Managing Performance in Turbulent Times

We live in a turbulent world. Turbulence caused by technology - think of the rate at which information and communications technologies, as well as social media, are developing. Turbulence caused by social and political unrest – think of last summer’s riots in London and the uprisings we have seen across the Arab world. Turbulence caused by economic uncertainty – think of the financial crisis and the current disquiet over the future of the Euro. Everywhere you look you see turbulence – uncertainty and discontinuity which makes it increasingly difficult to predict and plan. A turbulent world poses a dilemma for performance measurement. Measurement systems like stability and predictability. Many measurement systems take six to twelve months to design, develop and deploy. Some take far longer. We know of major companies with ten-year SAP rollout programmes! By the time the right measures have been identified, the appropriate sources of data established, the right targets selected, the right incentives introduced and the supporting infrastructure put in place, the world will have changed significantly and it’ll be time to start again. What role then for performance measurement in a turbulent world?

As part of research we have been studying the way that firms that operate in fast moving, often high tech environments, measure and manage performance. Rarely do they use traditional frameworks such as the balanced scorecard or the performance prism. Instead they use what we call the PM4TE (performance management for turbulent environments) framework. This framework consists of two core cycles, supported by five foundations.

Introducing the PM4TE Framework
The PM4TE framework consists of two core cycles - the execution management cycle and performance management cycle. These core cycles are supported by five enabling foundations – (i) strategic intelligence, (ii) continuous conversation, (iii) accelerated learning, (iv) organisational alignment, and (v) engaged leadership (see figure 1).
Figure 1: The PM4TE Framework
The starting point is the performance management cycle and specifically -performance modeling - within the performance management cycle. By performance modeling we are referring to the construction of a causal model (often a hypothetical causal model) that illustrates the links between the various dimensions of performance that matter to the organization concerned. Delivery on time drives customer service, customer service drives customer satisfaction, customer satisfaction drives customer loyalty and so on. The key is to articulate your theory about the factors that driver the creation of value in your organization and the links between them.

Once the performance model has been constructed then it is time to turn to managing projects. It is through projects that most organisations now drive change and improvement. Projects can be small-scale continuous improvement and kaizen activities through to large-scale radical transformation projects. Regardless of their size and scale the relationship between the projects and the performance model needs to be explicit and the impact of the projects evaluated (which involves measuring progress). The final loop in the execution management cycle is to make decisions – changing or modifying projects, speeding them up or slowing them down – depending on their impact.

The key for firms operating in fast moving turbulent environments is to get round the execution management cycle as quickly as possible. Just think about many of the social media firms, like Facebook, LinkedIn and Twitter. They are constantly iterating and evolving their technology platforms, executing projects to enhance the user experience. They race around the execution management cycle never slowing down in their efforts to enhance performance.

While the execution management cycle is fundamental, it is important not to loose sight of the performance management cycle. For sometimes one has to step away from the execution management cycle, back up to the level of the performance management cycle and ask the question: “is our performance model still appropriate”. This reflexive question forces managers to challenge the assumptions they hold about the performance model and hence the foundations of their business. This stepping back can be stimulated either by a recognition that the execution cycle is not delivering the required performance improvements or that external events require a change in direction. It is these external events that bring us to the enabling foundations.

Five Enabling Foundations
While the execution and performance management cycles are central to the PM4TE process, the five enabling foundations are the essential building blocks. The first of these – strategic intelligence – encourages organisations to scan the external environment, looking for weak signals that suggest emerging challenges. The second – continuous conversations – encourages those inside the organization to constantly probe and explore the implications of the strategic intelligence being gathered. The third – accelerate learning – lies at the heart of the entire PM4TE process. Speeding round the execution cycle delivers accelerated learning. Being able to step out of the execution cycle and into the performance management cycle to challenge assumptions delivers accelerated learning. Gathering and exploring strategic intelligence through continuous conversations gives accelerated learning. And with accelerated learning organisations are able to adapt to turbulent environments.

The final two enabling foundations – organizational alignment and engaged leadership – focus on creating buy-in and momentum. Without a leadership team dedicated to accelerated learning and an organizational aligned to delivering it, the rest of the PM4TE process falls to function. And without a fully functioning PM4TE process it is difficult to see how organisations will successfully navigate in turbulent times.

You can download the first chapter for free here.

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