Performance Management is one of the top 10 problems of 20th century management!

The definition of performance and performance management is a fundamental 20th century enterprise management problem

Since the 15th century, performance has been defined as both the capital utilized in action executed and the results accomplished. The definition prevents management of results separate from performance and restricts enterprise management to one confused performance dimension. Performance management is a big part of 20th century management, with a variety of structures like processes, dashboards, and scorecards laid over the business. Key performance indicators (KPI) mix result volumes, capital utilized, and performance levels. Business process re-engineering focuses on business process management and performance quality to produce a process output. Many performance and productivity methods and consultants redefine costs out of the process and into other capital utilized in the business.

Separate results and capital from performance to enable 21st century business management

Business Process Management, Conventional Management Methods, Performance Management, Solving Performance ProblemsThe performance management problem is eliminated by separating results and capital solutions from performance to organize the enterprise business in results produced, capital solutioins utilized, and the performance of a solution to produce a result. The enterprise business changes each time management decides to produce a new result, close a finished result, or utilize a different capital solution. Capital management acquires, develops, improves, and supports capital solution investments that have the potential and are qualified to produce results. Performance management maintains cost-effective capital solutions utilized in performance. Result management utilizes specific solutions to produce specific value-quality results.This produces 21st century business management.

The Performance Management Problem

Performance management mixes performance activity together with performance results like goods and services

To this day, performance is defined to include not only the capital utilized in execution of actions and activities in performance, but also the outputs, things accomplished, or results of performance. Sales performance includes the capabilities applied or time taken by the salesman human solution in making the sale, as well as the results in the number of sales, number of items sold, and the amount of the sale. The accepted definition of the enterprise business is “the activity of providing goods and services“. Yet the definition of performance suggests that the business is “the performance providing performance“, since the activity and the goods and services are both defined as performance.

Mixing actions and results of performance together as the same entity, prevents the 20th century enterprise from managing results separate from capital solutions utilized and performance in order to organize and manage the business.

Business Processes, Performance Management Systems, and Key Performance Indicators mix results, capital, and performance

Performance Management Systems report to management through a variety of dashboards, scorecards, cockpits, and control panels that are laid over the business and the organization structure. Re-engineered business processes mix results and capital solutions together and business process management tries to manage the monolithic process. KPIs mix indicators of performance, which indicate a level maintained over time, with measures capital that show the status of investments in the business, and metrics for results, which are finite outputs produced within a time period that can be counted. This is why we hear of sales performance, revenue performance, and profit performance instead of results.

When we re-engineered business processes, we mixed up results and performance, so that we expected organizations units to manage performance and performance quality, and we set up a process team to manage a result as the output from the process. This put our results and performance backwards. We managed performance in the organization and a result across a process.

The Performance Management Solution

The business can be defined more precisely as “investments in capital as solutions of worth utilized for cost and effectiveness of performance to produce value and quality in results”. Capital investments in solutions must be defined as a set. Economic output results must be defined as another set. Performance in the utilization of a defined solution to produce a defined result must be defined as a third set. This separates capital management and result management from performance management, and enables the enterprise to organize and manage the business. Results are managed to produce outputs that can be counted to reach goals. Capital is managed to acquire, develop, and implement solutions needed to provide potential. Performance is managed across the results produced as a level over time to know solution utilization to maintain expectations.

Manage capital through capital management, results through result management, and performance through performance management

In a managed business, business processes are refined to be result value-quality chains by separately managing results, capital solutions, and performance. Instead of business process management, the business is organized and managed as a matrix or a spreadsheet. Results are managed in the columns to create value and exceed goals. Capital is managed as specific solutions in the rows to manage investments and returns. Performance is managed in the cells, called performance domains, where solutions are utilized to produce a number of results, in order to record all costs and maintain expectations. Result metrics measure and manage the results produced by the organization units, capital measures manage the investments in the business, and performance indicators measure and manage the utilization of capital solutions across the business.

21st century business management enables gains not possible with 20th century performance management

Separate management of results, capital solutions, and performance enables the 21st century business management to do many things that are not possible with 20th century business process and performance management.

  • Organize results as a complete set and manage value as an attribute of results
  • Measure and manage quality as an attribute of results
  • Organize capital as a complete set of solutions of assessable worth that provide total capital and business worth
  • Organize the natural business by deploying specific capital solutions to produce specific results in cells or performance domains
  • Refine business processes as result value-quality chains to manage all capital solutions utilized to produce each result and to manage all results to a final result
  • Capture business activity in performance records to know the cost of capital consumption and capital solution utilization to produce a specific result
  • Capture performance costs against the capital solution to know changes in worth
  • Capture performance costs against the result value to know result-value added
  • Measure and manage capital solutions, performance, and results to manage capital investments amortized as performance costs against result value, capital capacity utilized in performance to produce result volumes, capital qualifications and performance effectiveness producing result quality, and capital reliability and performance uncertainty impacting result risk
  • Enable capital solution worth assessment to identify improvement or replacement needs
  • Enable result value evaluation to identify results that should be closed or improved
  • Understand the relationship between providing capital potential, meeting performance expectations and reaching result goals
  • Relate result symptoms and performance problems to understand the capital solution cause and the value-added benefits to justify the cost of improvement, acquisition,  or development of the capital solution
  • Optimize the total attributes of results against the totality of performance to produce high value-quality results through cost-effective performance
  • Provide two dimensions of management for results that utilize a set of solutions to create value and reach goals and for performance to provide qualified solutions utilized by a set of results to manage costs and meet expectations
  • Provide the third management dimension to manage value-quality over time to create strategic value in the transition to the strategic business

One of the fundamental advantages of business management is the explicit separation of results, capital solutions, and performance, to organize the natural business as one business structure to integrate planning, direction, control, and reporting.

Business management manages capital measures in capital management, performance indicators in performance management, and result metrics in result management. Capital capacity is utilized in performance to produce result volumes. Capital investments are amortized as performance costs and charged against result value. Capital qualifications must be utilized in effective performance to produce result quality. Capital reliability reduces performance uncertainty to reduce result risk. Result value less performance costs gives result value-added, which provides a contribution to each solution utilized to provide the return on investment gain to date and to estimate the worth of the solution in result value-added over the remaining life. Defective capital solutions cause performance problems that appear as result symptoms. Result symptoms are removed by solving performance problems through new or improved capital solutions. Capital solutions provide the potential to meet performance expectations to reach result goals. This provides the means and relationships to manage capital solutions, performance, and results to manage the business. 21st century business management manages the business directly to eliminate 20th century performance management problems.

Filed under: Business Process Management • Conventional Management Methods • Performance Management • Solving Performance Problems

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