Empowered and adaptive management model

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Submitted by Peter Bunce on 2 weeks 6 days ago

Description:

Traditional performance management implies someone higher in the hierarchy is managing my performance. People can only manage their own performance. The empowered and adaptive management model requires moving from traditional command and control to one that is much more self-regulating and self-organizing. Authority, responsibility and decision-making should be transferred to front line units that become value centers with responsibility for their own P&L account.

This means abandoning centralizing and divisive acts such as budgets and individual incentives. Targets should change from short-term and fixed to medium-term and aspirational relative to the competition and markets. Resources should be allocated as and when needed, not once a year. Performance would be reviewed by monitoring the few key performance indicators from each value center (e.g. profit, cost/income).

First Steps (extra credit) :

Start with a cross-functional group establishing the case for change, stating the problems with the existing system, why it should be changed and describing a vision of the new model. Describe the main elements of the budget (target setting, forecasting and resource allocation) and how these should be separated out and performed better by different systems. Then present to the Board of Directors to seek their endorsement, using the CFO as a champion.

Start by implementing light rolling forecasts and moving away from fixed targets (especially individual ones) to medium term relative goals. Move to allocating resources on demand using policies and decision gates. Replace any individual incentive scheme with a reward scheme linked to the success of the team, group and company. Look for quick wins.

Ben Biddle

2 days 1 hour ago

Hi Peter,

An interesting way of addressing the role of budgeting in performance management. I took what may appear, at first, to be a diametrically distinct approach, but I'm wondering if they aren't just two sides of the same coin.

From the sound of it, you are proposing empowering smaller teams closer to the front lines (presumably meaning customers and critical supporting operations) by giving them more control over setting and managing their budgets and holding them accountable for the metrics (KPI's) justifying those budgets and spends. The performance being managed, then, is that of small groups, not individuals, and specifically as it relates to the ultimate financial performance of the collective whole - the profitability of the firm. Correct anything I've gotten wrong.

This makes sense, and it could offer real improvements to how budgets are managed today. How investor expectations would be reconciled with this schema might be an area worth further investigation. After all, budgets are (mis)managed the way they are in part because of the pressures put on public companies by investors.

I also like how team, group and company incentives can be used to encourage collaboration and collective action. Individual performance, however, cannot be disregarded entirely. The best performers are frequently highly intrinsically motivated individuals. They want to measure their progress toward both collective and personal goals - to borrow from Daniel Pink, they seek both purpose and mastery respectively. Money often becomes just a rough proxy for how they are doing; it's the reason Wall Street traders are so quick to jump ship for another shop despite already making tens of millions of dollars.

In my hack ("Mastery Feedback Loops"), I focused on individual performance and left managing team performance as an unanswered question; your hack could be part of the answer to that question. While budgeting seems to be central to your hack, I proposed actually decoupling compensation and promotions entirely from individual performance management to be free of fiscal constraint entirely.

I'd welcome your thoughts on how to optimize both individual and team performance. Could these two hacks be used in combination for teams and individuals?

Ben

Nan Mehta

2 days 5 hours ago

Peter,
I like the fact that your model enables rewards to be based on whether the entire team, group/ company are successful. It encourages teamwork and collaboration to ensure everyone makes an effort to not only get along with but help each other so that the entire team can succeed. Furthermore, it keeps the entire team united and moving forward in the same direction rather than efforts being wasted by individuals competing with each other. Why should they when they are on the same team?

I think your model and the "Contribution Compass" model combined would be ideal as that one also takes into consideration each employee's individual development, which is crucial to maintaining their engagement, high levels of productivity and creativity.

I would like to volunteer to develop this model further. Thank You.

Helen Grafova

3 days 16 hours ago

Thank you for sharing your ideas about budgeting, authority and etc. Other participants shared their ideas for learning, reviews and other subsystems, that have impact on performance.
There are so many varieties based on the level of organization life cycle , human beings which are at different ‘levels of existence’ as well, their personality type per Myers-Briggs, their age and sex type that makes impossible to find one solution of performance management for every combination above factors.
Optimum performance in a work situation only when there is congruency in the total managerial situation, which includes:
- Methods for managing
-The manager or supervisor utilizing the available methods
-The supervised person - the one who is expected to respond to the methods
-The nature of the work being done by those who are being supervised or managed.
We can approach optimum equilibrated performance of any system only when its subsystems are all in phase and in phase with the goal of the total system.
The effectiveness of organization depends upon the harmonization of organization, culture, labor engaged, managerial style, incentive system or other facets of organizational inputs.
It was said 40 years ago and my management experience lead me to the same conclusion.
Processes (including performance management) can be different the principle is do not have negative impact on people as individual because everybody has own ‘levels of existence’.
We have to admit that we have to have and apply different ways to get things done, including performance management.
I reworded what you said and add to expectation from employee: Only employee can achieve their own performance.
With regard.

Ben Teehankee

5 days 23 hours ago

I like the way your model shows respect for an individual person's judgment while promoting collaboration organization-wide towards shared aspirations. The budget becomes a tool to support judgment and aspirations and not the goal itself.

Peter Bunce

3 days 17 hours ago

Ben,

Thansk for your supportive comment. The problem is that the way the budget is developed and used these days tends to restrict judgements and aspirations. Sticking to the budget, come what may, becomes the goal. To quote Dr Jan Wallander at Handelsbanken the annual budget is a great centralizing act that takes away power and responsibility from the front line teams and reinforces the hiearchical control.

So don't try to hang on to the budget, get rid of it. It's like trying to patch up an old tool because you have always used it. As soon as you replace it with new tools the results are so much better and you wonder why it took you so long to do it.

Peter

Bjarte Bogsnes

2 weeks 3 days ago

Peter,

Empowered and adaptive are definitely key words in what we are looking for. I fully agree with your point about addressing the budget process, because it sits at the core of traditional management and we get nowhere without radically changing it.

Thanks,
Bjarte

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