Chinese dynasties lasted centuries. Investments in companies by Silicon Valley California venture capitalists may last only months.

Which is best? A controlled growth approach or grab it all while the going is good?

The tortoise or the hare. Which one won the race?

Japanese firms like Toyota and Honda have historically been controlled growth firms. They want their amount of management competencies to parallel their size and evolving complexity. I am old enough to remember when Honda only sold lawn mowers with exceptional engines. Then they produced a low-end 90cc motorcycle. Then a car. It was their plan.

The famous Toyota Production System (TPS) and its “one piece flow,” just-in-time manufacturing approach was based on continuous learning and discovery. It is a management philosophy. It embraced the now famed plan-do-check-act (PDCA) iterative cycle espoused by the quality management guru W. Edwards Deming. Toyota’s objective was steady growth to build its managerial talent, somewhat independent of global economic cycles. When global economies boomed, Toyota raised prices to dampen accelerating production volume. When global economies declined toward recession levels, they lowered prices to maintain existing or modestly growing production volume levels. Maximizing short-term profits was back-seat to long-term success. more

Who would have predicted these outcomes as the best critical success factors to achieve the full vision of an optimized Performance Management framework? (Click on Fullscreen for a larger view.)

You need a lot of factors to ultimately contribute to successfully achieving the full vision of the Performance Management framework!

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March Madness Brackets for Optimized Performance Management

Did you see the movie Up in the Air, starring George Clooney? Those of you who have not seen it probably have heard something about it. It involves a professional with a job who flies in airline jets so much that hotels and airports become his life.

There are parts of this movie I relate to. I recently learned that with Delta Airlines I have traveled to the Moon and back eight times. In the last 18 months I have visited over 70 international cities. I am not as good-looking as George Clooney (who is arguably the Cary Grant of our era). But I did relate to a part of his character in the movie. That involved thinking rationally and always trying to make the best out of unexpected circumstances.

What does this have to do with enterprise performance management or the finance and accounting component of it? There is a connection. Few implementations of performance management methodologies ever go smoothly. There are always some hiccups or worse. For example, some projects run into input data quality and data management obstacles that adversely affect the modeling, calculated results, and output information. Some projects run into underestimated change management and behavior modification issues, including the natural resistance to change in people. Some projects are scoped too widely or narrowly. Some projects are underfunded, or the implementers are inexperienced. more

I recently had an exciting conversation with Kris Moreels, founder and managing partner of B&M Consulting, a firm that specializes in designs of managerial accounting and strategy execution performance management systems. Kris and I share a common history as management consultants engaged by organizations to improve a weak and deficient managerial accounting system. He made the profound statement with which I titled this article, “Is it better to have no costing than bad costing?” What did he mean?

The prevalent thinking is that an organization’s managerial accounting system will calculate costs differently than its financial accounting system. This is because financial reporting must comply with regulatory rules for external compliance reporting typically that oversimplify the rigor required to calculate the relatively more accurate costs from a managerial accounting system. Of course, the culprit here is the allocations of indirect and shared expenses. Traditional cost allocations apply convenient broadly averaged factors, such as using number of department employees or direct labor input hours, to reassign indirect expenses to product costs. more

From the top desk to the desktop, in many organizations there can be a wide divide between the executives in their large corner offices and the managers and employees. The separation I am referring to is between the strategy formulated by the executive team and the employees tasked to implement it. It is rare that there is a good connection between the two.

As evidence, at the 2009 annual conference of the balanced scorecard organization, The Palladium Group, led by Dr. David P. Norton and Dr. Robert S. Kaplan, in Dr. Norton’s keynote presentation he stated that seven out of ten organizations fail to successfully execute the strategy designed by its executives. What explains this? Advocates of strategy map and balanced scorecard methods believe that this is in large part because most managers and employees do not adequately know what their organization’s strategy is. For example, if I randomly interviewed 15 of your organization’s employees in a hallway and said, “Quick! Explain your executive team’s strategy!,” how many of them could describe it well? Maybe none. What’s the consequence? If employees and managers do not understand the executive team’s strategy, then how can we expect them to understand that what they do each week and month contributes to achieving that strategy? more