I’m continuing my series on the Achieving Top Performance: 7 lessons learned in a Disaster, an elaboration on the work we did during the Gulf oil spill. This week covers the final lesson, communications. In my last blog post, I wrote a little about the performance standards. This post continues that discussion and I’ll get into the communication and feedback process of those standards.
As an organization grows or changes, so does the complexity of managing the performance and processes. Unfortunately many organizations’ communication and performance management processes suffer from one of two conditions as a consequence: underdeveloped and fragmented or bloated and burdensome. Either way, the result is ineffective and misaligned performance systems and processes that do not support – and frequently work against – your ability to diagnose and direct performance towards your goals.
Often, the performance management systems are focused on functional performance (reflecting the organizational structure). The problem with this approach is that “functions” do not equal “processes” and fail to account for the interdependence among functions. The result is that one function can do well while other functions’ (and the organization’s) performance suffers.
We can validate what we know intuitively by a small experiment. Add up all the performance indicators in various functions. Do they sum up to the organization’s global numbers? Of course they do not. We know this intuitively, as we are witnesses to mangers gaming the system to make their numbers. The implication is that managers at various levels know the performance management numbers are at best, an approximation of organizational performance and at worst, making the numbers actually harms the business.
It’s in this environment of mistrust of the numbers that we expect managers to perform well and deliver bottom line results.
The challenge in managing organizational performance is to have local managers align their functionally oriented behaviors and decisions with organization’s goals. For example, in a for-profit entity, managers must make decisions that will produce favorable outcomes based on the same measurements to which the stockholders and customers hold the organization accountable for.
Additionally, managers and system owners must be able to predict and accurately measure the effect of decisions that are made deep in the organizational structure and see their effect upon the goals of the organization as whole. With the current processes, they are simply unable to get an accurate picture of how well the processes that lead to the results are operating.
There is also the issue of timing. Having the right information in the hands of the right people at the right time enables managers to capitalize on opportunities and be prompt in remedial actions.
Budgets Offer an Incomplete Picture of the Business
In most organizations, the main performance management system is linked to the financial aspects of the organization – local budgets. I am not arguing against budgets, they just offer an incomplete picture. The main driver of budget behavior is based on dividing the organization into functional areas. They measure the financial effect of the decisions made in the past, but do not make a decision model.
Good for allocating expenses, but difficult to judge a particular decisions’ impact. Especially when a manager has accountability for process decisions that affect expenses in other silos (For example, the sales function could make promises to customers that cause operations to spend excessively to meet them.). Most importantly, budget management assumes a fixed revenue source, over which local managers have little or no control. The reality is, that local managers, being part of the system, have a significant impact on the revenues of an enterprise.
Additionally, revenue is not a fixed thing; it’s a projection – a forecast. The result is that local management decisions become one dimensional – based on expenses and local optimization of a revenue level that may or may not reflect the current state. The result is often a sacrifice of revenue and market opportunities so the budget will be right.
The solution is not a balanced scorecard, but a focused set of process–based measurements and diagnostics that illuminates process behavior – the predecessor to results. These measurements, carefully calibrated to system and process behavior are then linked to reinforcement mechanisms to ensure alignment at all levels of the organization and across process boundaries.
These measures must then have a communication process that ensures the rapid response organizations require.
This was the problem we faced during our work with the vessel cleanup operation. BP had contracted thousands (yes!) of different teams of vessels and crews. We worked with them to create a process to manage the cleanup operation and the performance of the many remote vessel cleaning operations. Without coordinated communication between the clean up sites and the command center, the constraint of the entire operation – the dock space – often stood idle or full of vessels waiting to be decontaminated. Each morning, there was a meeting to discuss progress, but there were there were as many communication methods as there were contractors (and there were plenty).
Mistrust and confusion was common. More importantly, the command was unable to understand the status of the project and the decontamination sites were operating independently, out of sync with the global objectives.
Managing the Performance
We implemented the following principles to accelerate the performance management communications of the teams. They weren’t the ONLY things that were done, but the most critical:
Have the right information. Focus on the constraint. Since the constraint determines the overall process capability, it becomes central to the communication strategy. We reported things like dock utilization, lost time, vessels waiting to assess the health of the process. These weren’t the only things that were reported, as we were concerned about safety, too. But the constraint performance information was central to knowing the progress and developing action plans.
Have timely information. This is a discipline for the reporters of the information in terms of accuracy and for the managers using the data; regular (daily!) reporting and regular (daily!) cross functional reviews. Having the all reporting on a common time front helps decision makers assess the quality of the information. Having it as recent as possible gives a clear view into the process at the moment. We had daily reports and weekly reviews of the aggregated performance. These performance reviews were active – where are we, what do we need to do and short – less than a half hour a day.
Have templates for communication. Making consistent, standardized communications helps everyone understand the information and the process. By having a prepared template, meeting preparation time is reduced as everyone knows what is needed, how to present it, and with repetition, where to find the required information and what is critical to the process. Standardized communications greatly increased the effectiveness of the management process. The meetings themselves improved in terms of focus and quality of information discussed. The process became more transparent, so everyone involved remained informed and could make better decisions.
Read how these changes to accelerate communication greatly impacted the results in lesson 7 in our eBook, Achieving Top Performance Under the Worst Conditions: 7 Lessons Learned from a Disaster.
Also, have a look at some of our thought leadership on performance management here.
As always if, you have questions or comments please feel free to contact me by emailing me.