How Successful Would Beethoven Be in Implementing Performance Management?
Gary Cokins May 3rd, 2010
My interests in enterprise performance management (EPM) waver back and forth from explaining the mechanics of and outcomes from its various components to wagging my finger at those who are naughty for not yet implementing its components. (Read my From Nag to Wag article.) Should I be a teacher or a police officer?
We will get to Beethoven in a minute. First, what do I mean by the components of enterprise performance management? I mean all of its integrated managerial methodologies. Examples are a strategy map and its companion balanced scorecard, dashboards, customer profitability and value management reporting, driver-based financial rolling forecasts, and business analytics. There are many more I could name, but the key phrase is “integrated” methodologies.
Methodologies like these have been around for decades, and arguably even before there were computers. So EPM’s components are not new methods that managers have to learn. But like a tabletop jigsaw puzzle, the challenge is integrating them without seeing the puzzle box cover. The additional challenge is to embed in each methodology business analytics of all flavors, such as segmentation analysis and — especially — predictive analytics, as managerial styles shift emphasis from being reactive to proactive.
Beethoven and Heroics
I was educated as an industrial engineer, and I do not view myself as a scholar of the performing arts, literature, or classical music. However I have always been a careful observer of and listener to what I see and hear. As I continuously witness the success and failure of attempts to fully implement various enterprise performance management methodologies, I compare them with Beethoven. Why?
During Beethoven’s “middle period” of music composition, he was attracted to heroes and heroic efforts. This was the time period around 1810 when he composed some of his most popularly recognized pieces such as Eroica (his Third Symphony), Egmont (from Goethe, and his Op. 84), and Emperor (piano concerto no. 5 in E-flat, Op. 73). What is common about Beethoven’s interest in heroics and champion-like project managers who take on the challenge to implement and integrate EPM’s methodologies? It is these three heroic phases: crisis, struggle, and triumph.
Crisis
The initiation of an EPM project, such as developing a balanced scorecard or an activity-based cost management system, may not result from a crisis. But you could liken usually quickly emerging organizational interest and eventual need in such a methodology to being a crisis situation. The spark typically occurs when an executive (or a champion or coalition of concerned managers) realizes disturbing deficiencies.
Examples of these sparks are employees who have little or no clue as to what the executive team’s strategy is. Performance measures are too summarized, too late, and have little explanatory value as to what caused their result. There is little trust in the managerial accounting system to accurately calculate the costs and profit margins of products or standard service lines (or outputs in government organizations). And further, there is no inclusion of the increasingly more important nonproduct costs-to-serve (e.g., distribution, selling, marketing) to measure the channel and customer profitability levels. There are other similar types of deficiencies that I could describe, but the point here is that the crisis moment emerges when some motivated managers start asking, “How long do we want to perpetuate operating this way and making decisions with no or flawed and misleading data, measures, and financial reporting?”
This is when, in my opinion, Beethoven is at his best. It begins with the first of his four orchestral movements. The music starts with a single note or a few brief chords or with a melodramatic song giving the feel of a thunderstorm or of being lost in a blinding snowstorm.
Struggle
The next stage of heroics in Beethoven’s works is the struggle. How do we get started? What is the road map? How do we get buy-in, both from executives at the top and coworkers and employees at the bottom? How do we get funding? How do we select the correct key performance indicators (KPIs)? How do we construct an activity-based cost assignment model? How many activities should we divide our processes into? At what size is our model too complex to understand or unmanageable to maintain? Where do we get all the input data to feed our systems? Do we even have the data? If we have the data, are there quality and integrity problems with it? Is the data scattered about in disconnected and disparate data sources?
Life and work can be a struggle.
How did Beethoven compose his music to deal with this phase in his second and third movements? Sometimes moody. Sometimes sad.
Triumph
Not everyone wins. It is so tragic to me when during my international travels for SAS I visit an organization that initiated and even completed an EPM system, like activity-based costing — and then they abandoned it. An executive pulled the plug on it. The reason may be that it already provided the answer they wanted (so it was more like a one-time project rather than a permanent, repeatable production system). Alternatively, they may have concluded that it is not worth the administrative effort to collect, calculate, and report the information (meaning someone excessively overengineered the system and made it unnecessarily complex). Alternatively, the methodology may be something a new executive does not understand (the blind men and the elephant … touching the tail, it must be a rope).
But you can triumph and win.
Beethoven provides you the thrill of triumph in his fourth and last movement. The decibels grow louder. The chords are crisper. At this point, you want to march with your feet to his music.
What does it take to triumph in successfully implementing a performance management framework of methodologies? A few tips. Do not overplan and underexecute. Analysis paralysis. Just get going. Make mistakes early and often, to learn from, and not later when it is costly to make changes. Even more critical, do not underestimate the magnitude of peoples’ resistance to change and the need for behavioral change management. (For more on this, read my Why you have to be a Sociologist to Implement Performance Management blog.)
So, how successful would Beethoven have been in implementing EPM? Read my article about Beethoven’s Eroica Effect and Performance Management, and you will know my answer.
