Welcome back to the grind. I hope all of you had a nice Memorial Day weekend. Weekends like this do wonders for “recharging the old battery” and reconnecting with family and friends. And if you’re anything like me, weekends like this are also good for doing a little introspection on how the first half of the year went (ok, we’re not quite at the halfway point, but we’re close enough)…the challenges we faced, how we dealt with them, and a staging of priorities for the balance of the year.

It’s in that spirit that I thought I’d spend a little time on an issue that I know many of you have been wrestling with recently. Many of you have shared some rather challenging experiences in defining and executing your role organizationally as “service provider”. Not that we all don’t understand the role of a service provider, but in the context of endless restructurings and reorganizations, many of you have had to deal with redefining your relationships, both with your executive leadership, and the line organizations which many of you are responsible for supporting. And while this has been an age old problem, it seems achieving that balance is getting trickier than ever.

Many performance management organizations report administratively to a “staff executive” (HR, Finance, Strategic Planning, are among the most common). But while these executives may serve as our primary customer, we cannot effectively do our jobs unless we win the support “line management”. In the end, these are our real customers. And while its easy to get caught up in the daily grind of producing Board Reports, Executive Committee Briefings, and Corporate Performance Reviews, we must not lose sight of who the real beneficiaries of our services are. They are the real connection between what we do and the ultimate shareholder value that gets produced.

So as you think about your own YTD “report card” for 2005, here are a few things to consider:

1. What kind of relationship have you established with your internal customers? Is it one of cooperation and partnering, or is it more of the “corporate watchdog”? One of the biggest pitfalls I see performance managers fall into is misinterpreting the charter and authority they are entrusted with. Often, performance managers will look to their staff executives to reinforce the plans they’ve put into place. What do you do if the line organizations won’t “”play ball? Be careful of falling into this trap. Before you look for more “backing” from your boss, try to inventory your relationship with the line organizations. Sometimes, the solution lies simply in how you VIEW the relationship. Do you see them as working for you, or do you exist to serve them? Simple but big distinction.

2. Are you a provider of “projects” or do you strive to “enable” your customers with the requisite tools and capabilities? I know many of you spend a LOT of time producing reports, presenting them, and gleaning insights FOR your customers. That’s OK, but that, in and of itself won’t produce actionable value. In fact, I would argue in favor of producing fewer deliverables, and a heck of a lot more emphasis on coaching and teaming with them on what these reports mean for their bottom line.

3. Key to being able to deliver on #2, is a clear understanding of what keeps your customer awake at night. What drives her success? What is the biggest driver of his P&L? What factors most impact their career/ personal success? If you don’t know, ask. If you can position your initiatives in this context, you’ll instantly produce a lot more buy in and alignment. Sometimes, its just a matter of reprioritizing what you do first, in the context of what will most impact their success.

4. How do you evaluate YOUR success? I’ve talked to some really good performance managers who view their ultimate success as getting a PM PROCESS in place, rather than a long checklist of completed projects. One performance manager once told me that his success would be having such a good process in place, that he would ultimately work himself out of a job. Scary for most of us, until we look at the value that gets created, both organizationally, and with you personally. Trust me, if you create that much value, and God forbid your organization doesn’t value it, there will be many organizations waiting for a shot at hiring you.

5. Have you spent a day in your “customer’s shoes” lately ? When was the last time you got out of the corporate HQ and really saw “first hand” the activities you are responsible for measuring? I’m not only talking about the “young gun” MBA types, but many of us who have spent a little too much too much time on the office.

A client once told me that the best test to find out whether you know your customer, is the degree to which you can name his/her customers and their needs (i.e. one level removed).
How well do you know your customer’s customers???

6. How often do you ask “SO WHAT”? Take your last report or presentation, go to your conclusion page and ask, from your customer’s standpoint- “SO WHAT?” If you get stuck on that one, its back to the drawing board, because that’s what the ops folks are asking every time you put something new in front of them.

Of course, there are many questions like these that will help you reconnect with your internal customers. But my real purpose in posing some of the above questions to us is to get us back (I say back, because if your worth your salt as a performance management professional, I know many of us get this intellectually, and have practiced it in the past) in the mindset of your customers. We all know what makes our boss tick. But remember your boss (CEO, CFO, VP Planning) are not going to get your recommendations and ideas implemented.

So as you wrap up this holiday weekend, do some good introspection on your internal customers and THEIR business. It’ll make tons of difference in how the rest of the year goes.

The “Buts” of Performance Management. This is one of my better puns. I know, that doesn’t say much for my other’s, yet I still think it’s pretty good. So I’ll stick with it at the risk of frustrating my readers for the next few minutes. Please bear with me.

One of the biggest challenges performance management professionals face is the neverending excuses that they hear from their internal clients. You’ve all heard them, “That’s interesting, …BUT we don’t track that information, …BUT that doesn’t apply to us,…BUT we’re too different,…BUT our culture just isn’t ready for something that radical, BUT… You get the picture.

About once a month, I’m asked by a client of mine who is being bombarded with these kind of BUT’s (or is that spelled with 2 “T’s”?- sorry I couldn’t resist!) how they should respond. So I figured now would be a good time to begin addressing this little dilemma, not by reacting to these “concerns” individually (perhaps I’ll do a series of columns on each concern at a later date), but rather by addressing what I believe is the root cause of most all of these concerns.

And that is that people inherently do not like change. It’s one of the oldest but persistent cancers in today’s business environment. Given the magnitude of change that has occurred, particularly over the last decade, it’s quite amazing how prevalent these arguments still are. But the fact is, people still resist change at every turn. Change goes against our most fundamental human desire to put “order” around “chaos”. And for many, “change” = “chaos”.

Tom Peters wrote a book in the late ’80’s called “Thriving on Chaos”. It was one of my all time favorite books, right up there in my personal top 10. Ironically, in that book, Tom was actually not advocating companies learn to live with chaos at all, but rather to view this apparent chaos in a different light. Successful companies, he concluded, were companies that learned to live in a perpetual state of change. To embrace it, not fight it. It is a principle that I believe crosses over into every aspect of business and life.

In fact, some of the most centered and serene people I know are those people who live with more change on a day to day basis that most of us could ever imagine living with. People who dealt with long term illnesses, death of young children, or countless other personal tragedies that would spiral many of us into the ultimate crisis state. But many of these people who have learned to deal with change effectively see these events as part of life’s plan. Some even view them as opportunities for personal growth. What we see as pain, they see as one of life’s major turning points. Maybe you’ve never seen one of these people in in action, but I have. When you see it, its not only one of the most beautiful things you’ll ever experience, but it will often put your own set of life changes into perspective instantly. Sorry to digress, but I think that little detour will be helpful in driving home the point.

Sometimes, it just comes down to a “glass half full” interpretation of things. For example, if your asked a question that involves collecting some performance data, and you don’t have it readily available, you have two courses of action. One, you could rationalize that its just too damned difficult to get and your not interested in getting it….so why not fight it. Essentially you’re saying, “that’d be interesting, BUT we don’t track that data, so we can’t go forward with this “. The other interpretation is “That’d be interesting, and while we don’t track that data now, maybe that should be telling us something! Maybe we should start tracking it!”. In fact, I’ve worked with many companies in which the PROCESS of gathering performance data they didn’t already track, actually created more insight than the purpose for which the data was ultimately needed. You see, with the latter interpretation, you get a 2-fer. You get value from the result, but you also get value (often MORE value) from the process of getting to the result.

Since most of you are on the receiving end of the “buts” (jeez, this is really getting bad), its not only a matter of changing your perspective, its also a matter of changing the perspective of your client’s. And while it may often appear to be a unattainable goal or un-winnable battle, it’s your persistence that will make the difference. Many performance managers will avoid such conflicts and accept a much slower pace of change than would otherwise be possible. But having gone down both paths, I’ve found that going ‘against the current’ more often than going with it, while almost always generating significant pain, will win you the culture you ultimately desire. In these cases, YOU are the catalyst for change. And in most cases, the culture will follow. Maybe not tomorrow, or next week, but it will follow.

One last thought on “buts” (last pun, I promise). I once received a very sage piece of advice, when a colleague suggested that every time I was inclined to say “BUT”, to replace it with the word AND. I wont go into all of his logic here, but I guarantee you, if you do this for a week of so, it will change your outlook significantly. I encourage you to use that little trick, as it can be rather infectious on both your staff and that of your internal customers

Every now and then, you’ll get a reading on a key metric that is just too good to be true, or too bad to be real. When you do, its time to do some challenging of that data before you draw conclusions and “run with it”. Most often you’ll find something that created the anomaly. Even if your initial impressions were if fact accurate, what’s the harm of being a few days off on the reporting timetable in the interest of data integrity? In the end, a small price to pay.

We’re all taught in school to double check our work. Remember reverse engineering your math and see if you get the same answer? Remember how many times you caught that stupid mistake? Remember checking and rechecking that spreadsheet just because something didn’t feel quite right? Remember how good it felt when the world finally made sense?

For every error we catch because something didn’t feel quite right, there are those errors that are not caught because we’re not looking for them. Remember the last time you accidentally bumped into that spreadsheet error “by accident” 5 minutes before that key presentation? Not quite as good a feeling?

So what makes us so diligent at validating our work on some data but “cutting corners” on others? One reason is that it’s human nature to have hypotheses about the performance of our business. Assumptions about what certain initiatives should produce. And when they do, it’s human nature to accept it and move on. Think about that IT manager that completes an enterprise system implementation, and sees immediate results in efficiency. It’s only normal to accept it quickly as truth, and move on. We all have a burning desire to be right, even if the data is just a little too good to be true.

A good friend of mine is an equity trader who trades on technical signals and observations (i.e. he works purely off of chart breakouts and breakdowns). I find it fascinating how he is able to keep such a level head, no matter how good or bad a day he appears to have. You see, most investors measure their success on a “mark to market” basis- essentially judging their success on the increase or decrease in the value of their portfolio at each market close. Most traders are either really enthusiatic, really disgusted, or neutral at the end of each day. However, my friend has an uncanny ability to always stay neutral. He knows that if he has a 10% gain in his mark to market numbers, it is likely an anomaly. He knows the data and performance patterns so well, that if and when such a condition occurs, he knows that there is something well beyond his trading savvy that has likely driven it. His first order of business is to make sure his calculations and assumptions are correct- that the extraordinary gain or loss did in fact occur. If so, he accepts the windfall or extraordinary loss, knowing that the anlomoly will likely be corrected in the future by an offsetting experience that will bring his portfolio back to reality. Of course, there may be times where he has changed something in his methodology that has yielded the improvement. But its only after challenging his initial data and initial impressions that he will ever draw that kind of conclusion.

So my message for today is to avoid “kneejerk” reactions to performance data, even if, on the surface, it appears easily explainable. Validate it, challenge it, and stress test your observations. You’ll build a stronger reputation of data integrity, and your successes and “wins” will no doubt be sweeter.

Most of us Performance Managers have varied and colorful backgrounds as far as our careers go. Let’s face it, Performance Management is not exactly something you study in college, at least not yet. Perhaps one day that will change, but for now we’re all stuck with our pasts.

For me, that past involves more than a few roles in the auditing profession as an Operational Auditor. It’s where I first learned the skills of organizational assessment, process control, and performance measurement, among others. As an internal auditor, there are three basic tracks you can take- Financial (the basic accounting related auditing), EDP (Data Processing and IT related Auditing), and Operational Auditing (basically a mix of the other two, plus a healthy dose of work in organizational efficiency and effectiveness ). I personally chose the latter, and in retrospect, found it to be an excellent training ground for a career in Performance Management (although, I must admit that I’m more than a little biased) .

Nevertheless (all bias aside), I feel very strongly and favorable about the Auditing Profession, particularly Operational Auditing, in terms of its ability to teach its practitioners some of the most valuable lessons in business assessment and performance management. And I believe it is these skills that prepared me well for a career in performance management. That, combined with a great mentor, Glenn Sumners (The quintessential Internal Auditing Icon/ Guru, for those of you who do do not know him) who not only taught me the essential skills and building blocks I would later need, but also guided me through my early years as an operational auditor.

While I owe most of my early career success to all of Glenn’s teachings and advice, it was a very specific principle of auditing that I am most grateful to have had drilled into my head at an early age. And that is the principle of INDEPENDENCE and OBJECTIVITY. For those of you who have served in auditing roles, internal or external, you know that this is THE most important part of auditing. Without it, you become PART OF operating management itself, and lose your ability to make the kind of unbiased assessments that good auditing depends on. It is common believe among many in the auditing profession, that many of the corporate disasters (Enron, Worldcom, AIG, etc) in recent years can be linked, in part, to a breakdown in objectivity, and the inability of internal and external auditors to act independent of operating management. Clearly, not all of these corporate scandals were the auditor’s doings, but most would agree that it was a lack of good auditing (not enough of it… and not independent enough) that helped enable and precipitate the “meltdowns” that ensued.

No doubt, independence is a tough attribute to hone, both externally (where audit fees and long term contracts hinge on management relationships), and internally (where more than a little of your career success depends upon an administrative reporting relationship to corporate management). Independence is perhaps the hardest thing for an auditor to achieve, while at the same time being the most important attribute of success. The ultimate paradox.

So what does this all mean to Performance Managers?

The performance management discipline is very much like the auditing profession in many respects. While it may not be as compliance focused as Financial or EDP Auditing, it’s similarity to operational auditing is quite significant. As performance managers, we often work for executive management, but live in the reality of having operational management as some of our most important internal customers. We often wear two hats much like the auditor does. We measure and report as independently as we can, but we all draw our pay check from the same coffers. Quite a balancing act, to say the least.

As performance managers we must strive for the same level of independence and objectivity as the auditor does. And for answers on how to achieve that, all we need to do is look closely at the auditing profession. Do our internal reporting relationships support us being objective and independent of the processes we measure and evaluate? Does the level and stature of our PM executive command the organizational respect of the Board and Executive management ? Is our PM charter and mission built on the principle of objectivity ? Do we undertake projects (like benchmarking, for example) “on the fly” through our internal staff, or do we use an unbiased third party who will view the information and comparisons as neutral and objective ? Are we trained to tell it like it is, or do we conform our measures and recommendations to win the support of our internal customers ?

I am not suggesting that we become auditors, or transform ourselves into compliance officers. But there is a big benefit to embracing the their principles of independence and objectivity. These skills can be a very powerful addition to your toolbox, if you use them effectively. Over time, your value to the organization will increase in the eyes of your board and executive management…and yes, ultimately those internal customers as well!

Not too long ago, companies swore by their long range business plans. 2 year, 3 year, 5 year, …heck, I even remember one client with a 10 YEAR plan, complete with 10 year performance targets! Long range plans and targets were the norm. And our executives were put in place to manage these plans. And MANAGE they did. Many viewed themselves appropriately as CARETAKERS or custodians of the business plans during their time at the helm- their primary job being to avoid disaster and keep things moving along.

So what makes made these leaders operate like this? And why do many still operate like this? What makes a good “leader” turn into a “maintainer” of the status quo? I have a little theory, and it goes right back to how we set up and execute our our performance management system. My theory is that there are three fundamental flaws inherent in most PM frameworks today. They are as follows:

1. Our planning horizons are way too long. Few individuals (actually, I can’t think of one!) have the ability to “crystal ball” accurately into the future. I’ve talked to many a sales executive who tell me that their long run sales forecast is, at best, “a finger in the wind guess”. Two things bother me about this. First, these kind of projections directly drive the forecasts these companies give to individual and corporate investors (a very scary thought if you base any of your stock purchases on little things like PE and growth ratios!) Second, God help the poor soul that inherits that “finger in the wind” projection in year 3 of a 5 year plan. Planning horizons that are too long term, by definition, create very shake foundations on which to build future success.

2. Within these “long term plans”, our managers remain “SHORT TERM ACCOUNTABLE”. I’ve often wondered what kind of performance we’d have if our executives remained vested in the performance of a business unit, once they’ve moved on to bigger and better things. Why don’t our PM systems give some level of weighting to the later stages of their business plan, say years 2-5, once they’ve departed ? It’s interesting to wonder how many plans fail because they are built on bad foundations- foundations that never become visible because a) the executive that built it is long gone, and b) there exists a very convenient fall guy whose bad luck has left him holding the bag. Something to think about.

3. Finally, many of these executives have already achieved financial success. (note I stopped short of just using the word success, which would imply overall success) Yet we still try and motivate these executives with money. OK- I’m not being that naive. I know executives will always aspire to more money. But I would argue that an executive who has banked millions will be a lot more likely to take big (and often bad) risks, than those who have not, even if there’s a pile of cash awaiting him when he wins. These kind of executives have little to lose and a LOT to gain. Far better to find rewards that go well beyond financial success. Find those attributes that make a Phil Mickelson or Tiger Woods still compete even though they’ve achieved well beyond any reasonable definition of financial independence. Remember, some of the greatest executives in history have turned companies around without asking for a penny of salary during the turnaround. Remember Chrysler? Where are those executives today?

Also…and this may go without saying…you must have very solid risk controls in place at this level. At lower levels of the organization, money can be as good of a motivator as it can be a deterrent of risk (i.e. make the wrong bet and lose your job). As wealth builds, however, the “money governor” begins to lose its steam. Organizations must turn to controls to govern decision making and other related executive behavior.

There you have it…my little three part theory on why its difficult to achieve sustainable performance against long run business plans.

The optimal solution to the problem (my opinion only) is to stop fooling yourself into target setting more than 12 to 24 months out. That would solve 90% of the problem. Of course, I don’t mean stop “visioning”. But I do think we should stop guessing at longer range targets, and fooling ourselves into thinking that we can effectively manage them successfully given the almost certain changes you’ll experience in personnel and business dynamics.

But if you must have long run targets, give some serious thought to points 2 and 3. They can be useful tools for managing the long haul.