Performance Management Institute (PMI) white paper: Purpose, Rationale and Intent of the PMI Solution

Purpose

The purpose of the Performance Management Institute (PMI) is to provide a Measurement Systems Audit (MSA) for oversight, review and control by owners, stewards, board and / or audit committees. PMI’s solution insures that internal and external financial controls throughout the organization can be universally identified and adopted at all levels of reportability.

By integrating the operational and financial reporting systems with the organizational objectives, organizational behavior, and value delivery model; the MSA becomes the performance driver and reporting mechanism that personnel and stakeholders use to create alignment with ownership, stewardship and board directives.

PMI Rationale

Financial information systems are usually complex, fragmented and not geared for easy audit committee or board review, operational accountability or oversight. Additionally, aligning financial information to organizational behavior, culture, and value creation, and then relating that to current organizational mandates often leads to disconnects in hand-offs, between value-creating activities, typically requiring enormous energies to be invested in partial solutions, work-arounds and patchwork systems.

Through the adoption of the PMI solution, what is created and implemented is a process of reporting and self-correction of all staff and personnel activities, which is then able to be measured against ownership, stewardship and board mandates and governance. PMI is the exclusive, global and perpetual master licensor of the Ballard Method of Collaborative Culture for commercial purposes. The Ballard Method is grounded in a glossary made "sacred" by the contributions of Chuck Kremer, CPA, author of Managing by the Numbers, an entrepreneur’s ‘bible’ that many thousands of small businesses across the US and the world rely on as a primer on how to use their accounting and financial reporting investment as a powerful resource to make money, and thereby sustain their mission.

The Ballard Sacred Glossary: (CC) Ballard/Commons/PMI, Inc. 2010

An open glossary to be used in support of building organizational cultures with environments in which everyone can strive without impedance to fully give their gifts.

Glossary definitions:

Chart of Behaviors: (CC) Ballard/Commons/PMI, Inc. 2010

Can be described as both a transect of an organization's complete behavior profile and as an index of all the value chains/streams that cycle in a work system, organized in the sequence of the whole system's value creating activities, from the beginning to the end of the process for generating a thrilled and delighted customer.

When a thrilled and delighted customer, or potential customer uses that same Value Cycle, they enter into a mutual value creation cycle which both the customer and the provider will continue to participate in until either party's receipt of value diminishes significantly, or ends from outside factors uncontrollable by either party. The Chart of Behaviors compliments and ultimately drives the Chart of Accounts’ index of transactions (lagging indicators of the past), providing an index of all the behaviors (leading indicators of future results) that give rise to those financial transactions in the first place.

(CC) Ballard/Commons/PMI, Inc. 2010. Giving the blanket right to use with attribution. See www.creativecommons.org.

Accounting 1.0: (CC) Ballard/Commons/PMI, Inc. 2010

Uses a traditional approach to presenting standard financials that are compliant with GAAP (Generally Accepted Accounting Principles) as defined by FASB (Financial Accounting Standards Board).

Traditional approach: Finance Function is a cost center. With the recent regulatory requirements such as Sarbanes-Oxley, compliance can have even higher costs.

Accounting 2.0: (CC) Ballard/Commons/PMI, Inc. 2010

Standard GAAP Financials when enhanced with Systems Integration, ERP (Enterprise Resource Planning), Performance Measurement, Management Metrics, Balanced Scorecard, Baldridge, Total Quality, Six Sigma, Lean Manufacturing and Lean Accounting, Business Intelligence and Data Warehousing, etc.

Finance Function, although still a cost center, now has descriptive and auditable techniques to enhance internal efforts that drive higher returns and performance.

Accounting 3.0 ™:

Upon adopting the PMI process, the Standard GAAP Financials form a foundation for the people being measured to be fully engaged in building and continually improving the measurement, reporting and accountability system , which becomes self-managing by fully engaging all those who are being measured. This is accomplished through the implementation of Integral Operations Finance and Accounting Practices ® that unify the financial framework with a newly defined and comprehensive behavioral framework.

The heretofore missing behavioral framework is now added to the existing Standard Financials and actually drives results; thereby enabling the co-creation over time, by all stakeholders, of a comprehensive Objective Function Model (see Operations Research). This unified total set of objective facts of property, contract, and the bank account are combined with the organization’s value-creating behaviors, into a single, big-picture mathematical formula, which evolves with collective experience to ever more usefully describe how the whole system behaves to generate financial results.

With the advent of Accounting 3.0, Financial Function services can now become a profit center where the investment in the accounting activities, including all its supportive software and reporting techniques, can now provide a consistent return by streamlining existing processes and/or integrating workaround activities. Full implementation means that the internal controls and reporting mechanisms can be structured to deliver over-compliance with regulatory requirements (Sarbanes-Oxley/404 et. al.), and that this will happen in the normal course of business.

The Value Cycle: (Ballard Method definition) (CC) Ballard/Commons/PMI, Inc. 2010

The sequence of value-creating activities that a thrilled and delighted customer chooses to enter into and/or continue. At this point of choosing to continue being a customer with the enterprise (social or commercial), value delivery can now be defined as a cycle. Once identified clearly, it can be shown in its effect and result, as being the most elegant and effective process for supporting that customer’s overall needs, desires, mission and mandates.

A validated Value Cycle graphic can become the visual touchstone for every conversation that takes place within an organization. It then is the primary reference image, or the company centerpiece, that organizes the framing and coherence of every meeting, thought process, and activity.

Measurement Systems Audit (MSA): (CC) Ballard/Commons/PMI, Inc. 2010

A comprehensive and proprietary systems reporting methodology and template set which allows all stakeholders to begin seeing what is actually going on in the total organization. By creating specific focus on internal and external financial controls, and any other key value-creating sets of internal behavioral data, the audit can pinpoint a total set of crucial areas for problem-seeing, problem-solving, leverage, and risk management. The result is a complete set of validated, math-based definitions that are uniquely customized to support overall current mandates, while laying the groundwork for future activities and desires of all stakeholders.

The MSA is an internal organizational self-auditing process that frames, supports and connects the financial dimensions to the day-to-day activities, with the resulting effect of transforming the communication among all parties, especially in the focus and quality of dialogue around the meaning and strategic implications of the data presented, and all of it’s relevance to current mandates. (See primary reference work, Transforming Performance Measurement by Dean Spitzer, Ph.D., for comprehensive framing of this need, with a solution – the Path to Measurement Maturity – see www.performancemanagementinstitute.com.)

A comprehensive Measurement Systems Audit enables the sustained emergence of a vigorous learning enterprise (see Robert ‘Doc’ Hall’s planetary system’s assessment master work, Compression at www.compression.org). The MSA provides a core set of conversational protocols, visualization tools and planning templates for capturing the 60% of crucial data missing in general accounting practice, thereby enabling the definition and capitalization of the tacit job knowledge and personal experience wisdom of all key participants in that system’s value cycle.

This glossary will continue to be populated with new additions.

Read more about PMI here.

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