Page 43 - Performance Leadership

32 • Part I A Review of Performance Management

Table 2.2
Types of Performance Management Methodologies

Origin Example Methodologies
Finance • DuPont
• Economic value added
• Budgeting
• Beyond-budgeting
Operations • Activity-based management
• Six Sigma
Strategy • Critical success factors
• Balanced scorecard
• European Foundation for Quality Management (EFQM)
Excellence model

management methodology. The balanced scorecard is not better than
EVA or activity-based costing. It is not a specific methodology that
improves performance, but people’s actions and their behaviors. Any
methodology can work, as long as it is the single methodology that col-
laborating people work with...as long as you stick with it. I have
heard many times remarks like this: “Yes, we tried to implement the
balanced scorecard, but we dropped it after three months. It didn’t
work.” And indeed it didn’t work, nor would any other methodology.
It takes time to learn how to use a framework.
All performance management methodologies have one thing in
common. They are based on the concept of “double loop learning.” 16
In single-loop learning, people and organizations take action accord-
ing to the difference between expected and obtained outcomes; in
other words, it is a simple variance analysis. In double-loop learning,
you question the values, assumptions, and policies that led to your
actions in the first place. If you are able to view and modify those, then
double-loop learning is taking place. In more compact terms, double-
loop learning is learning how you learn. The most important goal of
the various methodologies is to spark a discussion. Once a cost price is
calculated, ABC tells a story on how the costs were accumulated and
provides a way to verify the assumptions that managers have when
driving costs down or pricing the products and services. That insight is
invaluable. EVA should be used to clarify assumptions and discussions