Traditional performance management is grounded in measurement, operational excellence and analysis. It is a well understood model that has served business particularly well for the last two decades, but how well does it fit the complexities of the networked economy? According to leading thinkers such as Frank Buytendijk, businesses need to take far more account of behavioural aspects of management if they are to succeed in fostering relationships that contribute to success. Gary Simon, FSN’s managing editor explores his recently released book “Performance Leadership” which takes performance management to the next level.
Thousands of column inches in professional and technical journals have been dedicated to the science of performance management. In the main it’s been a recipe based approach based on predictable and readily available ‘ingredients’. Take a strategy statement, develop some objectives, derive a few KPIs (key Performance Indicators) bake in a budget and then take the results out of the oven. If the strategy cake is undercooked put it back in the oven otherwise consume the fruits of your endeavour. OK you get the idea – a standardised process that is followed slavishly in a relatively unthinking way and sometimes produces the desired outcome. But what if we are not baking the cake entirely for our own consumption? Where does the recipe provide for creativity, new ingredients and different flavours to suit different stakeholders?
The analogy may be farfetched but is useful if taken a stage further. In many organisations the recipe is handed down from the top of the organisation to the bottom and, in the strategically aligned organisation, everyone ends up baking similar cakes. The first flaw that Buytendijk points out is that a pre-occupation with vertical alignment, i.e. handing down the recipe through the organisation from top to bottom, (my example not his) is that it fails to take account of the way that business works – particularly now. Business is transacted and costs are incurred in business processes that cut across the organisational hierarchy and transcend functional boundaries. Measuring performance in functional silos merely leads to dysfunctional behaviour. And behaviour is an essential ingredient, says Buytendijk.
“Our approach to performance management is still very mechanistic. We try to command and control; we impose rules and regulations. We align people with a common goal; we provide targets that we expect them to meet, instead of allowing them to be inventive and resourceful. .......As it is with managing a machine we set up systems of control, when in reality we should set up a system of encouragement, improvement and innovation,” he says.
Buytendijk’s second challenge is around the rigour of strategy development, for example, how do we know that the strategy is right, that we are doing and measuring the right things? It is a fair question if we are pre-occupied with self perception and obsessively measuring performance within narrow boundaries.
“We run the day-to-day processes in our organisation, and once in a while take a step back and see if we are doing the right things – that is if we can agree on what the right things are,” comments Buytendijk. “What is missing in traditional performance management methodologies is guidance on what the right things are,” he adds.
So Butendijk tosses in two new aspects or “dimensions” of performance which he labels the “Social dimension” and the “Values Dimension”, designed to provide the guidance necessary to come to the right strategies and decisions. The social dimension provides the “outside-in view”, i.e. the how the actions and reactions of the organisation’s environment affects the business. The values dimension does the opposite from the social dimension. It provides the “inside-out view”. Different organisations have different cultures, values and missions. Things that make business initiatives successful in one organisation can be a complete failure in another organisation and, says Buytendijk, by not examining these new dimensions traditional performance management does not reveal these shortcomings.
So the essence of his fresh approach is to use the framework of the social and values dimension to align strategy by reconciling what the organisation stands for and what the market is looking for. Buytendijk hypothesises that understanding and resolving the potentially conflicting values and demands of internal and external stakeholders is crucial to developing an appropriate strategy.
Isn’t this just common sense I hear you ask? Well at one level it definitely is – the logic of giving the market what it wants and ensuring that the organisation is willing, motivated and capable of delivering is undefeatable. However, what Buytendijk usefully highlights for us is that both sides of the equation are more complex than we sometimes care to acknowledge.
Organisations do not always behave in a way that is helpful to delivering strategic objectives so a deep understanding of organisational culture is a necessary pre-requisite. Similarly the number and variety of stakeholders has mushroomed considerably with the networked economy and the rising influence of corporate social responsibility reporting. And in case you were thinking that culture is too “touchy feely” to have a place in performance management, Buytendijk has a good riposte.
“Understanding and using your organisational values can be a powerful source of management control,” he says. He contends that the traditional predilection for bureaucratic controls along with hierarchical management structures works best in environments with low ambition and low uncertainty, but most of us are facing anything but certainty. Buytendijk argues that more control and more performance indicators would not lead to better results. He believes that a better approach is to internalise control so that members of an organisation share the values and objectives of the organisation, and will seek to do the right thing and be open about it. Nevertheless Buytendijk is a realist. He understands that organisational values cannot be set “you can only discover them” and that when organisations list their values they are often desired attributes rather than actual behaviours.
So is Buytendijk right? There is no question that performance management is far from an exact science. Current market conditions suggest that many companies are far from secure in their strategies and research consistently shows that few organisations discuss strategy frequently or are competent at rolling it out. In recent years the focus of strategy development has been on enabling technology but are we missing a trick? Buytendijk thinks we are. Stakeholder management, organisational behaviour and horizontal alignment (within and beyond the organisation) are 21st Century challenges. Buytendijk takes performance management thinking and practice further exhorting us to change the way we view the world and setting the stage for a new era - Performance Management 2.0
His book, “Performance Leadership” is published by McGraw Hill.
Related FSN Articles
FSN/Oracle Whitepaper - The Challenge of Strategic Alignment
“Strategy to Success” – Is this where is performance management is headed?
