NOV 1, 2007 9:28pm ET

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Rules for Assuring Poor Performance


In 1773 Benjamin Franklin, one of the U.S.A.’s founding fathers, wrote a pamphlet aimed at the royalty of England titled Rules by Which a Great Empire May Be Reduced to a Small One. Satire is one way to get your point across. I apply my own style of satire here to appeal to organizations to cease their hesitation and skepticism and embrace the benefits of performance management. I apologize in advance if I offend anyone, but sometimes there is truth in humor.


Imagine I took over the management of a poorly performing organization and wanted to keep it that way. For example, I might not want it to grow so quickly that it would leave me less time to pursue my hobbies. What steps would I take?


First, I would ensure that all of the managers and employees are totally ignorant of the executive team’s strategy. That way no one will understand how the work they do each week or each month contributes to successfully achieving the strategy. Next, I would figure out ways to insure that managers and employees don’t trust one another. I would discourage dissent and debate. It would be tricky to preserve some level of harmony by not allowing healthy conflict among managers that are already distrustful of each other, but I think I could do it.


Next, I would avoid holding anyone accountable. That would be fairly easy because I would disallow reporting of performance measures. Anyone mentioning the phrase “the balanced scorecard” would be summarily fired. I’d allow employees to measure their local processes and results in dashboards. After all, I don’t want the organization to go bankrupt; I just want poor performance. But I would restrict any measures from being key performance indicators (KPIs) because we would not want to monitor our progress toward any targets that are strategic. I would try to disallow setting of targets, but some managers have a nasty habit of liking them. I think those managers believe that if they could make it appear that they are better performers than others, that I would then reward them with a “pay for performance” bonus system. If I allow people to be motivated this way, performance might improve. I’m not going to fall for that trick.


I would freeze our managerial accounting system to remain in its archaic state. It was probably designed in the 1950s, but our external financial auditors would always be giving us an OK grade. I’d allow managers to hire more support overhead to manage the resulting complexity, but I’d preserve the primitive overhead cost allocations to processes and products using those distorting and misleading broad averages, like product sales volume or number of units produced. Most employees would already know that these cost allocations cause big cost errors, but I would want to keep them guessing about which products make or lose money and what it actually costs to perform our key business processes. I don’t think my financial controller will correct this, but I need to keep a watchful eye because my accountants are getting much smarter about how to improve operations and serve as strategic advisors to me.


We would need to be careful about how much information we collect and report about our customers. Obviously we’d report their sales volume data, but I would not segment our customers into any groupings. I’d keep sales reporting at a lump sum level. I don’t want anyone asking questions like, “Which types of customers should we retain, grow, acquire or win back from competitors?” To keep our company from tanking, I would encourage sales growth by putting big signs in the marketing department saying, “More sales at any cost!” I’d prevent the CFO from any thoughts of measuring customer profitability. But that would be easy because our arcane cost accounting system wouldn’t be capable of calculating that information. The marketing people typically spend their budget with a “spray and pray” approach, anyway. Targeting specific types of customers and getting a high-yield payback from our marketing spend would be outside their level of thinking. I’d maintain our advertising spending as the “black hole” that no one understands.   


I would, of course, implement an enterprise resource planning (ERP) system. I wouldn’t want to be at a cocktail party with other executives and admit I don’t have one. That would be too embarrassing, like a teenager without an iPod. Luckily, ERP systems alone won’t improve performance; they produce mountains of transactional data for daily control but not meaningful information from which anyone could make wise judgments or good decisions.  


Our budgeting system would be another way to assure our poor performance. Since the budget numbers are obsolete a couple of months after we begin the fiscal year, assembling the budget for six months during the prior year would provide a great distraction and prevent anyone from working on more important things. Plus I’d love to send the budget back down a few times to be redone to lower the budgeted costs. Everyone would moan. I would be very stingy about giving managers any budget for one-time projects. When those kinds of initiatives sneak in, companies always get a jolt of productivity improvement, which is counter to poor performance.


We’d squeeze our suppliers. We could talk about partnering and collaboration, but any attempt to actually do so would be squashed immediately. Never trust a supplier. If you drive one out of business, you can always find another.


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