Where Management Is Faltering

Exhibit 1 is an oversimplified version of a framework developed by Ralph D. Stacey, Ph.D., a scholar in organizational management and professor at the University of Hertfordshire in Hertfordshire, England. The framework describes a range of managerial approaches with which companies may respond to a given problem, depending on where the problem resides on a two-dimensional matrix that has the level of managers' agreement on one axis and the degree of uncertainty about the outcome of any specific management action on the other. Then it divides the grid into four zones.

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The lower left and upper right zones are easy to understand. The lower left zone (zone one) represents simple and rational decisions; MBA programs typically focus here. Decision-makers gather past data and use it to predict the future, spiced with modifiers (often intuition). Managers reach consensus, and the expected outcomes are confidently predictable. They jointly select the actions they will take and then monitor results with variance analysis from plan in order to make midcourse corrections if necessary.

The upper right zone (zone four) is the opposite decision-making environment. It represents a management culture ruled by chaos, anarchy, and decision avoidance. Breakdowns occur here because traditional methods of planning, debating, negotiating, and committing to decisions aren't working. Organizations get Balkanized and either proactively make strategic mistakes or take no action due to lack of confidence. Innovation and creativity should prevail in this zone, but they often come up short. Some automobile manufacturers are currently trapped in zone four. The combination of high uncertainty and a failure to achieve consensus is radioactive.

Most management decisions occur in zones two and three, somewhere between the impossibly difficult environment of zone four and the often unrealistic simplicity of zone one. Zone two is a desirable place for a management team to work toward. Decisions here are complicated, but they're not excessively so. At the upper left side of this zone, politics and coalition-building occur. There are broad differences among managers in how to reach their desired outcome, but executives agree on what that outcome is. At the bottom right of this zone, cause-and-effect linkages between a company's actions and the resulting outcomes are not reliably predictable, so this is where a shared vision of the desired future state beats preset project planning. A comfort with test-and-learn methods is key.

What's interesting about exhibit 1 is that the number of decisions which fall into zone three is growing rapidly; we believe that the accelerating interest in CPM systems is a result of this growth. The characteristics of zone three -- complexity, uncertainty, and change -- combine to form a gathering storm that threatens all organizations. This zone borders chaos and anarchy. In zone three's upper left region, the development of hidden or unsubstantiated agendas overrides fact-based decision-making. In the lower right region, blind muddling by the management team overrides visioning and good risk management.

Zone three is a scary place to be, but the collective suite of integrated methodologies that comprise CPM (e.g., strategy mapping, scorecards, customer value management, risk management) can help companies move to a safer place. CPM shifts the decision-making problems of zone three in the direction of zone one, in several ways. For one thing, a shift in emphasis toward applying analytics in information gathering bolsters proactive decision-making. So does the process of consolidating all of a company's performance-related information on a common, enterprisewide information platform. The cross-functional collaboration that CPM software encourages among employees helps prevent a self-serving silo and bunker mentality from arising.

Performance management software aligns the work processes, priorities, initiatives, and target setting of managers and employee teams with the strategic intent of the executive team. Formal objective setting and resource-allocation policies that support corporate strategy replace pet projects; minimal (or nonexistent) accountability; and excessive numbers of trivial, even internally competing, performance metrics that fail to focus the company on optimally meeting stakeholder needs. Likewise, performance management software helps executives better learn how value is created so that they can constantly reset the organization's strategic direction in response to changes in the marketplace.