The Performance Paradox

The Performance Paradox

(Click to enlarge)

The Performance Paradox creates a profound misconception concerning the nature of performance. This drives a high failure rate in change programs across industry.

Collectively, local (functional) performance losses reflect the means by which an enterprise disposes of its excess productive capacity. 

If productive capacity can’t be utilized to profitably satisfy demand for products and services in an enterprise, only one question remains; “where is the excess capacity discarded?” Wherever it is discarded, the loss is always reflected in lower operating performance within one or another function.

Management don’t typically associate these local losses with an enterprise measure of capacity utilization.  In fact, they tend to think that the performance losses can be improved independently without improving demand or reducing available capacity. This isn’t true.

 

Recognizing that local performance measures are the dis-aggregated pieces of a single measure of enterprise measure of capacity utilization, there is a severe limitation confronting those seeking to improve local outcomes.

Holding enterprise demand and capacity constant, any improvement in one measure of local operating performance can only result in the concurrent deterioration of one or more other measures. Excess capacity migrates between performance measures depending on the level of local resistance. So, while individual local performances can be moved about like proverbial ‘deck chairs’, aggregate operating performance cannot be sustainably improved until enterprise capacity utilization is first improved.

The Performance Paradox

(Click to enlarge)

The Performance Paradox creates a profound misconception concerning the nature of performance. This drives a high failure rate in change programs across industry.

Collectively, local (functional) performance losses reflect the means by which an enterprise disposes of its excess productive capacity. 

If productive capacity can’t be utilized to profitably satisfy demand for products and services in an enterprise, only one question remains; “where is the excess capacity discarded?” Wherever it is discarded, the loss is always reflected in lower operating performance within one or another function.

Management don’t typically associate these local losses with an enterprise measure of capacity utilization.  In fact, they tend to think that the performance losses can be improved independently without improving demand or reducing available capacity. This isn’t true.

Recognizing that local performance measures are the dis-aggregated pieces of a single measure of enterprise measure of capacity utilization, there is a severe limitation confronting those seeking to improve local outcomes.

Holding enterprise demand and capacity constant, any improvement in one measure of local operating performance can only result in the concurrent deterioration of one or more other measures. Excess capacity migrates between performance measures depending on the level of local resistance. So, while individual local performances can be moved about like proverbial ‘deck chairs’, aggregate operating performance cannot be sustainably improved until enterprise capacity utilization is first improved.

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