When it comes to performance management, culture is everything

Transcription

1 When it comes to performance management, culture is everything Improving the financial performance of an organization happens when a culture of accountability is instilled in the entire workforce. By Joe Mullich

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3 CONTENTS Introduction... 4 Leaders Must Be BI Users... 5 Not a Big-Bang Process... 6 Environmental Support... 7 About the analyst... 7 Key messages / Takeaways... 8 How will the user benefit from this content?

4 INTRODUCTION Driving business performance cannot be a restricted, tactical initiative focused on a department or two. It must be an empowering, organization-wide commitment. To succeed in the new global economy, companies must forge a culture that promotes a discipline of informed decision-making and allows workers across the organization to become agents of change. "Too many people think of performance management as an exercise in scorecarding," says Richard T. Roth, formerly chief research officer of The Hackett Group, an Atlanta-based consulting firm. "World-class organizations focus less on performance metrics than on instilling a culture of accountability." Indeed, the biggest obstacles to successful execution of performance management are "lack of accountability" and "a culture that does not support measurement," according to a 2007 survey of 317 C-level executives conducted by BusinessWeek Research Services. How can companies overcome these obstacles and develop winning attributes? "Organizations achieve a competitive advantage when they develop a culture that fosters improved performance--one that holds a high respect for facts, is customer-centric, competes from a common playbook, makes datadriven decisions, and promotes cross-group collaboration, alignment, and execution," say Joey Fitts and Bruno Aziza, coauthors of Drive Business Performance, the forthcoming book about Fortune 500 companies that are winning by building cultures based on accountability, intelligence, and informed decision-making. To develop a culture that embraces accountability, employees and the organization as a whole must be able to see quantifiable progress toward specific goals. The goals and milestones have to be aligned with the organizational structure in a way that makes it clear which individuals are responsible for which results. Typically, these goals and milestones are key outputs of a business intelligence (BI) system deployed throughout the organization. "Used at its full potential, business intelligence becomes a communication vehicle that allows corporate strategy to tie to actions that all employees can understand and are enabled to act upon," Fitts and Aziza say. "It is only in the context of enabling more employees that business intelligence and performance management pay large-scale "World-class organizations focus less on performance metrics than on instilling a culture of accountability." Richard T. Roth formerly of The Hackett Group 4

5 dividends and deliver competitive advantage." LEADERS MUST BE BI USERS A performance-based culture starts at the highest levels of the organization. Not only must leaders promote the concept of performance, they must be visible users of the information that comes from performance management systems. Experts suggest leaders go so far as to bring scorecards and dashboard information to meetings, for example, and ask questions based on this information. "Enterprisewide culture change calls for strong leadership," Fitts and Aziza say. Leaders setting an example makes sense only if the initiative is broadbased. "Justifying the value of BI department by department can be both a wise way to begin the journey to better performance and also detrimental if it goes on too long," Fitts and Aziza add. "While prudent pilots and proof-ofconcepts are sound business principles, a culture of performance rarely comes from piecemeal [efforts]. Performance management needs to be baked into the DNA of the organization, to become part of its fiber and way of doing things." Michael Treacy, an author and internationally known expert on corporate strategy and business process transformation, spoke at a recent Microsoft Corporation BI conference about how companies can incorporate these tools into their organization s DNA through what he calls "performance discipline." A company achieves a performance discipline when the risks of high performance have largely been eliminated and all that remains is hard work, he says. Firms that possess a performance discipline align objectives with shareholder value and radiate that message from the top through every part of the organization. Treacy says that at Wilmington, Delaware-based chemicals and health-care company DuPont, for example, the commitment to safety is understood--and embraced--by every worker as an objective of the firm. He adds that workers at Japanese automaker Toyota do not question the mantra about quality driving success, just as employees at Fairfield, Connecticut-based technology and services company General Electric regard productivity as their Holy Grail. "Ask any FedEx employee--from someone delivering packages to someone working in the call center--the keys to the firm s success, and their list will include "A culture of performance rarely comes from piecemeal efforts." Joey Fitts and Bruno Aziza Coauthors of Drive Business Performance 5

6 reliability," Treacy notes. "They are all working from the same small set of principles and singing from the same hymn book. When they gather for a meeting, 95 percent of the things that other companies debate they have already agreed about, so everything runs much more efficiently."as Treacy sees it, performance discipline requires patient commitment to the objective with the following doctrine at its foundation: Everybody is committed to a common model of what drives results. The discipline is a company religion. Under all conditions, there is accountability for performance. Performance carries consequences within the culture. NOT A BIG-BANG PROCESS Implementing such a culture takes time. Patience is crucial, because a discipline of performance requires a long-term commitment, Fitts and Aziza explain. One example they cite is Energizer Holdings Inc., the Town and Country, Missouri-based maker of batteries and other highquality products that is profiled in their book. "Performance management is not a big-bang process," says Randy Benz, vice president and CIO at Energizer. "It is a continuous improvement process. You are constantly tweaking, so it has to be something that you do in the normal course of business." To make a substantial difference, performance management must be the mechanism that a corporation uses to bring all employees--not just the few--into alignment with business objectives. Consider this: When Energizer s Benz uses the term "difference maker" in describing key employees, he is talking not about a handful of corporate executives but of line-of-business managers and front-line workers who make daily decisions that affect customers. Benz s view that everyone can be a "difference maker" goes hand-inhand with Energizer s widespread use of BI systems, because rankand-file employees can only achieve this status when they have relevant, impactful information close at hand. Energizer uses business intelligence to provide employees throughout the company with constant access to accurate, up-to-date information. With the ability to 6

7 monitor Key Performance Indicators (KPIs) and compare actual results to predefined targets, Energizer empowers all of the company s "difference makers" to take immediate actions to correct problems or to replicate the success achieved by one region or one country. "Performance management is about giving people the best information to make the best decisions," Benz says. In the end, Richard Roth says creating a framework where everyone has access to the data-- "BI for everyone"--means better decisions and better results. A study by The Hackett Group found that "world-class" companies using business intelligence enjoyed 2.4 times the shareholder return of the typical organizations in their industry over three years. Clearly, delivering this kind of competitive value requires skilled employees at all levels, sound processes, and enabling technology. But, above all, this success hinges on selecting the right metrics and making a true, high-level commitment to a culture of accountability and high performance. ENVIRONMENTAL SUPPORT "The right people, tools, and processes do not deliver results in an environment that does not support them," say Drive Business Performance coauthors Fitts and Aziza. "They are as ineffective as an organ rejected by the host body." ABOUT THE ANALYST Michael Treacy is an internationally known author and speaker on corporate strategy and business process transformation. He is the author of The Discipline of Market Leaders and Double Digit Growth: How Great Companies Achieve It, No Matter What. Treacy is currently the Chief Strategist and Co-Founder of GEN3 Partners, a consulting firm based in Boston. Mr. Treacy was formerly a Professor of Management at the Sloan School of Management at the Massachusetts Institute of Technology. He received an engineering degree from The University of Toronto and his Ph.D. from MIT. For more information about Mr. Treacy and GEN3, please visit this Web site: 7

8 KEY MESSAGES / TAKEAWAYS Improving corporate performance requires a culture of accountability. Metrics will not be taken seriously unless the entire workforce believes that the performance management includes consequences Establishing a culture of accountability, implemented through performance management, starts at the top: senior executives must set an example Creating and entrenching a culture of accountable takes time The right tools can greatly facilitate performance management, but such efforts will fail in the absence of the right culture HOW WILL THE USER BENEFIT FROM THIS CONTENT? Better understand the crucial cultural underpinning of performance management Learn the steps and managerial approach that helps performance management succeed Appreciate the value of widely distributing information that contributes to improved performance About the writer Joe Mullich is a Sherman Oaks, California-based writer who specializes in business and technology topics, including performance management and business intelligence. 8