Systems for performance control

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After setting a course of action, or taking a decision not to do something, all organisations face unforeseen events which force them to adjust their plans along the way.  For this reason, a means of compensating for unexpected change is an essential part of any management system: a control mechanism which checks that planned operations are on track; regulates input or output variables of the system within set limits; or varies them in a pre-determined way to achieve future goals.

In the PDCA cycle, performance control follows action planning in a continuous loop: each activity reinforces the other.  The two activities need to be harmonised if they are to work efficiently; for example, the inappropriate use of measures and targets can have the effect of driving perverse behaviour or holding organisations to a level of attainment below their natural potential - see inset.  According to architect Frank Duffy, performance measurement is essential for managing property as a strategic business resource: ‘What is absolutely necessary, if office architecture is to become truly relevant to business, is to have reliable measures that link business performance with the capacity of buildings, environmental systems and interiors to accommodate and enhance that performance.  Both sets of measures must be expressed in the same terms if the equation is to work.  Both sets of measures must relate to organisational purpose.’  [13]

In practice, performance control can precede action-planning so that the two activities are placed in opposition; for example, the routine extrapolation of previous annual plans often acts as a default strategy in the absence of any deliberate plan.  Budgets can also be used to guide the organisation instead of being derived from strategies; for example, zero-based budgeting starts by questioning the legitimacy of policies and programmes; similarly, ad-hoc budget revisions are often used to impose percentage updates across the board.  A key weakness of formal planning methods is that when performance management competes with action planning it tends to be more successful because it works with the system, rather than imposing external control.  Action planning usually requires structural reorganisation, which can be resisted, but performance control tends to sit on top of the existing structure, making it easier and less risky for managers to use this method as a means of inducing desired behaviour - in this way performance control often ends up displacing action planning.

Conflict and ambiguity between action planning and performance control leads to what Mintzberg has named the ‘Great Divide’ of strategic planning, reflecting the difficulty in integrating a system of objectives and budgets with a system of formal strategies and programmes: ‘While the links on each side of our divide may seem clear - for example, between objectives and budgets - the crossovers between the two sides are more often assumed than specified.’  When the similar confusion identified in the previous section about whether strategies precede programmes or the other way round is also taken into account, the situation appears messy - see opposite page.  Mintzberg concludes: ‘Our point is not where to draw the line; it is how can such lines be drawn in the first place?  Or, more to the point, why must such lines be drawn at all?  Planning theory, by trying to draw arbitrary lines all over the place, has often served more to confuse issues than to clarify them.’ [10]

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