Complicating Factors in Performance and Productivity Assessment

Management Services Winter 2018 41 Complicating Factors in Performance and Productivity Assessment By Professor Colin Coulson-Thomas. M anagement services professionals use a variety of methodologies, tools and techniques to improve productivity, performance and quality, according to what they feel is relevant in a particular situation and context. As the latter changes and new and inter-related factors emerge, our view of what is helpful and relevant may also need to adapt to new requirements and priorities. Could our past experience of what at the time were regarded as successful initiatives bias our perspective of what might be possible in the future? For example, could a desire for rigour and quantification result in factors that cannot be easily measured being overlooked? Simply repeating what has worked in the past can result in important considerations being missed. A study could focus upon an input such as time worked because it can be more precisely measured than how creatively this time was used. It could favour a higher volume of standard output over a lower quantity of a more tailored version, that could also be more easily modified and upgraded as requirements become more demanding. A customer might prefer the latter and be willing to pay a premium for the longer time and extra creativity that is required to make it happen. Questioning past approaches One needs to be careful not to automatically apply approaches 42 Management Services Winter 2018 Hidden and unaccounted for factors can account for incomplete and potentially misleading assessments of different contributions, outputs and options. that are more applicable to the speedy and low cost production of a relatively undifferentiated and stand-alone product to the creation of bespoke solutions in a more dynamic context where a longer time scale and a wider range of considerations and contributors might apply and more judgements involve probabilities. In such a context, do previous approaches need to be modified, are new ones required, or is it more a matter of making sure that relevant factors are not being overlooked? A greater diversity of approaches and the multiplication of opportunities and options may lead to more guidelines and fewer standards. In some areas, consensus may have to give way to the tolerance of diversity. Care may need to be taken to ensure that the ‘groupthink’, ‘safe spaces’ and ‘political correctness’ found on some university campuses does not spread to commercial enterprises where innovation and paradigm shifts might depend upon challenge, experimentation and vigorous debate. More business leaders may face the dilemma of how to encourage questioning, challenge, creativity, innovation, enterprise and entrepreneurship while complying with laws and other requirements dating from when previous and different concerns and priorities applied. Might some regulations and controls designed to protect people and communities from unwelcome developments actually limit the freedom to act in certain areas and prevent innovations that might benefit them? In some situations could conformance to out-of-date rules prevent the evolution of a more responsible capitalism that addresses a wider range of needs? Reviewing the scope of performance and productivity studies Do we need to spend more time identifying inputs, or are more comprehensive and inclusive assessment of outputs required? Is more thinking required in relation to both? If the process of creating value and ensuring relevance itself is changing and likely to continue to change, does our analysis need to include more and/or different contributing parties and additional intervening and moderating factors? Could what we are examining be in the context of a changing business model and regulatory environment? In future we may require greater awareness, flexibility, openness and willingness to change our approaches in order to maximise our contribution. Judgements about who and what to include may also become more difficult. When measuring performance, productivity and the value added by individuals, groups and teams in contemporary organisations, are we missing certain aspects of their contribution and taking full account of the consequences and externalities of what they do? Many people, especially as they become more senior, have multiple roles covering a variety of issues and requiring multiple inputs and multi-tasking. They may be spending less time upon repetitive and discrete or selfcontained tasks where their particular contribution can be easily identified and measured. In many areas of knowledge-based work, people may also be supported by various digital technologies and software environments that have an independent ability to learn, and the capacity to undertake ever more of what humans have done in the past. Assessing the relative contributions of people and complementary technology and how these might change in future can be challenging. Should negative consequences be included in assessments? How are they to be identified, Management Services Winter 2018 and their costs determined, when some people may have a vested interest in hiding them? How can one fairly assess the contribution of a complementary element such as artificial intelligence (AI) when its users play up their own contributions? Avoiding missing elements Hidden and unaccounted for factors can account for incomplete and potentially misleading assessments of different contributions, outputs and options. They are not limited to assessments of people’s performance. For example, in relation to the relative merits of electric vehicles, are the externalities of electricity generation and the rarity and potential future costs of rare minerals required for battery production assessed? As with solar panels, are the full life cycle costs, including the cost of disposal, taken into account? For assessments to inform decisions, how should one account for what might happen or be if an incomplete group or team were strengthened with a missing element? Should one include the consequences of either not acting or the increasing costs of delaying a decision, whether to train or reskill or to maintain or upgrade, when remedial action will become more expensive the longer a situation is allowed to run? Should the cost of these potential consequences be discounted back, to obtain a Net Present Value (NPV) to set against that for hoped for benefits? Opinions vary on the causes of the stagnation or disappointing improvement of productivity in recent years (Harari, 2017). One reason could be the failure of output measures to take account of the increasing functionality of outputs and the value of developments such as greater connectivity or the wider range of apps now available on a mobile device. The latter have often occurred against the background of improved manufacturing processes and more intense competition that has limited the extent to which suppliers have been able to achieve corresponding increases in prices. Disruptive technologies Looking ahead, more applications of digital technology, AI and other software support may be capable of handling multiple tasks, switching quickly between tasks and undertaking initial assessments of new situations or requirements. Their ability to process large quantities of data, identify links, patterns and relationships, and also learn may increase the areas in which they can be allowed to operate autonomously, or with little supervision. It may enable them to move ahead of any human equivalents and into arenas where people are not as well equipped to operate. Where such environments and tools are able to replace below average and average knowledge workers and professionals, future human involvement may be limited to superstars in the areas concerned who design solutions and develop the capabilities of applications, and who have a role to ensure that responsible learning is occurring. Management services practitioners will need to be sensitive to human factors. Assessments of individual and group performance may be resisted by some people when it is perceived as a precursor to replacing some of the lower performers involved. Other people may react more positively and focus on new possibilities, viewing certain technologies as enabling rather than disruptive. 43 [Business leaders] are simultaneously confronted with multiple and inter-related challenges and, at the same time, new and unprecedented opportunities. Trends and external developments A particular challenge for practitioners, directors and boards is the complexity, interdependence and inter-relatedness of issues. Business leaders portray a business and market environment of change, uncertainty and insecurity. They are simultaneously confronted with multiple and inter-related challenges and, at the same time, new and unprecedented opportunities. Because these challenges and opportunities may have implications across a company, identifying which individual, group or department should be asked to address them is becoming more difficult. Some issues remain at board level because there is no obvious area or group to whom they can be delegated. External and other parties may need to become involved, but identifying who to approach is difficult when few people and organisations appear to have authoritative and relevant expertise or offer compelling and actionable solutions. Some business leaders find that their colleagues’ past experiences and current corporate capabilities, approaches, structures and practices are not necessarily relevant for today’s requirements. They face a relevance challenge. External threats are evolving and increasingly having an impact upon many or most companies, whether immediate such as the risk of hacking and cyber fraud or possibly imminent, such as an impact of climate change that occurs sooner than expected. Examples include the challenges and opportunities offered by disruptive and digital technologies, new business models and the sharing and circular economies. Some areas of opportunity are open to many enterprises and like some threats may require a collective response. Complicating factors The scale and potential impact of some threats and opportunities is such that some business leaders acknowledge responsibilities to a wider range of stakeholders. As issues become more interdependent and wide ranging in their possible impacts, and as more boards recognise that a broader set of interests may need to be engaged and involved, many business leaders are finding they need to restore trust if they are to achieve the more intimate and mutually beneficial relationships they are seeking (Coulson-Thomas, 2018). Trust is an issue in part because many companies are perceived as compounding problems rather than developing solutions. It is increasingly recognised that tackling a challenge such as climate change or sustainability requires more than incremental improvement of current operations and practices. The challenge 44 Management Services Winter 2018 for current business leaders and boards is to provide the innovation and transformational leadership that is needed. There is more recognition of the value of collaboration and collective action, than understanding of with whom and how this might best be achieved. A pressing issue is whether complacency, compliance, departmentalism and risk aversion will prevent the creativity, innovation and entrepreneurship that is required. Will protectionism and vested interests in the status-quo prevent transformational leadership and paradigm change? Clinging to standard models and approaches developed in a previous era might also frustrate the exploration and diversity required to develop more adaptable, flexible and bespoke solutions that are appropriate in particular situations at a certain stage of development and in a changing context. Management and governance arrangements Many boards used to find that their annual calendar of meetings and board practices allowed them to deal with most discrete issues as and when they arose. Many directors felt that being available to address self-contained issues that arose between annual meetings of shareholders was a justification for their existence and role. The departmental structure of organisations meant that issues could be categorised and routed to appropriate specialists who could handle them with or without intervention from the board while others carried on the general work of the organisation. As issues become more complex, inter-related and significant in their possible implications their categorisation can be more problematic. Addressing them may require a multi-disciplinary and, when a company’s own capabilities are insufficient to deal with them, a collective approach. Such issues may be increasingly regarded as strategic or existential rather than simply as operational matters. Some directors may doubt their mandate to tackle them without reference to shareholders, or stakeholders such as creditors or affected communities whose involvement would be desirable. A question that many directors need to consider is whether traditional board and governance practices are capable of handling a collective response to a complex and longer-term challenge such as climate change. Related issues are whether appropriate action in relation to sustainability might be more likely if governance arrangements were improved, and whether this could create better than average or expected financial performance (Clark et al, 2014). Who now needs to be involved and what new mechanisms, practices and tools are also needed to build the understanding and develop, approve and implement the responses required? Determining required responses In many companies urgent action is required to develop or acquire multi-disciplinary and complex and inter-related problem solving competences. More issues may need to be handled by multi-disciplinary, multi-location and multi-organisational working parties and project and programme groups and teams. Their effective management and governance might also benefit from more effective use of digital technologies. More systems thinking is required in corporate boardrooms and among practitioners supporting boards to better understand and map interdependencies, identify points of greatest potential impact, agree warning signs or “traffic lights” and establish control limits. It may be possible to identify areas for action that might interrupt or moderate certain interdependencies and their negative impacts. It may be possible to model some systems that at first sight seem excessively complex and/or use scenario planning to assess how action in some areas can impact on performance elsewhere. Many companies would benefit from a fundamental and subsequent periodic review of board and management structures and responsibilities, business models, and corporate policies and guidelines relating to the assessment of performance. Boards and senior management should question whether they provide transformational leadership and do enough to stimulate, support and enable creativity, innovation and entrepreneurship, and build a corporate culture that encourages questioning, challenge, and the analysis and understanding of complex and interdependent issues. References Clark G., Feiner A. and Viehs M. (2014), From the Stockholder to the Stakeholder: How Sustainability Can Drive Financial Outperformance, Oxford, University of Oxford and Arabesque Partners, September. Coulson-Thomas, Colin (2018), Corporate Leadership and Governance for Increasing Stakeholder Involvement and Developing Stronger Connections, Effective Executive, Vol. XXI No. 1, March, pp 7-25. Harari, Daniel (2017), Productivity in the UK, Briefing Paper Number 06492, London, House of Commons Library, 20th September. About the Author Professor (Dr) Colin Coulson-Thomas, President of the Institute of Management Services, has helped directors in over 40 countries to improve director, board and corporate performance. An experienced director, board chair and process vision holder of complex and mission critical transformation programmes, he holds a portfolio of national and international roles. He is also the author of over 60 books and reports and well over 1,000 articles, and also contributes theme papers for international conferences for business leaders held in Dubai, India, Singapore and the UK. Colin has held public appointments at national, regional and local level, and has had professorial roles in Europe, North and South America, Africa, the Middle East, India and China and been a Dean of Faculty and head of a university campus and chairman and/ or president of both professional bodies and think tanks. He was educated at the LSE, the London Business School, UNISA and the Universities of Aston, Chicago and Southern California, Colin holds honorary fellowships of professional associations in both the UK and India. He is a fellow of seven chartered bodies and obtained first place prizes in the final exams of three professions. Colin received the CSR Lifetime Achievement Award at the 2018 CSR Leadership Summit. His recent publications can be obtained from https://www.policypublications.com.