Page 91 - Performance Leadership

80 • Part II Operational and Analytical Dimensions

budgets are for the business domains and for protecting the hierarchy.
The process leads to games and disconnected results. Usually the var-
ious domains are not intimately aware of the business of adjacent busi-
ness domains or of how operational decisions affect the other business
domains. Also, management that is two or more levels removed from
a certain business activity looses insight into the finer details. The ques-
tion whether to take away a part of the resources in department B and
reapply them elsewhere in the value chain, in department A, to get a
multiple of the output overall, including in department B, will not
likely come up. And if it comes up, it will be fought by management,
as loss of budget equals loss of power.
Budgeting, planning, and rolling forecasts should be an exercise
focused on the cost and revenue drivers, and how resources and activ-
ities in the end translate as financial results, in other words, a value
chain. The financial results, in the end, can then be allocated to—
which is the opposite to cascaded down from—the various units in the
organization, to support the hierarchy for the necessary people man-
agement. The process should be overseen and managed by the hierar-
chy, but not be structured hierarchically. Real-time information should
not only benefit senior management, but it should be a tool to create
feedback to previous steps in the value chain, to show them the result
of their work, and as feed forward information to next steps in the value
chain, as an early warning signal. Scenario analysis should not be an
ivory tower exercise, focused at the organization alone; it should con-
sist of continuous conversations with selected and trusted stakeholders,
such as employees, long-time customers, strategic partners, and soci-
ety representatives.
But not everything can be managed as a network, as a flow of activ-
ities. In the 1990s we saw many network organizations aiming to be
completely work-managed. People were networked around business
initiatives, bottom-up entrepreneurial initiatives were supported and
departmental structures were dissolved. When economic times became
hard, many of these organizations collapsed as they lost a sense of direc-
tion. There was a lack of leadership and structure to change course and
pull everyone together. Or perhaps there was too much leadership from
all employees, who all had their own ideas about the way to go. Lack
of focus and coordination all of a sudden led to an ineffective response