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The principles of performance management

Michael Rosen

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Performance management is one of the most important but least understood or implemented aspects of business and IT management. Perhaps that's because it can mean many different things to different (or even the same) people. So what do we mean by performance management? Abstractly, it is the management of an activity toward achieving and improving results. Or, more concretely, it involves: a) definition of goals and desired outcomes, b) definition of criteria by which to judge the outcome, c) collection and analysis of data to measure that criteria, d) adjustments or corrections to improve results, and e) continual measurement and feedback.

We're not talking about individual employee "performance reviews" or the measurement of hardware, network or software performance in terms of MIPS, Megabytes or transactions per second. Rather, we're talking about the management, organization and culture that focuses on "continuous improvement."

One of the most well known examples of this is GE under the direction of Jack Welch. We often hear about how Welch insisted that all of his business segments would be leaders or they would be dropped. We hear less about how he achieved this. How did he know whether or not something was a leader, and how did he bring and keep a business segment into a leadership position? Obviously, the specific actions differed greatly for each instance, but underlying all of them was performance management.

In the recent Advisors on "Reorienting Performance Measures to a Business Centric View" (25 August and 1 September 2004), Cutter Senior Consultants Bob Benson, Tom Bugnitz and Bill Walton stress the measurement of IT activity in terms of the business value they deliver and how those IT systems/activities help achieve the strategic intentions of an organization. They pose three critical questions that are worth repeating: 1) Is IT doing the right things? (i.e., correctly allocating resources to deliver business value); 2) Is IT doing things right? (i.e., operating efficiently and effectively); and 3) Is IT implementing its own strategy? (i.e., meeting its internal goals and initiatives).

Asking these (and other questions), answering them and more importantly, tying the answers to achieving results, is what performance management is all about. If you've got a lot of time and a large beer budget, I could discuss the Federal Enterprise Architecture (FEA) with you at length. One of the things that it does right is to identify the importance of performance in IT architecture and governance. The FEA is based on a hierarchy of five "reference models," which are: technology, service, data, business, and at the top of the stack is the Performance Reference Model (PRM), which applies to all the others. This is just one prominent example of a "performance architecture," but performance should be part of every enterprise architecture initiative.

One of the values of architecture is to look at a problem/solution set in numerous different scenarios and abstract out the commonalities so that the same solution can be used over and over again. This leads to more consistent results, and the ability to share infrastructure, tools, frameworks, etc. In these respects, performance management is no different. For example, performance architecture addresses our earlier description of performance management by defining mechanisms and models for the: a) definition of desired outcomes, b) definition of criteria by which to judge the outcome, and c) collection and analysis of data to measure that criteria. It also identifies processes for: d) adjustments or corrections to improve results, and e) continual measurement and feedback. These concepts apply whether it is a question of measuring business value of an IT initiative or measuring an IT specific concept such as conformance with a Service-Level Agreement (SLA) for a particular IT service. Of course, the specific mechanisms, models, and tools would be different for these two scenarios.

The value of the architecture comes from defining what performance management means once, and then applying that consistently across the enterprise. Thus, the measurement and reporting of business value would be done the same across all projects, not reinvented each time by each business unit. And, the measurement of SLAs would be done the same for all services, using the same infrastructure and utilities. Moreover, the principles that are used to understand the performance of business value are the same as those used for service performance so that performance management becomes a common vocabulary that brings business and IT together.

If performance management is not part of your business and IT management today, it's time to start introducing the concepts. And the best way to apply them consistently across business and IT is by introducing a performance architecture. Or, if you prefer, follow the FEA example and call it a reference model. But whatever you call it, just do it.

Michael Rosen is a Senior Consultant with Cutter Consortium's Business-IT Strategies and Enterprise Architecture practices. He has more than 20 years' technical leadership experience architecting, designing and developing software products and applications.

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This article was originally published by Cutter Consortium
www.cutter.com
© 2004 Cutter Consortium. All rights reserved. Reproduced with permission.
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