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.

We’ve all seen it before. Companies who are just a little “too good” for the rest of us. Every industry has them. The best of the best. The elite of the elite. Companies who are so darn good (or at least they think they are) that they believe they have little if anything to learn from other organizations in the peer class.

For the past 20 years, I been involved in all aspects of performance management, from simple performance measurement and reporting, to the formation of benchmarking and other peer to peer learning consortiums. I can tell you, from experience, that in all the work we’ve done, we have yet to see a company excel in EVERY aspect of performance. In fact, on average, these self proclaimed “elite organizations” tend to fair no better than the overall average on actual performance efficiency and effectiveness. And after all these years, that average still hovers between 25 and 35%. That is, companies tend to “lead the pack” in, at most, 35% of the functions they perform. That leaves at least 65% of the business where they LAG the average- well shy of what most of us would define as an “elite class”. And for that reason, these companies remain (to coin a phrase from Clint- the famous actor turned politician) “legend in their own mind”.

While it may appear to be, it is not my purpose to publicly ‘dis’ these organizations. If it were, we’d be naming names and sharing some of the real comedy that these companies produce for the rest of us in the performance management arena. Trust me, these companies know who they are, and so do you. My purpose here is to lay out the facts. And in the performance management realm, those facts say that there is no such thing as an “elite class”. Most every organization has more to learn than they have to contribute to the best practice treasure chest. And embracing that little fact can be the difference in whether you end up with a culture of learning, or a culture of ungrounded elitism.

So as you traverse the course of your performance management program, beware of the tendency to proclaim yourself a member of that elite class. Doing so will most certainly slow the degree of learning you are trying to foster in your business.

To the contrary, maintaining a healthy level of what I call “organizational humility” is a far more powerful ingredient to long term performance success. Without it, some of the most toxic ingredients such as the “NIH” (not invented here), and WSD (we’re so different) syndromes are allowed to thrive. And when this happens, any semblance of a learning culture that exists is most certainly put in jeopardy.

So in the words of Roy McAvoy (the Kevin Costner character in the movie Tin Cup) as he took the tee in the final round of the US Open- BE HUMBLE! Your peers may be less impressed (assuming they ever really were), but you’ll be the silent winner in building a long run culture of learning and innovation.

As everyone knows from Chemistry 101, a catalyst is an chemical agent whose primary role is to initiate and accelerate a reaction among the other agents in a particular process. In simple terms, it is the one chemical agent that starts the “launch sequence”.

Just as certain agents are catalysts for chemical processes, performance data can be just as effective in catalyzing organizational change and performance improvement. While much of the data we collect is aimed at monitoring and controlling our day to day processes (i.e.- compliance within control limits), there are other data that have a much bigger purpose. When we benchmark ourselves, for example, one simple data “gap” between you and other organizations (assuming the data is reliable and trustworthy) can initiate a process of exploration, best practice implementation, and major organizational change. All that from one very simple but insightful comparison.

Sometimes we get so caught up in using our data for management controls and day to day reporting that we dismiss much of the data that could be very valuable in our organizational change efforts. For example, performance gaps that may appear on the surface to be outliers- big gaps that we shrug off as being bad data, or rationalize as coming from a company too different to be relevant to us. But with a little work and exploration, many of these “outliers” can serve as catalysts for MAJOR leaps in performance.

I once co-facilitated a data validation workshop for a consortium of companies who annually benchmarked their performance vis a vis each other. The purpose of the workshop was to create a “challenge environment” where participants could openly challenge their peers on such things as definitional compliance and reporting consistency. During the meeting, someone pointed out what appeared to be an anomaly- a company who failed to report maintenance cost on a certain type of electrical breaker. When challenged, the respondent replied, “well, for that particular type of breaker, you’re right, we did not report any cost…” Before he could finish his explanation, the challenger blurted out a big “AH HA!”, which was followed by a wave of frustrated grunts from the audience similar to what you’d see in British Parliament sessions when dissension occurs. After the noise subsided, however, the respondent said softly, “that’s because we have found that this particular type of breaker is much cheaper to let fail and replace, then engage in a continuous maintenance cycle. There was little reliability or safety risk associated with the failure of the breaker, and the failure rate was so low, that we eventually decided to seriously scale back our planned maintenance on that piece of equipment…and that saved us a ton of money, with little if any drop in service level or quality.”

WOW- now that was an AH HA moment of biblical proportions. Talk about a catalyst. A year later many of the organizations had made changes to their maintenance cycle, most of which had resulted in serious cost reduction. All from what appeared to be one erroneous piece of data.

Are you looking at your performance data simply as a component to your management reports, or as potential catalysts for change? As you go forward, try and remember that the real value of performance information is usually deeply hidden, and its your job as performance managers to uncover that hidden value and to leverage it to the greatest extent possible.

One of the most common questions I get from clients is how to best create “buy in” from the organization for their performance management initiatives. This question pops up frequently, as performance managers struggle to collect and report performance information, and then get the organization to actually follow through on best practice implementation and other improvement recommendations. The problem is not new, yet many are still searching for the magical answer.

Truth is, there’s probably not one magical answer. Organizational cultures are built over time, and are the result of a lot of pieces and parts working together well. Nevertheless, there are some common characteristics that exist within organizations that have achieved the type of of buy in and alignment necessary in building that kind of culture. One of those characteristics (and the most important in my opinion) is the ability of the organization to free itself from what I call an “initiative driven”, or “flash in the pan” culture. That is, a culture where management and workers are in a constant state of having something DONE TO THEM, rather than encouraging and enabling them to take ownership for their own performance improvement.

Let’s face it- we are largely a codependant workforce. We surround ourselves with consultants for everything from restructuring initiatives to the hands-on management of the company itself. This has created many problems, the most significant being that the organization loses the ability to “own” the results of their actions. I’ve actually had executives acknowledge using consultants and temporary workforces so that “there is someone else to blame when things go south”.

Most organizations used to claim they did a major restructuring every 7 years. Now, many of the same organizations (including large consulting firms, ironically!) go through an organizational shakeup every year or two. Benchmarking programs run on an annual cycle and tend to be big distractions for the workforce as these initiatives peak. Couple that with process redesign, quality, and six sigma initiatives, and what you’ve got is an organization in a perpetual state of working for the consultants and internal PM staff. Kind of backwards, wouldn’t you say?

We need to get to a place where these programs are no longer viewed as “initiatives”. A place where things like benchmarking and process improvement are woven into the fabric of day-to- day management. A world in which managers have PM tools on their desktop so that they can drive their own conclusions, rather than being spoonfed via consultant reports and presentations.

Several years ago, I led a very interesting engagement where we (the consultant) spent our time setting up profit centers throughout the enterprise. Basically, we created these small workgroups organized around business lines and service areas, each of whom was given their own P&L. Rather than redesigning their processes for them, benchmarking them, or reorganizing them, we placed all of our attention on changing the philosophy of the business model and the incentive structure. We basically incented them to think like owners, and once they did, all of the other things just fell into place. What was once done TO THEM, was now done BY THEM. A new culture was born, one which had fewer initiatives, special projects, and task forces. Fewer distractions, better alignment, and a highly innovative and productive culture.

What are you doing to rid your organization of “flash in the pan initiatives”, and the dependency that goes with it? Start doing less TO THE ORGANIZATION, and more FOR THE ORGANIZATION. Enable management rather than spoonfeed. A more aligned and motivated culture will follow.