How Broken Is Performance Measurement At Your Firm?

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How Will You Measure Your Life?

Most organizations, especially large ones, have too many performance metrics to deal with. Some firms are adding more metrics to their enterprise performance measurement system (EPMS), hoping to improve strategic alignment, better monitor/report business activities, and make proactive decisions.

However, most performance measurement systems are half broken and need improvement. 

This article breaks down the performance measurement system into its players, and value exchanges among the players, before manifesting both in the form of a value flow map. The article concludes with pointers to rethink performance measurement, and suggests why you should care.

Players

Corporate: Senior management who is responsible for making strategic decisions.

Metric user: An employee (e.g. manager) who utilizes the metric for strategic alignment, monitoring and reporting of business activities, as well as decision-making. 

Metric generator: An employee (e.g. engineer) who performs the actual work that generates metric-related data for collection. 

Metric collector: An employee (e.g. manager or appointed personnel) who collects metric-related data. 

Metric processor: An employee (e.g. manager or appointed personnel) who processes metric-related data. 

Information technology (IT): IT group that provides the necessary hardware and software infrastructure to enable metric collection, processing, and interpretation.

Value Exchanges

Strategic intent: Communication of intent and purpose.

Investment: Strategic allocation of resources in terms of time, effort and money.

Work output: Work-in-progress and/or finished products and services.

Information flow: Flow of unprocessed or processed metric-related data. Data processing can be fully automatic (i.e. data entry followed by computer-generated reports), or semi-automatic (i.e. data entry followed by some form of human processing).

Technology: Hardware and software infrastructure that enable metric collection, processing, and interpretation. 

Combining the players and value flows, a typical value flow map consists of three different levels: (1) Corporate level; (2) Program/Project/Department level; and (3) Execution level. 

Food For Thought

- What if the generator, collector and processor happens to be the same person? Will he "game" the system such that he is handsomely rewarded by reporting good metrics? While it makes performance measurement more efficient by employing the same person for generator/collector/processor, the possible unintended consequences must be identified upfront, and mitigating plans/actions must be in place and enforced. Separating generator/collector/processor makes performance measurement more effective, but how many firms are willing to incur the additional costs and effort?

- Do all the players get the right intent and adequate investment? Links between metric user and IT are usually weak, especially when performance measurement is not a revenue-generating activity. Does intent get propagated to all the players? It's probably strongest from corporate to metric user, but much weaker elsewhere. 

- There are two routes for information processing: (1) Automatic processing where data is processed by computers after data entry; and (2) Semi-automatic processing where some form of human processing is required after data entry. Firms are usually better with (1) than (2). How timely are these automatic/semi-automatic reports? Can they help to make proactive decisions? Decision-making is often reactive or at best timely in nature.

- Corporate and metric user get performance feedbacks through performance reports. How fast does this  get to the metric generator (i.e. employee who performs the actual work)? Such delays can be greatly reduced by making performance feedback readily accessible to the execution level. 

Why Should You Care?

If the flows of strategic intent, investment, information and technology can be strengthened, the quality of work output will certainly increase. 

How motivated will you be if you know that some parts of the performance measurement system are dysfunctional? Will it affect your ability to take preventive and/or corrective actions? Does it affect your performance bonus? Does it frustrate you?

How good is the performance measurement system at your firm? 

Thanks very much for reading. 

Work Cited

K.S Teo, "Enterprise Performance Measurement System: Metric Design Framework and Tools," Engineering Systems Division, Massachusetts Institute of Technology, Master Thesis 2013. 

Nested Is The Word To Describe Our World...

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The SEO makes a better CEO?

This post is part of a series on enterprise longevity and good product architecture. 

At TEDxBoston, Harvard Professor Clayton Christensen said, “The world is, in many ways, organized in a nested system. So we have nations, within those we have industries, within industries we have corporations, within those we have business units, within those we have teams, within the teams we have people, and within the people we have brains.” (TedxTalks, 2012)

To ensure enterprise longevity, we need to recognize that the world we are living in is nested. Almost everything (if not everything) is part of a nested system. The company product must be seen as part of a larger system. Defining the boundaries of the product is crucial, because it determines the exact deliverables of the enterprise. Next is to identify the other objects in the nested system. Emergence is a property of nested systems, where the whole is more than the sum of the parts. The product will be dysfunctional if it operates alone. 

Almost certainly, one of the objects in the supporting system will be the operator, who is the intelligent agent. Both the product and supporting systems have boundaries. Everything that crosses these boundaries needs to be coordinated and facilitated by interfaces. More importantly, holistic comprehension of the whole product system lays the foundation for further downstream tasks.

Why do we see more gasoline cars than electric cars? Think of the coordination and interfaces between the boundaries (see below). Which is better? Electric or gasoline?

Nest, Nests, Nested. 

Thanks very much for reading. 

Credit

TedxTalks. (2012, July 17). (TedxBoston, Producer) Retrieved December 9, 2012, from You Tube: https://www.youtube.com/watch?v=tvos4nORf_Y

The SEO Makes A Better CEO?

It's been a while since I last posted. The past few months has been super busy, but filled with joy and fulfillment. I'm thankful. 

So who is the SEO and why does he make a better CEO? This post is the start of a series where I will write about the ingredients of enterprise longevity. 

All companies exist because there are jobs to be done. Automotive companies exist because they produce cars that perform the job of transporting people from place to place. Airliners exist because we need them to do the job of providing air travel. As long as companies can continue to do the jobs, and in some cases doing the jobs better than anyone else, they will survive and even prosper. 

Longevity is not simply about maximizing revenues and minimizing costs. Such an approach is extremely shortsighted. The fundamental driving force that keeps companies going is their abilities to fulfill the jobs to be done, or even create the jobs to be done. In essence, all that companies are doing are fulfilling needs. 

Every company exists because of its product that does the job. Good product architecture is key to enterprise longevity. The ingredients of good architecture are Success, Elegance, and Operations. 

I have taken the framework from MIT ESD.34 System Architecture class (Crawley & Cameron, 2012), and expanded it to incorporate the elements of longevity. 

Good architecture and longevity consist of three ingredients. Success requires understanding the world we are living in and stakeholders' needs, well-defined goals, and good concept selection. Product elegance is determined by modularity and simplicity. Operations must be given due consideration. I assert that the CEO/SEO needs to understand the elements of success and operations in order to deliver elegance, and hence enterprise longevity. 

The SEO is the Systems Executive Officer. Does he make a better CEO? 

More to come for this series. 

Thanks very much for reading.

Credit

Crawley, E., & Cameron, B. (2012). ESD.34 System Architecture Class. MIT, ESD.

How Will You Measure Your Life?

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Architect Your Life

The road is longer than you think...

I finally completed the book "How will you measure your life?". It's a great read and I highly recommend it. 

For me, the completion of the book brings a very nice closure to Summer. Summer has had many takeaways but something really stood out.

Short-term gains almost always create long-term trouble. Yet, many people choose immediate gratification, perhaps even in the absence of adversity. Some knowingly choose short-term gains, thinking that long-term trouble would never come and haunt them. 

Life is short, why be so hard on ourselves? Take the easy way out. It isn't going to matter in the end, anyway. It's not worth it. The marginal cost is too high.

A child intentionally left an assignment undone till the last minute. The loving parent stayed up the entire night to help his child ace the assignment, so that both can be proud parent and child. 

This process repeats itself once, twice, and so on. A culture is built. The child doesn't accumulate the "schools of experiences" required to succeed in life.

Eventually, the parent (plus the child) ends up paying the full cost of his marginal thinking and actions - When the going gets tough without the parent, the child reveals who he really is...

Don't measure success and happiness with the wrong metrics. It's extremely dangerous as they drive the wrong behaviors...

Thanks very much for reading.

Works Cited

Christensen, M. C., Allworth, J., & Dillon, K. (2012). How Will You Measure Your Life? New York, NY, USA: HarperCollins.