In the Letter from the Editor, Frank wrote: "You could reason that the current economic crisis was actually caused by performance management. I realize that this is a provocative statement - but think about it. Many commentators highlighted the fact that bankers were given large bonuses based on the revenue they brought in by taking big risks. Linking incentives to targets is a performance management ‘best practice’. These same commentators pointed out that financial institutions often didn’t really understand the risk profile of the subprime mortgage packages that they bought, reshuffled into different packages, and sold. The risk calculations were based on very complex and advanced analytics; which are also part of performance management. Lastly, many organizations felt safe because they were ‘compliant with regulations’ and did all the necessary reporting. Obviously, ‘accountability’ (a large driver of performance management) was not enough. Hence, my harsh statement that performance management caused the current crisis.
So what’s the good news? I think performance management will play a leading role in weathering and solving the crisis too. The economy, despite all the mathematics, in the end is a social science and is influenced by human behavior. What was damaged the most in the beginning of the recession was ‘trust’. Financial institutions trusted the mathematical models too much. When the economy collapsed, the banks didn’t trust each other anymore. This impacted consumer confidence and trust, and the financial crisis impacted the real economy.
Rebuilding trust is the key to ending the recession. Consumers must regain trust to buy houses and cars again, which will fuel the real economy and restore the financial system. The path to trust is transparency; which is exactly what organizations should invest in."
This issue has many interesting articles: - Trust, Relationships and Performance by Frank Buytendijk, Oracle Vice President and Fellow, Enterprise Performance Management. - High-trust Companies Equal High-profit Companies by Claire Carradice, Service Excellence Operations Analyst Siemens IT Solutions and Services - Enhancing Partnership Trust with Collaborative Performance Scorecarding by Mike Haley, President, Landmark Decisions and Toby Hatch, Oracle Senior Strategist - Sustainability Results That Build Trust and Improve the Bottom Line by Angela Enyeart, Oracle Director, Sustainability Intelligence Product Strategy - Transitioning to IFRS: What’s Your Roadmap? by John O’Rourke, Oracle Vice President BI and EPM Product Marketing - Building Trust With an End-to-End Approach to Financial Reporting and Compliance by Mike Malwitz, Oracle Director, Product Strategy - Managing Reputation Risk by Thomas Oestreich, Oracle Chief EPM Strategist - Industry Insights by Mark Conway, Oracle Director, BI Product Marketing
The Journal of Management Excellence is a very good reference on Performance Management, provided by Oracle. The previous issues also can be downloaded.