I suspect all of you out there have someone that you rely on for insight and perspective – that wise old mentor that seems to have an unlimited depth of experience to draw from in helping you navigate life’s little challenges. You know, those little parables and anecdotal tales that always relate perfectly that very problem you’re trying to solve. Today, I go to that well of experience in responding to a problem I know many of you are facing right now- squeezing that last drop of improvement that never fails to elude us.

First, the problem: Most of you out there in the performance management world have worked for years trying to find hidden value inside your organizations. Along that journey, some of that value (be it cost savings, productivity improvements, or gains in service delivery and customer satisfaction) has come pretty easily.

We’ve all heard the term- LOW HANGING FRUIT (I’ll refer to this as LHF). Problem is that many of us haven’t heard that term lately. Why? Because most of your organization’s have already captured those kind of improvements… the kind that smack you in the face right away even when you’re not looking…and are very easy (perhaps too easy) to implement.

And along the way, capturing that LHF has created some real superstars within your company. How familiar is this- upon finding a bottomless pit of LHF, one of your esteemed, but intellectually challenged colleagues becomes the “instant hero” overnight! Reminds me of that FedEx commercial where they go on that long retreat, and the woman gets the idea of using FedEx in the first 30 seconds, and proceeds to get showered with kudos.

Of course now, months or years later, you’re now in the role of continuing in your esteemed colleague’s (aka new hero’s ) footsteps. Only the LHF you’re looking far has become much harder to find. Those “bit hits” and “home runs” have become fewer in frequency and impact. You work day and night to make your assessments, ground your conclusions, align management, and facilitate the necessary organizational changes. You put in more (much more!) work than your esteemed colleague ever put into it, but capture nothing close to the impact of those initial wins. Where did all that LHF go?

Truth is that it got replaced by the practice of “squeezing blood out of the proverbial turnip”. And you’re the corporate bloodsucker! You find yourself in that under-appreciated job that no doubt produces a lot a value, but not without several times the effort that used to be required. That’s life for many of our performance managers today. Boy, wouldn’t it be nice if someone made this job a little easier?

Enter my mentor, and one of his anecdotal gems. He starts by asking me to recall the first time I went out to the golf course. I’m sure if you’re a golfer, his experience will bring back similar memories. If not, just read on, as I’m sure you’ll be able to relate, at least in spirit.

He recalls his 1st time on the course: More misses than hits, a verrrrrrrrrry frustrating intro to the game…and probably one he’ll give up pretty quickly. But he continues despite his apprehension. It’s amazing how much one good shot (out of over 100) will keep you coming back, but I digress.

5 rounds later, AT LAST, he has more hits than misses- that moment of truth when the golfer gets “hooked”, and alas, the confidence starts to build

Round 10, now he’s starting to get the hang of it, and feeling pretty good

Round 15- end of his first full year- he’s cut his score by a whopping 25% (although he won’t mention our previous scores!)

Round 20- the following season- after a couple of rounds dusting off the “off-season rust”, he shaves off another 10-15%, and he’s now shooting somewhat respectable scores (measured, of course, not by the total stroke count, but rather by the number of people who aren’t embarrassed to have him in their foursome). He, on the other hand (although borderline delusional) is now thinking Senior Tour!

Round 20-320 (over the course of 30 years), He spends the rest of his golfing career trying to cut his score by another 5%- Where the heck is the LHF now, he asks ???

And, of course, the story gets worse….

He has spent virtually no money (except for those second hand clubs) getting that first 40% improvement, but could damn near retire on the money he spent chasing the next 5% (the latest driver, several hundred sleeves of those new balls that go farther and straighter (NOT), greens fees at clubs he has no business playing at,…you get the idea). How in the heck can I get that next 5%, he pleads ? Am I that poor of an athlete? Should I change my swing?

Now here’s the punch line… Most professionals don’t have this problem. Why, you might ask. Are they just naturals? Sure, that’s part of it. But there is more. My mentor calls this secret ingredient “the art of diagnosis”, something all of us could be much better at.

If you’ve ever read about the trials and tribulations of pro golfers (a far better investment of time than that new triple titanium, variable weighted, moon dust infused driver !), you’ll find one common thread. They know how to diagnose their game at a level we would never think of.

When we diagnose our game as an amateur (and it’s a stretch to call most of us amateurs!), – assuming we diagnose it at all- we think about things like % of fairways hit, greens in regulation, # total puts, etc…and that’s ok for a first cut. But the pros go much deeper.

I recently read some work by Dave Pelz- Phil Mickelson’s short game coach and advisor to several tour players. For those of you who don’t know, Dave is an ex-NASA engineer who worked on the first Lunar Module design who, over the course of the last several years, has applied his expertise to diagnosing and fixing the flaws of pro golfers. Interesting career shift to say the least, but it has paid off. His mission, is to help them find that next 5,4,3,2, and 1% (more like .001%) improvements. And how exactly does he do that?

Dave knows the art of diagnosis, which is no doubt driven by his engineering, scientific and technological prowess. Last weekend, I saw a special Dave ran on the Golf Channel in which he encouraged us amateurs to come up with a “short game handicap”. Without going into a lot of detail, this SGH didn’t just deal with one or two metrics, but many that worked together. Things like shot dispersion with different clubs, hit/miss ratios from points inside 30 yards for a variety of shot types, putting success from a half dozen different putt lengths and types, etc. Whether you’re a golfer, or identify better with another sport, the message is the same.

Many of us would cringe at the depth of analysis that goes into this one area of focus. In this case, the SGH only deals with shots inside 100 yards. But if you talk to pros, they’ll tell you that this guy is a miracle worker. Not because of his athletic ability, but because of his savvy at the art of diagnosis. He makes a living off of people (pros and amateurs alike) who have fully captured the LOW HANGING FRUIT, and want to begin sucking that turnip for some more blood. And that’s very similar to our jobs in today’s business environment as performance managers.

As performance managers, we must think like Dave. We must design scorecards that operate effectively at the executive/ “results” level. But we must also possess diagnostic measures that explore strengths and weaknesses in the very processes that PRODUCE and/ or CONTRIBUTE to those executive level results. We must be BRUTALLY HONEST with our baseline, and diligent in our goal setting. We must diagnose, challenge, and set new goals at the work-face- Goals that if achieved will make a difference in one or more sub-processes. In short, we must develop the equivalent of Dave’s breakdown of the TOTAL handicap in to SUB HANDICAPS like his Short Game and Putting-Only metrics.

There are many tools available to us that can help us achieve this. Tools that help us design these kind of narrowly focused, but strategically connected metrics and scorecards. Tools that help us integrate these scorecards so that we can see the rollup and rolldown effects on the bigger picture. Tools that help us translate our strategic plan into its manageable components. Tools that help us baseline and set targets. Tools that help us benchmark against the outside world. One of the things that our company has spent many years focusing on is developing these types of integrated scorecards for business, and helping organizations use them to manage the small but vital pieces of that equation.

But whatever tools you select, the biggest challenge you will face is changing the culture and mindset of the business. Essentially, developing a mindset that recognizes the new game we are in, and that those 1% gains are going to be a lot harder to come by. A game where the entire focus is on that Turnip, and how to get that last drop of blood out of it. It is a culture of ACVTIVE diagnosis and analysis, not one of PASSIVE enterprise level KPI tracking and reporting.

And that challenge starts with you, the performance manager. The bad news is that it will take the right tools, the right culture, and a lot of hard work. The good news is that if you can apply this art of diagnosis in the corporate world, you’ll begin to find that next tier of performance improvement, not to mention, a much lower golf handicap.

…And with any luck, I’ll see you on the Senior Tour!

-b

Author: Bob Champagne is Managing Partner of onVector Consulting Group, a privately held international management consulting organization specializing in the design and deployment of Performance Management tools, systems, and solutions. Bob has over 25 years of Performance Management experience and has consulted with hundreds of companies across numerous industries and geographies. Bob can be contacted at bob.champagne@onvectorconsulting.com

I’ve had a number of recent conversations with my clients and business partners about the importance (or lack thereof) we, as a community of performance managers, are placing on data standards. After all, the ability to compare, analyze, and effectively mine for insights among peers depends on being able to have some type of common data lexicon to rely on for our conclusions.

Throughout the course of history in the PM discipline (which is still relatively young), we have seen some bright spots. For example, many industries have in fact established reporting standards that exist to this day. Safety concerns, for example led to the establishment (and proliferation I might add) of airline accident and incident reports. If one wanted to (and I wouldn’t suggest doing this before your next plane trip), you could literally find dozens of online databases that profile this type of data and be reasonably assured that the data is comparable across carriers. That is because the NTSB and FAA (save for some inter-agency inconsistencies and recent infighting) require very clear standards regarding when, how, and to what level of detail incidents should be reported. We also see this prevalent in the Nuclear power sector, where again, the main driver is public safety.

But what about where the main driver is something other than public safety? In regulated industries, we see evidence of similar reporting standards having emerged in banking , healthcare, and local transmission and distribution utilities. In these cases,the driver was more the regulator (e.g.- FERC for the utility sector) who set up these standards to prevent monopolistic control from being exerted on the industry and to hold these otherwise shareholder driven companies to “reasonable” levels of performance. Most of these reporting standards worked well for a while. But as deregulation occurred and competitive markets began to control themselves from a performance standpoint (as capital markets often do), the need for these standards began to wane. Sure, we still see some of the reporting artifacts still in place today (for example, the utility sector still requires FERC reporting), but it is almost always viewed as a necessary distraction for the real operational executives within these organizations. The vehicles that were designed to produce a rsolid eporting standard, now produce some of the least reliable information around And that should be no surprise. When standards are set up to oversee or punish an organization for not achieving a result, you can bet the data will be “worked” and stretched to the maximum extent possible in order to achieve that result.

While I may be accused of being a bit pollyanna, I genuinely believe that the setting of data standards can in fact work well. But the underlying PURPOSE that drives data standardization must be changed. I am of the opinion that if these systems were set up to enable each company to achieve their fullest potential, from both the cost and effectiveness sides of the equation, companies would be a lot more diligent and honest in their adherence to standards.

In the power sector for example, there are some benchmarking and best practice sharing programs that do a great job at reporting consistency. In fact, if I were to bet on the result, I’d put my money on the data that was reported in these programs well before I would trust the more institutional standards like FERC, NERC, and the NRC, for example (all of which have many more years of history under their belt). Why? Because the benefit of complying in the former case is directly proportional to how much an organization LEARNS from the data that is shared. If you twist the data to reveal a better overall position on the scorecard, you’re only hurting yourself.

I believe there is room for a new standard to emerge across all of the industries I mentioned and beyond. A standard that originates from a desire to be competitive and learn, versus one that is set up to regulate and punish. Such a system would need to revolutionize everything from accounting treatment to the work management processes themselves- where a dollar means a dollar (no red dollars and blue dollars) and an outage means an outage. Sure, it’s complex, but as performance managers, we’ve seen these standards achieved way back when it was done for regulatory and safety purposes. Not for long, but it did work. It failed not because it couldn’t be done, but because it had an underlying driver that was flawed. A good system became just another form to fill out.

So let’s try this again, only this time lets make sure that the people reporting the data see the clear benefit of complying with a standard. Only in this way will we end up with a system that is sustainable in the long run.

I must say that I’ve had numerous reactions to the Bernie Ebbers’ news of late- from “good riddance”, to pure apathy. Actually, I did feel a flash of compassion, as I read about his blubbering crying episode in the courtroom- although it was a very quick flash, kind of like when Jim Baker was filmed walking out from his sentencing. But by far, my overwhelming emotion was one of justice. For once, executives in corporate America were given the message that we don’t reward corporate mischief. In fact we now punish it- hard. And that’s a big step forward that was a long time coming.

But there’s a lot more to do in terms of how we reward executive management in this country. Things have gone seriously awry when our executives are given enormous sums of money and other rewards, long before they actually perform. And while they may fail to get their second or third tier bonus when they fail to meet key targets (some actually still do, by the way), they’re base compensation levels are often left untouched. Sure, maybe they lose their jobs somewhere down the road, but only after they’ve banked millions during their performance backslide.

While the recent conviction and big time sentencing of Bernie shows that we are not TOTALLY blind as a society of shareholders, there is a long way to go. Punishing those who overstep the line of executive integrity is a start (hopefully it wont take a year next time). But what about the incompetent executive that brings a company down in flames without having committed a federal crime? There should be clear disincentives that stop that kind of poor performance in its tracks. Just stopping the flow of rewards earlier in the backslide cycle would be a start. To me, this is clearly the next battleground in executive performance management.

Why isn’t this happening today? Sure- part of it is that many Boards and CEO’s continue to “wish these problems away” rather than taking swift action in terms of consequence. Part of it also is the poor design of our compensation schemes that posses precious little in the way of compensation DOWNSIDE for poor performance. Sales teams know this well. Some of the best guys and gals I know in sales have upwards of 90% of their compensation “at risk”. Too excessive? Maybe. But no downside to base comp is equally ridiculous. Executive compensation, in design alone, could use some big time overhauling.

But even if we had well intentioned boards, operating inside of a near perfect comp structure, that was willing to act when it detected a performance breakdown …My guess is that the system would still fail to stop poor performers any earlier than it does today. Why? Because of the way performance is reported. The metrics that we use are often compiled by individuals or sophisticated algorithms, and reported on a periodic- weekly, monthly, or quarterly basis. Sometimes (actually more often than not), at the executive level, the data is reported annually. Hard to believe in the kind of information environment we now find ourselves in.

If we are to reform executive compensation, we must fix all of the things I mention above. But without more timely, accurate, and available performance feedback, even the most perfect system will fail. We must take our collective “heads out of the sand”, and bring our performance information to light, much quicker and more frequently than it is today. It must be broadly accessible, and accessible on demand. In the age of information we live in, there is almost no excuse for the kind of “back room” reporting that still takes place today. The more timely and accessible the information, the less poor performing executives will be able to hide behind their information reporting inadequacy.

So as you navigate forthcoming rounds of executive hiring at your company, do your part to drive performance information into the open forum. There are many tools and systems that will help you do that, in a manner that is more timely, accurate, and accessible. You might not be the most liked person at first, but if you survive the initial pain, you and your company will have a much brighter future.

I’ve had more than a few readers tell me that the indexing feature/ archiving of the “Blogger” site we use for PM Daily is a little “clunky” /difficult to use. For example, there is no easy way to browse titles without going into each archived month separately.

I know “Blogger” is working to make the search and indexing features better, but in the interim, I have posted an index page that has a running list of all articles posted since inception of the site.

The link is http://www.rjci.com/pmdaily-index.htm

Hope that helps!

One of the things I like to do is take a practice that I observe in one industry, and think about how it might apply to another very different sector. As I have indicated in past columns, I genuinely believe that the best insights are often revealed by looking well outside of your own organizational or industry boundaries.

To that point, I’ve had an opportunity to talk last night with a friend of mine who is a “big time” equity trader. By “big time”, I mean he trades many times over what I could ever dream of investing. And for him, the last several weeks have been downright gut wrenching. Trends have had a real difficult time staying in tact, often reversing course on what would have normally been a longer term run. While his methodology plans for a good amount of that (i.e.- he expects to “lose” on about 40% of his trades (with built in stop losses of 2-3%)), he more than compensates by winning much larger returns (say 10-20%) on the other 60% that follow the expected trend.

But as most of you know, the market has been about as unpredictible lateley as it’s ever been. Traders have, for years, banked on trends which, believe it or not, are generally pertty predictible. But the last few weeks have not seen the ‘follow through’ that they ‘should’ have. We’ve had big breakouts that have reversed course unpredictibly. We’ve also had big breakdowns (like the major drop we experienced after the London bombings) that sent many traders “shorting” the market, only to see a major buying frenzy that lasted well into today. I’ve done a little bit of trading in my past, and I can tell you that it’s week’s like this that make you want to throw in the towel. And it’s those times that you need to be extra careful.

It’s during the unexpected change in performance patterns that traders start messing with their methodology. And there is nothing inherently wrong with that, as long as you can be reasonably assured that the change would have produced better results. Traders call that “backtesting”.

What differentiates great traders from poor ones (and I mean that literally) is that they backtest rigorously just about any change in methodology BEFORE they apply real money to it. How do they do that? They literally take the change in methodology (say entry or exit parameters) and apply it to all past trades, even ones they may have skipped, and see whether or not it would have produced more favorable results. Then and only then do they actually implement the process change. You may say that breeds over-analysis. Probably so. But I know from talking to a lot of these guys that it is this mindset that truly makes or breaks a trader.

I couldn’t help but thinking how useful that practice might be to the art of process management and performance reporting. How well do we really implement the performance management mantra of Plan, Do, Check, Adjust? Are the adjustments we plan to make tested against our historical metrics? Sure we look at pre and post performance based on the process changes we make, but do we go back and see how the process would have performed during the times where our old processes failed? That’s the real test of whether or not the process change actually makes sense. It’s during the tough periods that our processes are really put to the test, right?

I suspect many of us make changes to our businesses processes based on a particular problem that appears to be hurting our business. Does that mean every process we change based on “gut feel” or political pressures is the wrong move? Of course not. But we’d all be a lot better served by our own little bit of “backtesting”…challenging our proposed process changes against history, and seeing whether the new change would have made a difference.

Certainly, this is not a black or white topic. There will be times wher we change things on “gut feel”, just like the trader that breaks out of his method for a trade or two. That will happen, and you need to be flexible. But most traders will tell you that they do their worst when they trade for any length of time on pure instinct. Following a well backtested methodology almost always produces superior results.

Let’s all take a lesson from all those traders who got burned over the past few weeks. The really bad traders have probably already implemented changes that will likely fail because they are reacting to what was just an anomoloy in the market. Good traders will realize that and most likely stick to their process for many profitable trades to come.

Next time you contemplate a change in your business process, try and do a little bit of your own backtesting in different environments and see how the changes would have held up. The answers may surprise you.

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