Page 90 - Performance Leadership

Chapter 5 Operational and Analytical Alignment • 79

After a scenario analysis, a management hierarchy translates clear
strategic objectives into operational plans and makes sure there is an
effective organization. Swift feedback to the strategic level comes from
rolling forecasts and right-time information. At the same time, the hier-
archy provides focus for the people on the various lower levels.
But work doesn’t flow like a hierarchy, it flows from outside the
organization into the organization, and out again, passing multiple
nodes in a network of activities. Work needs to be managed as a net-
work, with flows, interfaces, inputs, and outputs. There is feed forward
information, that shows what is coming through the value chain, and
there is feedback information, that captures the performance of the past
steps in the value chain. As argued in methodologies such as zero-based
budgeting, beyond budgeting, and activity-based management, plan-
ning and monitoring is best managed through the network of activities,
and not a top-down hierarchic approach. Horizontal alignment is
needed as well.

VERTICAL VERSUS HORIZONTAL ALIGNMENT
Vertical alignment uses the corporate hierarchy to implement strategy and to
provide feedback. It is a top-down and bottom-up approach. The higher up in
the organization, the more aggregated the data become, the more strategic
impact management decisions have, and the more external the organization
view becomes.
Horizontal alignment uses the value chain to create an efficient and an effec-
tive business. On the strategic level it tries to reconcile different (even conflict-
ing) objectives of the different stakeholders. Next to feedback to previous steps
in activities, processes, departments or organizations, to optimize collaboration,
there is feed forward information to next steps.

When the need for both vertical and horizontal alignment is not
well understood, performance management adds to misalignment in
an organization. It will lead to unwanted isolated behaviors and not to
collaboration and “doing the right thing.” For instance, why is budg-
eting such a mess in many organizations? Why does the process take
so long (four to six months is not an exception), and why does it result
in a disconnect (artificial numbers)? The answer is that it is using a
hierarchy where a network approach should be used. In a hierarchy,