Wednesday, January 07, 2009

Peformance Office Insufficient

What's missing behind President elect's appointment of Nancy Killefer as America's Chief Performance Officer in the Office of Management and Budget? Theory and methods, not to mention the rush to improve.

In a 2006 BusinessWeek piece, Nancy said in order "to boost performance, government needs to measure and set targets for its programs." Wall Street did the former and imploded. CEO's set measures and targets. Their boards designed incentive compensation plans to motivate leaders to achieve those targets. But, it wasn't enough. Poor quality destroyed investing.

Nancy worked for McKinsey & Company, a huge consulting firm advising CEO's. What role did such firms play in the wholesale outsourcing of American jobs over the last eight years? Her specialty areas include retail. China now makes many products sold in U.S. stores.

They also produce medicines, sometimes dangerously. Tainted heparin killed and harmed many patients, some undergoing already risky medical procedures. Nancy also advised pharmaceutical companies as a McKinsey consultant. Did she help them race to the lowest global common denominator on pay and benefits? With most pharma ingredients made outside the U.S., especially China, I consider it Russian roulette every time I take my medicine.

Our nation needs a return to quality, to the teachings of Dr. W. Edwards Deming. He broadened his message to transformation of management before his death. Leaders understand theory in the areas of systems, psychology, variation and knowledge. They also understand how they interact.

For the last decade, leaders aimed to grow their compensation, not to provide jobs. The Obama team wants to employ "pay for performance" in education and healthcare. Rest assured they will distort behavior. Teachers and doctors are as smart as Wall Street CEO's.

Will Barack Obama use The New Economics for Industry, Government, Education as foundational management theory? Will Nancy? It appears not, thus suboptimization is assured.

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