Dr Ian George on Procurement Transformation – Performance

Continuing the theme of Procurement Transformation, we’re delighted to feature the next in the series from Dr Ian George, a senior partner and practising consultant at Agile Partners. In this post he looks at performance.

Eli Goldratt once said “If you measure me in an illogical manner, don’t be surprised at my behaviour.” The world is littered with the unintended consequences of performance measures designed to drive outcomes rather than assess the impact of the actual inputs and processes that create the result. Performance measurement is a problematic issue for many organisations. Not only is it extremely difficult to create measures within an enterprise that accurately reflect the needs and expectations of customers, it is even harder to balance those measures with each other in order to optimise the achievements of the whole enterprise.

The root-cause of many problems is the inability of measurement systems to reflect the critical issues in a way that ensures appropriate and timely responses are made in ever-changing situations. The remedy is often to ensure ongoing engagement between customers and suppliers at both the individual and organisational level. Easy enough, but difficult when that isn't actually the reason the measurement system exists. As the need for strategic alignment and common aims develop, it becomes increasingly important for aligned measurement systems to be deployed across partnering organisations. This point is rarely reached as measurement often remains inward looking, financially oriented and the primary resource for punishment and reward.

The emphasis on strategic alignment and common aims also raised the issue of performance needing to measure more than simply outcomes. It is generally recognised that outcomes are a consequence of process performance and the quality of the inputs applied to them. Therefore, a balanced mix of measures needs to exist that supports the understanding of the workings of the enterprise, rather than simply the outcomes delivered. On a cross-organisational level this is extremely difficult. In some cases, customer-centric supply chain reviews may be more appropriate as a mechanism for identifying improvement opportunities (rather than the more usual focus on deviation and deficiency). Although not ideal these provide a snap-shot of the as-is situation rather than the monthly histories of financial transactions and outcomes that can no longer be influenced. This is a rudimentary approach, but often acknowledged as the most pragmatic solution available to many. Performance measurement needs to balance the accountant's requirement of measuring the past with the organisation's imperative of developing for the future.

Good performance measurement presents input, process, systemic and outcome data in such a way that inferences and relationships can be made between them in support of a competitive strategy based on current and past performance that simultaneously focuses on delivering the opportunities emerging in the future. It’s always a telling story when you reflect on whether your enterprise uses data to navigate the future or regret the lost opportunities of the past.

 

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