Alliance Reports

Overview of the Performance Excellence Process


Hi I'm Steve Ouellette, President of the ROI Alliance. Our idea is to have monthly video blogs describing some of the questions that people have as they are moving towards the objective that we call "performance excellence" following the various paths that we're going to lay out.

However, before we get into some of those details I thought it might be a good idea to take a step back and get maybe a 10,000 foot view of a map of what it is we're trying to accomplish with the concept of Performance Excellence so we can always refer back to that. It's really easy to get lost in the details.

Now the devil's in the details so we need to get to those details but instead of getting super focused on a particular tool or a particular question we always will have this to kind of roll back and see where it is we're trying to go and what it is we're trying to accomplish.

Alright so having said that when I first go into an organization we're probably going to spend some time talking about where we want things to go in the long term, and so I'll often ask people to write down in words something like this: it's 15 or 20 years in the future, you're looking back you did a great job you accomplished what needs to be done and you're feeling good about it. Describe for me in words what that looks like, what that environment is like, how you feel about that, and from those words we're going to define what it is we want this organization to be - and from that we're then going to distill that down into something we might call a vision or a long-term description of where we're taking this organization.

Now this provides what Deming used to talk about as "constancy of purpose" and so no matter where we're going, we know that's what we're trying to head towards. So imagine an analogy of we're driving to Florida - we know we're going to end up in Florida but with along the way we may have to take some detours here and there. A bridge might be out, something might change, some road is is clogged up so we need to move to another one. So we can adjust as we're going along the path, but we know we're going to end in Florida.

And that's the purpose of a vision. The purpose of a vision is to provide that constancy of purpose - it says this is where we're heading, and so although there may be little fiddly bits along the way we know that that's where we're going to end up.

Okay that's the vision: a short statement of where we want to be maybe 15 to 20 years from now.

Another thing that is required in these early phases is to discuss the value that you provide to your customers your clients with whatever products or services that you provide. Now a value proposition is that it's a word description of what your customers perceive as the value that you provide.

You need to make sure that your value proposition from your perspective meets what it is that your customers understand to be your value proposition. And it's probably unlikely if you don't measure your value proposition, if you don't understand your value proposition, that your customers probably don't perceive it the same way that you do either. So a value proposition is a very very important step here in the early days because we're trying to understand why people give you the money the time the resources to accomplish what it is that you propose to do as opposed to giving all that to somebody else. So we better understand that pretty early on and that's our value proposition.

There are a couple of optional things that could show up in this phase as well one is "core values." So core values are those things that are so important to us that we need to call them out specifically. We don't need to call out every little thing like "be honest" or "be nice to people" that type of thing but there are certain things in many organizations that really rise above kind of that expected level.

Sometimes what I tell people this is helpful for is in looking at maybe multiple candidates for a job. Maybe you've got a couple of people that are completely equally qualified but one feels like a better fit. Sometimes it's because they match those core values better, they exemplify those core values or they've had a history of exemplifying those core values, and so they feel like a better fit for your organization. And it's also really good to have those written out because then you can look around your organization and see do you actually have the corporate or organizational culture that you purport to have. And so those core values kind of help give everybody a touch point to know what it is we're trying to be together.

Another thing that can come up in these early days is something called "guiding principles." Guiding principles are those things that bring us all together that we may not actually have control over but that's why we are here in this organization at this time.

Okay so you'll notice in these early days where we talk about a vision, a value proposition, core values as well as guiding principles, its words at this point because that's how humans think - they think in terms of words, and if we get the words out on paper, if we craft a particular statement, that gets us somewhere, right? That gets us to the human scale, because business and industry and organizations are all about humans. Humans doing things for other humans. And we're going to have to communicate amongst ourselves and with our clients or our customers what exactly it is we are there to be doing. So we need the words to start with.

We can't stop there and some of you may have experience with those words that people put up on a wall: it's a vision it's a mission it says they're going to be the number one of whatever it is that we do and then that's where it stops.It's just a bunch of empty words these words can be interpreted in different ways for example if it says something like "we're going to be the biggest provider of widgets in our industry." Well okay "biggest" defined how? Revenue, number of units sold, highest visibility... There's all sorts of different ways to interpret the words that we've now put on our big poster and if we stop there it's open to everybody how to interpret that and it's open to everybody to interpolate whether it is we're actually making that a true statement or whether it's just a crazy statement that the managers are talking about.

So what we really need to do for the next part is turn those words into actual objective metrics. So what the metrics do is they define for us what we mean when we say these words. And so we will spend some time turning these words into metrics via a simple process to define what these words that we assert that it is that we're trying to accomplish will become.

Now those are metrics that's what we measure right? So for example, if we're going to be number one then I guess we'd better define how we're going to measure that. And so let's say it's a revenue something simple that everybody understands. All right so let's say revenue is the metric. That is the number that we're going to be generating. Maybe there's different ways of generating that number.

Okay so we define what that actual metric is: it's going to be dollars or revenue generated per year let's say. Okay if that's the case, then now we've got a number that we all agree on but that's just the number. Now we need to generate data to tell us where we are and so we'll get that will generate some of those numbers will get their revenue and I'll be able to figure out where we are, but we also have to say where we need to go. And so we go back to that vision, back to that value proposition, and then we start defining for ourselves in that 15 year vision where would those metrics be where are our long-term targets for revenue, for safety, for whatever the metrics are that would be important for your organization.

Now it's really important to do this because that tells us what we're working towards. Then you'll have a list of metrics that are going to be the definition of success for the organization and those are allocated directly to the person at the top of that  organization: a president a CEO, whatever that function is in your organization. And that becomes that person's measures of success because now it clearly defines the fact that that person at the top of the organization exists for the sole purpose of enabling everybody else in the organization to perform in a way that will achieve those long-term targets for the metrics that you define from the very beginning step.

So again, notice that the metrics are linked back to the words, and the words are linked back to the whole point, the purpose, the human reason why this organization exists. Okay? If you don't have the metrics it's just too fuzzy, there's too many competing efforts in terms of defining what it is we mean by these different measures of success all the managers say that they're successful and nobody's actually accomplishing anything that needs to be accomplished with the organization as a whole.

So we need to have these metrics defined at the top so that we know what success looks like in an objective way. Okay? Now if we stop with a top-level metrics that's pretty dangerous as well. Now we've got accountability for, let's say, a CEO, but the problem is we don't know where all that's coming from. Because if you think about it every metric that a CEO is responsible for is the outcome of a whole bunch of other people's work. A CEO can promise something to an audience but if they don't have the organization to bring that to fruition it's going to fail. A CEO can go out and search for sources of revenue but if they don't have the organization that is measuring those metrics of success throughout the organization it won't matter, right? And so the whole point of a CEO or manager is to support those people working for him or her in order to accomplish what it is they need to do to achieve those top-level metrics.

How do we do that? Well that's a question that we have to answer. How does everyone contribute to accomplishing these these metrics that are rolled up at the very top of the organization? So we do that through a level of translation and so we cascade these metrics from the top level of the organization down into the organization step by step by step. So if the top level of the organization is looking at revenue then probably somebody ought to be looking at where that revenue is generated by area by product etc and how we link those from the top level to the next level down to the next level down and down into the organization needs to be a logical structure - an initial hypothesis of what it is that we think that each level the organization - their role that they play in generating those top level metrics.

This eventually, once you complete this all the way down to your last level of management, becomes a decision support system. And so what that means is managers at each level now understand at least at a hypothetical level what they're responsible for and how that relates all the way back up to the organization to the CEO.

Now that's a step along the way - it's a huge step and sometimes in an organization this may be the first time that they've ever had metrics that have actually related activities of multiple levels all the way back up. We also know that these are hypotheses to start off with unless you've got a lot of data initially. If you do that's great. If you don't you end to come up with your best guess. People have experience, they tend to be pretty good at that they'll get about 80% of the metrics right in my experience and we're far better off than we were before.

Key to this however is a continuing loop to make sure that we're validating that the metrics actually do have the relationships that we that we theorized going into this. And so there is kind of a data analysis option or a portion of this as we go forward to make sure that the data actually continue to show that these two things are related and these two things are not related etcetera.

So there's a data analysis piece of it as well. But overall what we want to have at this point is all managers at all levels are measuring those things for which they are responsible that actually relate to what it is we're trying to accomplish at the top level of the organization.

So if we have such a decision support system what does that allow us to do? Well, in my conception there are two main things that managers are trying to do: manage and lead. Now these things are co-equal without management you can't have  leadership without leadership you can't have management and what do I mean by that?

Well management is the day-to-day management of people and processes - this is the stuff that you need to do to get things done. This is the you know 80 to 90% of what it is you should be doing on a day-to-day basis as an organization to keep the lights on to keep people employed to keep making the things that you're selling. There needs to be continuous improvement activities associated with this management function as well, because if you just stay where you are today somebody else is going to come along and steal your lunch and do it a little bit better.

So I need to continuous improvement activities the mechanisms whereby this happens we call "daily management," which is the management of the day-to-day processes making sure that things are as they have been and that we're making continuous improvements over time. As well as "cross-functional management," which is making sure that management in different areas aren't working at cross-purposes. That we are all kind of aligned and horizontally integrated in order to achieve those high-level metrics that we've laid out.

That's management - that's a manager supporting the people that work for them in order to make sure that they are getting what they need on a day to day basis. But that doesn't make big breakthrough changes.

It's like the Deming world there of continuous improvement but times that improvement rate is not enough, and we need leadership as well. So for leadership we might define that as taking an organization or part of an organization someplace where wouldn't typically be able to go without that. And so something that we wouldn't be able to achieve with just continuous improvement we would need some sort of a breakthrough improvement or some sort of a leadership in order to happen.

And that's where the management of strategic initiatives comes in. Because as you go back to the top, and as you look at that 10 to 15 to 20 year vision and you  compare what those metrics would be if you achieve that, and you compare that to where you are now you're likely to find gaps. And some of those gaps could be quite big and some of those gaps could be bigger than what you would expect to get through just by working harder, faster, and smarter.

That's where strategy comes in, and that's where strategic initiatives enable the entire rest of the organization to align behind achieving those metrics.

Now unique about our strategic planning process is it's an outcome of all of this. And you will notice it's at the end of the process because until I've defined where I want to go and I know where I am now and I know how all these different things support achieving those objectives, it's going to be awful hard to figure out which thread to pull on in order to make progress towards those 15 or 20 year goals.

So once I have that I can come up with some breakthrough improvement activities. These are things that we need to change the rules on - we need to go from where we are to where we've never been before in order to achieve these longer-term objectives and that's called a strategic plan. We document that on a piece of paper and all of the strategic plan also needs to roll up to affect those metrics.

If you've got a strategic plan with a bunch of things to do on it and you do all those things and you don't notice any change then clearly there's a problem. And so that's also characteristic of how we do a strategic plan.

Now as we explore these concepts in this blog going forward, of course we're going to do a deep dive on different aspects of these and answer some specific questions, but that's what we're trying to accomplish overall.

So if you roll it back up to the top, what we're thinking of is using words to define where it is we're trying to go and what value it is that we're trying to provide to our customers. Turning those words into top-level metrics of success that a CEO or president would then have as their responsibility that they are accountable for. But continuing to roll those metrics down through the organization so that everybody knows their role in achieving what the CEO or what the president is trying to accomplish. And as we start tugging on things either with management or with leadership understanding where we need to work in order to achieve that long term vision that we started off with at the very beginning.

So you notice it's all logically linked together: how we manage, how we lead, how we measure and it's all in service of achieving that long term vision that we start off with in the very first step.

So that's the plan, that's what we're going to explore. Send me your questions and of course if you want to subscribe go ahead and subscribe if this is the kind of thing that interests you and that you'd like to discuss. Feel free to keep coming on back and we'll have some more discussions.

So send your questions and I will see you next month.{jcomments on}


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