One of the problems that impedes organizations from successfully implementing the Performance Management framework is the pace at which executives attempt to implement its various methodologies, such as strategy maps, a balanced scorecard, dashboards, customer profitability reporting with activity based costing, predictive analytics, and others. The problem is executives try to implement them with only two speeds – too fast or too slow.
When executives try to move too fast, such as attempting in three months to define and cascade a scorecard of key performance indicators (KPIs) from the executive team down to the front line employees, the implementation is doomed to failure. The reason is organizations require a managed rate of learning and buy-in acceptance. The major impediments to implementing Performance Management methodologies are not technical, such as data availability or quality; they are social. For example, KPIs should be gradually and carefully defined and cascaded downward to KPIs of middle managers that influence their higher level managers’ KPIs. Conflict and tension in organizations is natural, and it takes time to rationalize what to measure and how driver KPIs correlate – or not – with other influenced measures.
When executives do not try to move quickly enough, they introduce risk that the organization will conclude that the Performance Management methodology is not worth it. If the executives embark on implementing a methodology, but the project team drags it out without anyone seeing tangible results, then the organization doubts the benefits will exceed the administrative effort to report the information. For example, many activity based costing systems are frequently way over-designed in detail and well beyond diminishing returns in extra accuracy for the extra administrative effort to collect and calculate the more granular information. They collapse under their own weight to be maintained. The adverse effects of too slowly implementing and more importantly integrating the portfolio of the Performance Management methodologies is the organization will not see the synergies of the interdependencies of the integrated methodologies.
The key is determining the Goldilocks pace to implement and integrate the methodologies. Just as in the Goldilocks fable, with the porridge being not too hot or too cold and the beds not too soft or not too hard, find the optimal speed to implement. The real jewel in the crown of the Performance Management framework is the synergy of the methodologies working in integration and imbedding each of them with analytics such as those provided by my employer, SAS.
There are more than two speeds to implementing the Performance Management methodologies. The optimal speed exists and can be controlled.
