value insights

Managing Service Providers for Performance – Valutrics

Different classes of service providers need different structures. But all of them, we
may conclude, need first to impose on themselves such discipline as did the managers and leaders of the providers.
1. They need to define “what is our business and what should it be.” They need to
bring alternatives of definition into the open, and to think them through carefully, perhaps
even to work out (as did the presidents of the emerging American universities) the bal-
ance of different and perhaps even conflicting definitions of “what our business is and
what it should be.”
2. They need to derive clear objectives and goals from their definition of function and
3. They then have to think through priorities of concentration which enable them to
select targets, to set standards of accomplishment and performance, that is, to define the
minimum acceptable results; to set deadlines; to go to work on results, and to make some-
one accountable for results.
4. They need to define measurements of performance—the customer-satisfaction
measurements of the Telephone Company, or the literacy figures by which the men of
Meiji measured their progress.
5. They need to use these measurements to feed back on their efforts, that is, to build
self-control from results into their system.
6. Finally, they need an organized audit of objectives and results, so as to identify
those objectives that no longer serve a purpose or have proven unattainable. They need to
identify unsatisfactory performance, and activities which are obsolete or unproductive, or
both. And, they need a mechanism for sloughing off such activities rather than wasting
their money and their energies where the results are unsatisfactory.

The last requirement may be the most important one. The absence of a market test removes from the service institution the discipline that forces a business eventually to aban-
don yesterday—or else go bankrupt. Assessing and abandoning low-performance activi-
ties in service providers, outside and inside business, would be the most painful but also
the most salutary innovation.
To test objectives and their appropriateness, priorities, and, above all, results against
expectations, is perhaps needed most for yesterday’s successes.

No success, as our examples show, is “forever.” Yet it is far more difficult to abandon
yesterday’s success than it is to reappraise failure. Success breeds its own hubris. It cre-
ates emotional attachment, habits of mind and action, and, above all, false self-
confidence. A success that has outlived its usefulness may, in the end, be more damaging
than failure.
In a service institution particularly, yesterday’s success becomes “policy,” “virtue,”
“conviction,” if not holy writ, unless the institution imposes on itself the discipline of
thinking through its mission, its objectives, and its priorities, and of building in feedback
control from results and performance on policies, priorities, and action. We are in such a
“welfare mess” today in the United States, largely because the welfare program of the
New Deal had been such a success in the thirties that we could not abandon it and, in-
stead, misapplied it to the radically different problem of the Black immigrants in the cities
in the fifties and sixties.
To make service providers perform, it should by now be clear, does not require great
men. It requires instead a system. The essentials of this system are not too different from
the essentials of performance in a business enterprise, but the application will be quite
different. The service providers are not businesses; performance means something quite
different in them.
The applications of the essentials will and should differ greatly for different service
providers. As our examples showed—and were meant to show—there are at least three
different kinds of service providers—providers that are not paid for performance and
results, but for efforts and programs.

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