Page 56 - Performance Leadership

Chapter 3 Measurement Drives Behavior • 45

on finance easily leads to misinterpretation, even misrepresentation. A
too-strong focus on operations may lead to nonaccountable behavior.
The balance between financial and operational information leads to a
higher predictability of financial results as well as a better understand-
ing of financial consequences of operational decisions.
Organizations should also balance leading and lagging metrics.
Lagging metrics are put in place in order to be able to report and to
justify. Leading metrics support decision-making processes. Both
should drive the right behaviors. Internal and external focus should be
balanced as well. Our definition of alignment is that the self, self-per-
ception, and external perception of the organization should closely
match. Organizations should realize that the market and the environ-
ment at large have a huge impact on the organization. These influences
should be weighed in internal decision making. Competitive intelli-
gence is a crucial discipline in an organization’s performance manage-
ment. Another reason for external focus is the added value of
benchmarking on an organization’s behavior. Many operational issues
are not unique, and it makes sense to face the truth and compare your
organization with the best. It leads to a more realistic self-perception. At
the same time, organizations shouldn’t be led by the outside world.
Strategies should not be copied from the competition, they should be
authentic. Strategic differentiation comes from having a unique strat-
egy. And the best way to predict the future is to shape it yourself. A good
internal focus on your own strength is fundamentally healthy.
However, another balance is emerging. In most organizations, per-
formance management and risk management are seen as separate dis-
ciplines. This is mostly because both disciplines have not reached full
maturity within the average organization. The focus within perform-
ance management and risk management is more on establishing them-
selves than on reaching out to each other. Yet, the two disciplines are
very much related. Key performance indicators complement key risk
indicators. The balanced scorecard speaks of the financial, customer,
process, and learning/growth perspective; risk management distinguishes
financial, customer, and operational risk. There are multiple advantages
to combining the two disciplines. First of all, risk management allows
the organization to establish improvement projects before the perform-
ance metrics show that a problem is looming, which leads to preventive