smartKPIs.com Performance Architect update 7/2010

Setting targets, cooking steak and using thermometers

Setting targets is relatively easy if you want to make it easy – just pluck a number from the air, make it your target and strive to achieve it. However, there is more to target setting than a simple number selection.

One of the first things to be clarified when using target is why they are used. The answer might seem intuitively simple: to facilitate their achievement. Still, there are more reasons to using targets.

One of my favorite metaphors regarding using targets is the thermometer. Thermometers are used in multiple ways:

  • To check if the temperature is within certain limits. In medicine 37° Celsius / 98.6° Fahrenheit is considered the average healthy temperature of a healthy human body. In a way it can be considered a target, however a flexible one, based on a variance interval around it.
  • To ensure the temperature meets a specific value. For example, in cooking some dishes require a specific temperature to be reached as per the recipe. In this case, meeting the target temperature is required for the successful preparation of the dish.

Similarly, in other aspects of human administration, such as business, targets can be set for multiple reasons:

  • To learn – targets provide a good reference point for evaluating achievement and comparing results.
  • To motivate their achievement – as per the principles outlined by the Goal Setting Theory
  • To control / ensure compliance – to verify the achievement of a specific limit required as part of the successful delivery of a business plan.

In time, the latter two reasons worked hand in hand to overshadow the learning aspect of target setting. They work fairly well in the short term and bonuses based on meeting short term targets have become the norm in business. However, their long term impact is in many instances less positive. The Global Financial Crisis is only an example of the manifestation in practice of this thinking.

Coming back at the thermometer metaphor is as we would use thermometers only to check the temperature of the steak we are cooking (satisfying our short term hunger), having forgotten to also using them to monitor the temperature of our body, for long term health benefits. In practice (medicine and manufacturing) this is not the case – thermometers used in equal measure for learning and ensuring compliance. In business administration it is as if we have forgotten about the learning aspects of target setting… Reward and recognition driven target setting is the norm.

The implications at cultural level are important. Targets for control in many instances result in a dangerous combination of human greed and mechanistic behavior. This combination, coupled with ineffective risk management is one of the factors that contributed to the demise of many organizations in recent history. Having a good steak is generally easier and more appealing than monitoring health and learning about ourselves.

Fortunately, the body has the ability to self regulate temperature. Organizations, on the other hand don’t have a mature self-regulation system, again mainly due to the relatively low level of sophistication of organizational culture today. As a result rewards and recognition target setting seems to be a relic of 19th century management prehistory, a reflection of our inability to find the right balance in human organizations. After all, it took hundreds of years to evolve the thermometer to its current form. Scientific management has been around for less than 100. Maybe it is just a question of time.

Stay smart! Enjoy smartKPIs.com!

Aurel Brudan
Performance Architect,
www.smartKPIs.com

smartKPIs.com Performance Architect update 4/2010

The case for using a Performance Management Glossary

Some of the most asked questions in performance management discussions, either online or during conversations are:

  • What is the difference between a mission and a vision?
  • What is a KPI? How is it different from a measure?
  • What is the difference between Key Success Factors and Key Results Indicators?

They are generally centered on clarifying terms such: Mission Statement, Vision Statement, Goal, Objective, SMART Objective, Critical Success Factor (CSF), Value Driver, Key Result Indicator (KRI), Metric, Performance Measure, Performance Indicator, Key Performance Indicator (KPI), Initiative and Milestone.

It is a positive thing to ask such questions and engage in discussions to clarify them. It is surprising how many different views are expressed on the similarities or differences between these terms.

What is interesting is that generally such discussions take place outside organizational boundaries. It is as if within organizations it is expected that staff have an understanding of them. Or as if such discussions are intentionally avoided within organizations.

The logical deduction is that if such discussions take place outside organizational boundaries, staff still have a need to clarify such concepts that is not fulfilled internally.

While this cross-polenization of opinions helps in building an informed view at individual level, in an organizational context things are different. While diversity of views is welcomed, a united common understanding of key terms used across the organization enables good internal communication. It also helps in understanding strategy and the contents of performance management reports.

However, glossaries of terms are rather the exception than the norm in the use of performance management systems. This is rather surprising considering that the expected benefits to effort ratio is one of the highest of all the components of a system.

The possible benefits of using them are:

  1. Conceptual clarity – Facilitate a clear understanding of the nuances of the cluster of performance management concepts
  2. Alignment of corporate vocabulary – Provide a single point of reference to clarify terminology used across the organization
  3. Building perspective – Paints a rich picture of available elements to be used as part of the performance management system and raise questions about the relationship between them.

The effort should be minimal as generally such glossaries average 50-80 terms, with 1-2 paragraphs of explanation each.

One of my favorite examples illustrating the importance of clarifying concepts through a glossary is the TOGAF 9 manual, containing The Open Group Architecture Framework (The Open Group, 2009). In version 8.1.1 of the manual, the glossary was a component of the Resource Base (additional to the manual itself). In the latest edition (9), the glossary is incorporated in Part 1: Introduction. It represents the third chapter of this part, following the Executive Overview (Chapter 1) and the clarification of core concepts (Chapter 2). The glossary is not considered an appendix anymore, but an important component of the manual, included in the introduction part, to facilitate the understanding of the rest of the manual.

Perhaps performance management implementations should have a similar approach, by considering the glossary not a nice to have, but a key initial step.

Ultimately, not what is written matters, but what and how is understood and used. However, every little bit of help in building clarity and alignment helps. While strategy management is compared to a safari in a savanna (Mintzberg et al, 2005), finding one’s way in performance management is more like an expedition in a jungle. The abundance of theories, frameworks, concepts and terms is much denser and requires a wider skill set to navigate. Performance Management glossaries have the potential to act as attenuators in reducing complexity. Ultimately it is all about getting smarter as the level of complexity increases.

Stay smart! Enjoy smartKPIs.com!

Aurel Brudan
Performance Architect,
www.smartKPIs.com

References

Mintzberg H., Lampel J., Ahlstrand B., (2005), Strategy Safari: A Guided Tour Through The Wilds of Strategic Management, London, UK, Financial Times-Prentice Hall
The Open Group (2009), “TOGAF version 9“, Van Haren Publishing, Zaltbommel

smartKPIs.com Performance Architect update 3/2010

Performance Management IQ Test or a hermeneutic dialectic process

A new feature available on http://www.smartKPIs.com starting with this month is the smartKPIs Performance Management IQ test.

It consists of a set of 24 statements that appear on the screen one at the time. The task on hand is to decide what each of these statements represents from a set of 12 options:

  1. Mission Statement
  2. Vision Statement
  3. Goal
  4. Objective
  5. Target
  6. SMART Objective
  7. Critical Success Factor (CSF) / Value Driver
  8. smartKPI / Key Result Indicator (KRI)
  9. Metric / Performance Measure / Performance Indicator
  10. Key Performance Indicator (KPI)
  11. Initiative
  12. Milestone

Only one option can be selected as there should be only one option closest to the way the statement is understood and perceived.

The term “IQ test” is pretentious and used to illustrate that being smart in performance management transcends the mechanistic approach of being right or wrong. Having this in mind, the test should be used more as a guide to discover the rich diversity of views on how key terms are or should be used in performance management. Overall the test should be a fun way to rediscover the basics of a performance management glossary. Ideally it should also raise questions about what actually happens in practice, away from the prescribing nature of management books, academic articles and management consultant’s opinions.

To me there are three key learning points illustrated by the test:

1. Performance Management as a discipline contains elements that closely link it to a multitude of other disciplines and organizational capabilities: Strategy Management, Project Management, Human Resources Management, Accounting and Psychology, to name a few. Understanding such linkages and the origins of key terms are an important step in building a robust basis for architecting organizational performance.

2. The popular understanding and perception of certain terms in practice may be very different compared to academic and consultant’s viewpoints. What matters in the end is how such concepts are used in practice to generate value and not necessarily which is the “perfect” definition of what a KPI is.

As Stringer (2007) put it: “Constructions are created realities that exist as integrated, systematic, sense-making representations and are the stuff of which people’s social lives are built. The aim of inquiry is not to establish the truth or to describe what really is happening but to reveal the different truths and realities – construction – held by different individuals and groups. Even people who have the same facts or information will interpret them differently according to their experiences, worldviews and cultural backgrounds.”

3. Have an open mind in terms of rediscovering performance management through the lens of various viewpoints and be prepared to change perspectives or shift entire paradigms. According to one view, by completing the smartKPIs Performance Management IQ test you have completed a test and reviewed different opinions on specific topics. From another viewpoint (Guba and Lincoln, 1989), you have just completed a hermeneutic dialectic process, as new meanings emerge as divergent views are compared and contrasted.

Stay smart! Enjoy smartKPIs.com!

Aurel Brudan
Performance Architect,
www.smartKPIs.com

References

Stringer, E. T. (2007) “Action Research, 3rd Edition“, Thousand Oaks, CA, Sage Publications.
Guba, E. G. and Lincoln, Y.S. (1989), “Fourth generation evaluation“, Newbury Park, CA, Sage Publications.