madness, Mother Jones, September / October issue
Schwartz, G 1991, The myth of the Ford Pinto case, Rutgers Law Review, Vol. 43, Issue No. 1013
Consumer Guide Auto, 2010, 1971-1980 Ford Pinto Available at: http://auto.howstuffworks.com/1971-1980-ford-pinto.htm, accessed on 3 May 2010.
DuPont, Toyota, Xerox, Analog Devices, Motorola…
What do they have in common?
Abstract reasoning and introspection enabled humans to advance scientific knowledge at an ever accelerating rate over the last 2500 years. As opposed to other natural sciences such as physics and chemistry, human organization or administration is more loosely defined, some considering it a science and others an art. However, both proponents of management as a science and as an art agree on its ultimate function – the one of getting things done or accomplishing desired goals.
While administrative science is one of the oldest fields of human inquiry, it is still behind in terms of maturity and impact, especially when compared to other fields. Scientific management is less than 100 years old and reporting the level of advancement in this field to others, one might consider it as being in its embryonic stage. It is ironic, as it is perhaps one of the most important aspects of human life – how as people on Earth we organize ourselves to live harmoniously and keep a balance between so many conflicting forces and priorities at so many levels.
So what can be done to accelerate the progress of administrative science, better known in practice as management, at both theoretical and practical level?
While there are many avenues to be explored, one of them is simple and with a considerable impact on both short and long term: Learning from practice.
Over time, administrative science has been driven by 3 main categories of contributors:
- Academics – researchers employing rigorous academic research methods.
- Consultants – commercial entities providing expert advice to challenges faced by practitioners.
- Practitioners - business professionals that apply in practice principles of management to achieve desired results.
A key ingredient for speedy progress in management is cross-polenisation of ideas. That is exchanging opinions, learning and trying new approaches and sharing results, to contribute collaboratively to the body of knowledge. However, each of the three categories of contributors has certain limitations in terms of their contribution to this process:
- Academics – sound academic research is slow and faces many challenges in terms of data availability and quality.
- Consultants – as profit oriented businesses, generally the main purpose is profit generation by deploying services. The emphasis on Research and Development in management consulting organizations is inconsistent. Even when it is actively pursued, results are often influenced by marketing and revenue imperatives.
- Practitioners – due to the ever-increasing demands of today’s fast-paced business environments, many of them have difficulties keeping up to date with professional development. Allocating time to activities such as research, documenting and sharing findings or even sharing opinions is mostly an exception rather than a rule.
For things to change, each of contributors from each of these categories needs to put more efforts both individually and collectively. Ultimately the most important category is the one formed by practitioners.
They spend most of their time in organizations that can be considered virtual laboratories for the administrative science.
They offer opportunities to change, experiment and innovate at a scale unmatched by both academics and consultant altogether.
This is one of the reasons why practitioners are key to the progress of administrative science. They are close to the data, can make decisions and have an unbiased position towards results as they are impacted by them anyway.
Both academics and practitioner have a key supporting role in this process. They can offer guidance and facilitate the cross-polenisation of ideas. The voice of practitioners needs to be heard more often: at conferences, on discussion forums, in academic and business publications and in businesses.
Successes from the past illustrate that, the contribution of practitioners to administrative science is the key driver of innovation in this field.
DuPont Analysis, Toyota Production System, Benchmarking, Balanced Scorecard and Six Sigma…
What do they have in common?
These concepts emerged from practice, championed in the companies nominated in the first question of this post. They were not concocted by consultants or academics in research laboratories.
Indeed, furthering the knowledge and application of such concepts in practice can’t be achieved without the support of the management consulting industry and academic institutions. They have done a rather good job so far.
However, listening to the voice of practitioners and learning from practice is something that we haven’t yet improved considerably. This is a condition that has to be met before the administrative science process of maturing is to accelerate dramatically.
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