Introduction

Most performance management systems involve plans, targets and resources that are negotiated, annual and fixed. These systems were designed for stable trading environments in which suppliers could dictate to the market. As we know, however, markets are now unstable and customers rule the roost. Just think of the airline industry in recent years.

Most organizations expend huge amounts of energy (and money) trying to align and realign their strategies, structures and systems to meet this changing business climate. It is a difficult and expensive process and a nightmare for many employees, whose jobs are at risk. This inability to cope with discontinuous change is caused by management systems. Consequently, many leading-edge organizations are undergoing a historic shift from “make-and-sell” to “sense-and-respond” management. Whereas make-and-sell is an industrial-age model centred on transactions, capital assets, mass production, economies of scale and product margins, sense-and-respond is an information- and service-age model emphasizing client relationships, intellectual assets, mass customisation, economies of scope and value creation.

Toyota is a well-known example of a sense-and-respond organization. It operates with what is called a “pull” system. Instead of pushing products through rigid processes to meet sales targets, its operating systems start from the customer; it is the customer order that drives operating processes and the work that people do. The point is that, in sense-and-respond companies, fixed targets and rigid annual plans are anathema and represent insurmountable barriers. That's why adaptive organizations such as Toyota don't have them.