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Performance Management: Finding the Missing Pieces
Gary Cokins
In a sentence
An argument that organizations should stop applying business improvement methods in isolation and instead orchestrate strategy maps, scorecards, activity-based management, and analytic technology into a single, integrated performance management system that closes the intelligence gap between strategy and execution.
Gary Cokins contends that most organizations are data rich but information poor, drowning in transactional data yet unable to translate strategy into results because their improvement programs—balanced scorecards, activity-based costing, six sigma, lean, CRM—operate as disconnected silos. 'Performance Management' reframes these familiar methodologies as interlocking gears of one overarching discipline that gives managers and employee teams the visibility, fact-based data, and analytic intelligence to align daily work with executive strategy, make better trade-off decisions, and ultimately convert customer value into shareholder wealth. Drawing on decades of consulting in cost management and industrial engineering, Cokins offers a practitioner's synthesis—strategy maps for focus, scorecards for communication and feedback, ABM for reliable cost and profit truth, and data warehousing/analytics as enablers—showing that technology is no longer the impediment; the thinking is. The book equips readers to escalate managing from an apprenticeship-based craft into a formal, systems-thinking discipline.
The four lenses
- Science
- Statistics
- Systems
- Strategy
The model
A causal path model expressing how design levers (integrated strategy maps, scorecards, activity-based management, and enabling technology) drive psychological and behavioral states (strategy understanding, alignment, calculated risk-taking) which in turn produce outcomes (execution effectiveness, customer profitability, and shareholder economic value). Inferred from the book's argument that orchestrated methodologies close the intelligence gap.
Integrated Methodology Orchestrationdesign lever
The degree to which an organization combines and coordinates strategy maps, scorecards, activity-based management, and other improvement methodologies into a single overarching performance management system rather than applying them in isolation.
Strategy Map Focusdesign lever
The clarity and cause-and-effect structuring of strategic objectives across perspectives that concentrates limited resources on the vital few priorities and discards untested pet projects, providing organizational direction.
Scorecard Measurement Systemdesign lever
The system of weighted, cascaded key performance indicators derived from the strategy map that communicates strategy, provides leading and lagging feedback, and answers 'How am I doing on what is important?' for teams and individuals.
Fact-Based Cost Data (ABM)design lever
The availability of reliable, cause-and-effect activity-based cost and profitability information that traces resource expenses to activities, products, channels, and customers rather than using arbitrary allocations.
Enabling Technology (Data & Analytics)contextual condition
The data management, warehousing, mining, and analytic intelligence infrastructure that converts raw transactional data into a single version of the truth and into predictive, actionable intelligence.
Employee Strategy Understandingpsychological state
The extent to which managers and employee teams can articulate the organization's strategy and clearly see how their own work contributes to achieving strategic objectives, closing the communication gap.
Behavioral Alignment to Strategybehavioral pattern
The degree to which employee work efforts, priorities, and decisions are focused on and congruent with the organization's strategic objectives rather than pet projects or conflicting local goals.
Calculated Risk-Taking / Decisivenessbehavioral pattern
The leadership behavior of making decisive, fact-informed trade-off decisions by converting uncertainty into calculated risks through business modeling and analytic intelligence.
Trade-Off Decision Qualitybehavioral pattern
The quality of decisions that balance conflicting objectives—customer service versus cost, short-term versus long-term, customer value versus shareholder value—using fact-based visibility of consequences.
Strategy Execution Effectivenessoutcome metric
The organization's ability to translate plans into results—achieving strategic objectives, gaining traction and moving in the right direction with speed.
Customer and Channel Profitabilityoutcome metric
The measured profit contribution of individual customers and channels after subtracting product costs and customer-specific costs-to-serve, and the migration of customers toward higher profitability.
Shareholder Economic Valueoutcome metric
The creation of economic profit and wealth for shareholders—returns exceeding the cost of capital—rather than mere accounting profits, representing the ultimate outcome of the performance management system.
How they connect
- integrated methodology orchestration → predicts execution effectiveness
- strategy map focus → predicts scorecard measurement system
- strategy map focus → predicts strategy understanding
- scorecard measurement system → predicts strategy understanding
- strategy understanding → predicts behavioral alignment
- behavioral alignment → predicts execution effectiveness
- fact based cost data → predicts trade off decision quality
- fact based cost data → predicts customer profitability
- fact based cost data → influences scorecard measurement system
- enabling technology → moderates integrated methodology orchestration
- enabling technology → predicts calculated risk taking
- trade off decision quality → predicts customer profitability
- customer profitability → predicts shareholder economic value
- execution effectiveness → predicts shareholder economic value
- calculated risk taking → influences trade off decision quality
The story
The reader A manager or executive who wants to successfully execute their organization's strategy and improve its direction, traction, and speed.
External problem
Strategy fails to translate into results because improvement methodologies operate in isolation and transactional systems produce data but not actionable intelligence.
Internal problem
They feel stymied and frustrated—unable to get employees to execute strategy, uncertain which customers and products are truly profitable, and boxed in by conflicting objectives.
Philosophical problem
It is just plain wrong that managing remains an apprenticeship-based craft when it could be a rigorous, integrated discipline that reliably converts plans into value.
The plan
- Focus: define and adjust strategy using strategy maps to select cause-and-effect strategic objectives.
- Communicate with feedback: derive scorecards with weighted KPIs that make strategy everyone's job.
- Ground decisions in fact-based data via activity-based management for accurate cost and profit truth.
- Integrate core solutions—customer, supplier, process, shareholder, and employee intelligence.
- Leverage data warehousing, mining, and analytics to enable forward-looking, calculated-risk decisions.
Success
- Employees clearly understand strategy and see how their work contributes, pulling in the same direction.
- Managers make better trade-off decisions, migrating customers to higher profitability and creating shareholder wealth.
- The organization operates as one coordinated system with lifted fog, visible costs, and calculated risk-taking.
At stake
- Continued turnover at the top from failed strategy execution.
- Misallocated resources, unprofitable customers left undetected, and destroyed shareholder value.
- Organizational inertia plowing ahead in the wrong direction, punished swiftly by markets.
Questions this book answers
- Why should business improvement methodologies be integrated rather than applied in isolation?
- How can organizations close the communication and intelligence gap between senior management's strategy and employees' daily actions?
- How do strategy maps and balanced scorecards make strategy everyone's job and align employee behavior?
- How can organizations measure true product, channel, and customer profitability using activity-based management?
- How do trade-off decisions balance customer value against shareholder economic value?
Glossary
- Integrated Methodology Orchestration
- The degree to which strategy maps, scorecards, activity-based management, and other improvement methodologies are combined into one coordinated performance management system instead of isolated programs.
- Strategy Map Focus
- The clarity, cause-and-effect structuring, and prioritization embodied in a strategy map that concentrates resources on the vital few strategic objectives.
- Scorecard Measurement System
- The cascaded, weighted KPI system derived from the strategy map that communicates strategy and provides leading and lagging feedback to teams and individuals.
- Fact-Based Cost Data (ABM)
- The availability of reliable activity-based cost and profitability information traced by cause-and-effect to activities, products, channels, and customers.
- Enabling Technology (Data & Analytics)
- The data management, warehousing, mining, and analytic intelligence infrastructure that converts raw data into a single version of the truth and predictive intelligence.
- Employee Strategy Understanding
- The extent to which employees can articulate the organization's strategy and see how their work contributes to strategic objectives.
- Behavioral Alignment to Strategy
- The degree to which employee efforts, priorities, and decisions are congruent with strategic objectives rather than conflicting local or personal goals.
- Calculated Risk-Taking / Decisiveness
- Leadership behavior of making decisive, fact-informed trade-off decisions by converting uncertainty into calculated risks through modeling and analytics.
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