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On a LinkedIn discussion the Chief Executive of a Housing Association asked

  1. For some practical experience of implementing performance management systems and cultures.
  2. How best to go about he process of identifying and measuring leading performance indicators.

Two quite different questions at quite different levels of detail.  So, were are nine tips to help any organisation (including Housing Associations) tackling these sorts of issues, and some links to further reading.

It is about understanding the problems you are trying to solve:

1) Make sure what you introduce fits into and complements the existing governance process. Fix basic compliance and regulatory problems, before operational reporting and then move onto strategy. Any other order will cause problems. This is about recognising the type of management problem you are trying to solve.

2) Never design a balanced scorecard for an organisation. Only ever design for a management team. For two reasons: One you know when to stop when they are happy and two you have a clear focus on improving their decision making. This way you limit what they need and also ask what needs to be delegated.

3) Remember that once your balanced scorecard has helped you to get control (ie you know what is going on reliably) then it is about the quality of conversation that goes on with decision making and action. Learning sets are useful for this as are peer comparisons and conversations. I have examples if that would help.

Read more about the wider performance management challenges and how to address them, in “The Performance Management zone”  This explicitly covers the variety of performance management cultures.

It is about understanding the core principles, how they work and why they work

4) Leading and lagging is a confusing term for two reasons. a) It is meaningless unless you ask “relative to what or whom”. Sales orders is a lead indicator for finance (as the money has not yet come in), but a lag indicator to sales, who are moving onto the next prospect. Likewise the learning and growth perspective provides leading measures of changes in the organisation’s capability which should ripple through as improvements in the processes which eventually satisfy the customers better so you have higher revenues (or a more satisfied regulator). So they lead performance changes and are ahead of the results.

5) Never ever start with measures. Never. Always start with objectives and do not even touch measures until you are clear what you are trying to achieve. This is where the strategy map fits in because it does not contain measures but objectives. Get these agreed and only then develop the measures. To get agreement, create conversations and discussions.

6) It is about learning. If you watch my video “Sesame Street and the Balanced Scorecard” you will see this was where Norton & Kaplan were coming from (but you cannot tell from many so called balanced scorecard implementations). The lower perspective is called learning and growth to create precisely that aspect of driving the deeper underlying changes in the organisation. Change it to people and you destroy this (as so many foolishly do)

7) Parmenter’s KPIs and Norton & Kaplan’s balanced scorecard both emphasise the difference between drivers and results. You need cause and effect.  Make this distinction clear. I strongly recommend you use the four perspectives of the balanced scorecard as a driver model. There is a subtle change at the top for organisations that are not purely commercial called the three ball juggle. Get the chain of objectives clear before you start.

Find out more about the best way to design and use Balanced Scorecards in “The Modern Balanced Scorecard Zone“,

It is about the way you approach the project and the conversations you create

8) Make sure it is an inclusive collaborative design process that creates conversation amongst the management team for whom you are producing this. It should never be a “here is one I prepared earlier” approach. That way lies demons and a short life.

9) As a basic test, when you get to measures, they have to be useful for those who are collecting and providing them. If not you have a problem.

You can read more about the right conversations and decision making in “The decision improvement zone

Finally, you are right to look at the bigger picture

I hope this helped that Chief Executive. They were right to address the more basic questions of what do I actually put in it and what culture do I want to create.  They might also find useful, the articles in our “Strategy Zone