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

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

Since the 15^th 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 20^th 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 21^st 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 21^st 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 20^th 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.

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

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

The Business Complexity Problem

Business Complexity is one of the top ten business problems of the 20th century enterprise

Business complexity is the opposite of business simplicity. Business complexity arises when the business is forced to adjust to overlaid management methods. Instead of simplifying the business and organizing and managing the business in its simplest form, the 20th century enterprise overlays a rigid organization structure on the business and then overlays more methods for strategy, planning, operating, reporting, accounting, etc.

Business complexity also arises from excess results, diverse capital mixed together, and unmanaged capital.

The Business Complexity Solution

Business complexity arises from two sources.

• Excess results that do not meet an objective or that have a performance cost greater than their value.
• Unmanaged and ineffectively utilized capital

Business complexity is reduced by simplifying the business. In order to simplify the business, the enterprise needs to understand and manage the business. In order to understand and manage the business, the enterprise must employ Result-performance Management to manage specifically the only two entities that describe business reality.

• Result: The economic outputs actually produced directly from the business
• Performance Solutions: The capital defined as specific solutions to be utilized to produce specific results

Result Performance Management eliminates business complexity as a problem by structuring only the high value results needed to generate revenues, to reach other objectives, to manage enterprise capital effectively, and to manage change, improvement, and development.

All other results are deactivated.

Performance solutions are defined and the minimum performance needed to produce a value-quality result is deployed to produce results. Unneeded or unusable performance solutions are outplaced or liquidated.

Thereafter, business simplicity is maintained by continually managing results to optimize the highest value results and by continually managing performance to improve and upgrade solutions, to redeploy solutions from deactivated or reduced volume results, and to outplace or liquidate solutions that cannot be redeployed.

Result Performance Management enables the 20^th enterprise to define, organize, and manage business reality to become a 21st century enterprise to leave business complexity and other 20th century business problems behind.

The Information System Investment Problem

Information Technology is one of the top 10 management problems in the 20th century enterprise!

Most enterprise information systems are sold by vendors who promise many benefits. Few Enterprises really understand how to gain from the system. Enterprise system implementation is a large undertaking. Invariably, system implementation is restricted to putting the system into operation for the existing business. Even if the objective of system acquisition was business improvement, the objective usually gets redefined to “implement the system”. The enterprise is left on its own to make business changes to gain benefits from the system.

Most implementation consultants employ a methodology that allows them to implement systems with staff that do not need to understand the enterprise business. The emphasis is on “doing what the customer wants” and satisfying “user requirements”, which is difficult to argue against. The administrative department is defined as the “user”, rather than result users, who use the system to produce results or face the customer. Usually, the main requirement of the administrative department is “no change”. These “users” often benefit from existing methods, and cannot visualize advanced ways to utilize systems to benefit other users. To minimize problems and delays in implementation, methodologies convert existing practices and utilities convert existing data. Some Enterprises adopt “best practices” embodied in the enterprise system as a utilization strategy. But, implementation rarely puts “best practices” into actual operation. Utilization to achieve benefit is “up to the users” meaning result users. Training covers system operation rather than using the system for business benefit.

Many enterprises view system performance as a responsibility of Information Technology (IT). But, IT will take responsibility only for the internal operational performance of the system as it is set up. Problems exist because neither IT, nor anyone else, was ever made responsible for the business benefit provided by the system. Enterprises often try to solve the lack-of-business-benefit problem with new more-complicated systems, rather than solving the IT problem and improving the utilization of existing systems.

Most enterprise system implementations are “cost projects”. Implementation itself provides little benefit to the real users and limited return on the investment. Enterprise performance problems are converted to the new system — in effect casting the problems in concrete — making change much more difficult and escalating the cost of future performance improvement.

The Information System Investment Solution

Investment in enterprise systems and technology must be to enable significant result and performance improvement and not be an end in itself. System performance is a management responsibility to utilize the system to achieve business results. IT performance is the responsibility of IT to deliver accurate data, information, and knowledge to support achieving results.

Business Process Management, Capital Management, Benefiting from Business Change, Information System Implementation, Investment Management, Packaged Solutions, Solution Implementation

The solution is through Result Performance Management to understand and plan significant result and performance improvements using the system as the enabling technology. Result value-added provides the justification and payback for enterprise systems. Result Performance Management addresses the results the enterprise must achieve utilizing the system. Performance problems are analyzed to make beneficial business changes that maximize the functionality of the system and create an integrated enterprise information base. Application systems are not addressed as performance solutions, but as a component of the business process solution. The application is first integrated into each business process utilized to produce results. The improved business process is then implemented to produce higher value-quality results.

Result Performance Management provides many features to ensure successful system investments.

• Information is organized and managed as capital, not as technology
• Information system capital is split between business capital for the application logic and processing and data utilization, and facility equipment for the service architecture
• Systems are never implemented directly, but are implemented as part of an improved business process
• System investments are analyzed and planned as a part of improved business process solutions to produce itemized result value-added
• System utilization to produce result value-added is mandated by result manager goals and business performance manager follow up

Result Performance Management takes the mystery out of system investments and provides a disciplined path to gain a documented and planned return.