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January 25, 2007
The Dark Side of Performance Management
Measurement drives behavior. Every student in the social sciences knows the Hawthorne Effect. This phenomenon dates back to the 1930s, the days of the scientific management. One of the experiments in the Hawthorne Works in the USA was about measuring the relationship between the level of illumination in the factory and the workers productivity. When the lighting level was increased, as expected productivity went up. Then, as scientists need to test all conditions, the lighting level was decreased. And productivity went.... up! That was unexpected. Lastly, the researchers reset the lighting level, and productivity went up... again. It was prof. Mayo from Harvard who explained the phenomenon. It wasnt the illumination that impacted the productivity, but the fact the productivity was measured.
Today there are countless examples of behaviors that are driven by measurement, in every single organization. Sometimes functional, many times also dysfunctional. Many people will have heard of the term budget games.
Together with the Deloitte CPM Blog we are launching a small inventory of the games that you know of, have encountered in the past, or maybe -- if you are really honest -- have played yourself.
Heres one example and my first contribution:
When I was in consulting, december was always one of my busiest months. Government agencies had to spend their remaining budget on all kinds of projects. Useful undoubtedly, but if the timing was optimal?
Please provide us with your examples, and perhaps also other sources in this area!
frank
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Posted by Frank Buytenkijk at 7:31 AM | Comments (0)
Dealing With Dilemmas, Part I
In my previous post on Kobayashi Maru I talked about dilemmas. Many strategic decisions, when you look at them carefully, do not address a problem, but a dilemma, a difficult choice of some sort. Its only when you see the dilemma, and not the solution, when the decision that needs to be made becomes more clear. How to make the right decision?
Dilemmas are often ignored, or if they cant be ignored anymore, people are trapped in them, feel pressured to make a choice and live with the consequences”. If you are lucky, the dilemma turns out to be false; one of the choices is not valid, or there are other alternatives that do not conflict.
In any case, it is strange that people consider dealing with dilemmas so difficult, as it is hardly a new subject. Thinking in terms of dilemmas is well grounded in philosophy, with the concept of dialectics. According to the old Greek philosophers, by understanding opposite viewpoints, truth can be found, for instance in the middle, words we often still live by today.
Philosophers Hegel and Kant did breathe new life into dialectic thinking. They revealed how many disciplines, including philosophy, evolve. First there is a thesis, an accepted situation. At one point there will be a reaction, stating the opposite and rejecting the thesis. This is called the antithesis. Both thesis and antithesis are extremes and tend to be mutually exclusive. Then over time a synthesis develops, which is a reconciliation between the thesis and antithesis, bridging the opposites. The synthesis becomes the new norm in which both the supporters of the thesis and the supporters of the antithesis recognize themselves. At that moment, the synthesis becomes the new thesis, starting a new cycle.
More recently, one of the foremost authorities in intercultural management, Fons Trompenaars, researches cultural differences in terms of dilemmas. For instance, he has asked people all over the world if they would testify for a friend that injured a pedestrian while driving too fast. Integrity is the key issue in this dilemma. In some cultures showing integrity means not testifying for a friend, as it involves lying in court. However, in other cultures displaying integrity means testifying, because if you cant even count on your friends, who can you count on?
Jim Collins, well known from his studies Built to Last” and Good to Great”, speaks of the Genius of the AND” as opposed to the Tyranny of the OR”. He points out that many managers think they need to choose between A and B, stability or progress, growth or compliance, strong cultures or individual autonomy. Collins says that visionaries find ways of doing both at the same time, lifting themselves to a new level. Bridging opposites is not about compromise, or balance, its about going the full way. We find ways to grow by embracing compliance, we progress through stability, we create a strong culture stresses autonomy.
In a previous post, on Strategy Leadership, I did discuss what Collins is talking about. I describe how to synthesize the core strategies we all know; operational excellence, product innovation and customer intimacy. I showed how innovating an operational excellence model by adopting mass customization principles leads to new forms of customer intimacy.
But not all dillemas have to be big and strategic of nature. Dealing with contradictory points of view is a very common theme in counseling and mediation, where two parties cant see eye to eye. A common technique is to ask both parties to switch roles, and defend the opposite position. This technique brings reconciliation near.
At Hyperion.com, you can find a series of articles on CIO Dilemmas, I hope you enjoy them. In future posts I will discuss more ways of dealing with dilemmas.
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Posted by Frank Buytenkijk at 3:46 AM | Comments (0)
January 16, 2007
A Reader Commented... BPM Business Case...
A few days ago I received an email from someone who stumbled over this weblog. Although a business professional, this person was not a BI or BPM professional. His email was very critical, asking how Hyperion can make so much money and be successful in the market, with such an intangible product as software to produce information. Isnt it all hype?
I thought it was quite a valid question, and would like to use this space to point out that management information actually is quite tangible if you think about it.
Ofcourse, in the end, it is not the software that improves business performance (other than Hyperions business performance ;-), it depends on what you do with it. But most definitely there are tangible benefits in terms of revenue growth, customer loyalty, the right cost savings etc. Let me give a few examples, where BI and BPM not only improve business but also simply do good:
- A lot of work in closing the books every quarter is in manual reconciliation. If you can get rid of the spreadsheets you can do the process in a 1/3 of the time. There is a correlation between how fast you report to the shareholders and the price/earnings ratio. This is not the same as laying people off, just giving them the time to actually analyze the data (and become more skilled and competitive workers)
- Sharing management information with all employees provides feedback. There are countless examples on how that positively changes morale. People want to do a good job, and hear about it. Measurement drives behavior, both positive and negative.
- Sharing information with suppliers makes the relationship tighter. Think of car manufacturers who have built a complete ecosystem of suppliers, in which also the suppliers collaborate with each other. This goes beyond price-dominated negotiations, and builds sustainable relationships. This is good for long term employability
- If you cant compete on price and not even on product quality (I mean, are there still bad products out there?), what do you compete on. On service!! There are countless examples on how sharing information with customers on the business relationship you have with them increases customer loyalty, certainly when customers use this information in their own lives or businessess
In the end the business case is really simple: can you run a business without management information? How to establish a newly introduced product is better, how rationalized purchasing leads to cost savings, how a new ad campaign is effective? You simply need objective feedback (= management information).
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Posted by Frank Buytenkijk at 11:59 AM | Comments (0)
January 8, 2007
CIO Dilemmas: Kobayashi Maru
Hyperion has just launched the CIO Dilemmas, am sure you will hear and see lots of it. The idea behind the CIO Dilemmas for me is that in decision making processes (our core market and expertise) we jump to conclusions way too fast. Current business culture asks for Solutions, not Problems. In fact, we cant even use the word problem, we need to talk about challenges. I am sure youve all heard people say If you are not part of the solution, you are part of the problem (challenge) or Dont give me problems, give me solutions!.
But if we look for solutions from the outset, can we be sure we understood the problem? At the bottom of most real problem lies a dilemma. A dilemma is a difficult choice of some sort, where every choice has severe negative side effects. In the current business culture, dilemmas make executives grumpy, how can you win?! Most people tend to ignore dilemmas, delay decisions until they are being taken by the situation, find a bland compromise, or simply live with the negative effects of a choice.
I would suggest that understanding a dilemma should make you happy, you have reaced the bottom of a problem. And there is nothing wrong about dilemmas, there are ways of solving them. A lot of my research is currently focused on how to deal with dilemmas.
One example (more to follow) of how to deal with dilemmas. As a Star Trek fan it made me think of the Kobayashi Maru. You can find more on this on Wikipedia, heres an abstract of it...
In Star Trek, the Kobayashi Maru is a starship that serves as the subject of a graded simulator training exercise at Starfleet Academy, in which command division cadets are presented with a no-win scenario as a test of character. In the simulation, the cadet receives a distress signal, stating that the Kobayashi has struck a gravitic mine in the Klingon Neutral Zone and is rapidly losing power, hull integrity and life support. There are no other vessels nearby. The cadet is faced with a decision:
• Attempt to rescue the Kobayashis crew and passengers, which involves violating the Neutral Zone and potentially provoking the Klingons into hostile action or an all-out war; or
• Abandon the Kobayashi, preventing war but leaving the crew and passengers to die.
James T. Kirk takes the test three times while at Starfleet Academy. Prior to his third attempt, Kirk surreptitiously reprograms the simulator so that it is possible to win. He justifies it by arguing that putting cadets in a no-win situation was cheating, and so he had to cheat in return.
If you cant solve the problem, change it. In later weblogs, I will explore different ways of how to do that.
frank
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Posted by Frank Buytenkijk at 9:06 AM | Comments (0)
