Performance management is a potentially productive yet little recognized field of consulting endeavor. Tremendous improvements in client operating results can be achieved, precisely because the orthodox Top-Down architecture of performance management is such a drag and drain on the human spirit.
By any measure this is a powerful story that every CEO needs to hear and understand.
Until now, the message has been blocked and obstructed at every turn, as a weak signal from the outlier fringe of the mainstream universe. The life of a lone wolf proselyte analyst in this field, is brutally hard. No sensible person would embark upon such a journey knowing the obstacles. Yet it remains a truism, that wisdom comes from hard experience in life and experience comes via immersion. There is no other way. And at the end of that long tunnel there might be an upside; namely that the experience earned just might be so valuable as to be priceless.
The first such obstacle to getting heard and getting paid is credibility; the lone wolf is unsupported by an organization and an unknown quantity. The big accounting organizations, by contrast, enjoy immense street credibility, even though their expertise in a specialized niche like performance management is likely to be zero, zip, nada. This irony exists because clients perceive a need for plausible deniability; in Client-World, blame is less likely to stick to the originator of a poor management decision, if a big four kahuna supported it.
Weak managers by definition, have little faith in their own powers of logical deduction and even less in that of their peers. Covering their fundamental orifices, they will pick the safe route every time.
The second obstacle is the brick wall of orthodoxy. Deviation from orthodoxy is deemed a heresy. You will hear that the consensus around performance management is pretty much a settled question; targeting and key performance indicators (KPI’s) are solidly established as management orthodoxy. Ergo, thou shall not challenge management orthodoxy by indulging in heresy.
The third obstacle is cultural push-back. Systems create culture; that is a fact. Where the new system proposed clashes with the extant culture, the pushback is going to be intense. As Niccolo Machiavelli stressed in his opus “The Prince”; established interests will oppose and fight tooth and nail to avoid perceived threats to their power base. And of course, targeting constitutes a major power base within the orthodox management structure.
None of this negates the need for change. Targeting for example burns the morale and motivation of high achievers and negates the dynamics of Pareto’s Law whereby 80% of the results predictably derive from 20% of personnel, products and customers. In formulating targets, it is inevitable that top achievers are proportionally over-burdened, eventually leading the producer to the conclusion that he/she is trapped within a hamster wheel. So, to protect the team, the intelligent CMO will pitch targets that can be beaten by a modest margin. This is a logical response to an oppressive Top-Down regime and probably the CMO’s most important negotiation of the fiscal period. This conflict plays out even in buoyant trading conditions.
But how does the targeting regime fare in a recession/depression environment? When the downturn hits, the targeting process is thrown into disarray. In the face of falling demand, price pressure and the collapse of credit markets, how does a CFO distinguish between mere sub-par performance and the signals pointing to the urgent need to shed overhead in survival mode? With conventional Top-Down performance management tools, the CFO is too far from the action to respond quickly and with precision. All he/she knows is that targets are not being achieved, and losses are proliferating. ‘Why and what to do in response’ are open questions. Eventually after failed attempts to capture the ‘falling knife’ of collapsing demand, chainsaw surgery is resorted to as a last resort, severing both dead limbs, bone and living tissue in a range of the moment response.
Against all of this, BOTTOM-UP has been called the most powerful management system on the planet, which indeed it is. BOTTOM-UP employs true cost attribution, powerful incentives and break even as the performance base line, with a focus upon the key personnel who drive the business. All resources available to the business are focused upon optimizing performance results from these key individuals that we refer to as rainmakers.
BOTTOM-UP operates in a reporting environment of total transparency such that costs and contributions are an open book. Rainmakers may well earn a performance remuneration component that represents a multiple of their base salary. A successful rainmaker may earn more than the Chief Executive Officer; a fact that more than any other metric or nebulous ‘value statement’ defines the true meaning of a performance culture. By virtue of the foregoing, the corporate power structure will certainly be modified as it need to be. In summary, with BOTTOM-UP you have the definition of Free Enterprise 2.0.
BOTTOM-UP is the context whereby a business organization with a sustaining product and conservative balance sheet can survive and thrive within the Greater Depression of the modern epoch, which BTW is just around the corner. Along the way, it will eat the lunch of Top-Down competitors as they go to the wall.
It’s all in the book “BOTTOM-UP beats Top-Down” which is available (free) by emailing the author stuart@quollpublishing.com