Engineering Design Performance Management – from Alchemy to Science through ISTa Wolf-Ekkehard Matzke Cadence Engineering Services, Cadence Design Systems GmbH Mozartstr. 2, D-85622, Feldkirchen, Germany [email protected] Abstract: The drive for performance is omnipresent in modern society. We believe this to be true, althoughwe only havea vague idea of what “performance” really means. The demand for management is omnipresent in modern society. We accept this to be true, although management theory is a science barely out of its infancy(Who wishes to be supervised by an infant?). Performance management is considered to be the need for the hour in modern society. We are told this is true, although we feel that we are trying to cope with something that we have very little comprehension of. Engineering is the omnipresent backbone of modern society. We experience this to be true, although we acknowledge that design is least as much an art as it is a science, a world where uncertainty rules. The impact of Information Society Technology (IST) is omnipresent in modern society. We understand this to be true; although we know that there is no point in automating something we don’t understand. Somewhat ironically, one could conclude that Engineering Design Performance Management (EDPM) is about the challenge to handle the uncertain and appraise the unknown. Not to forget about IST embarked on a mission to automate everything it possibly could to pretend that there are ready answers. This is like alchemy, but for performance. Alchemy hovered between worlds. So does contemporary performance management hovering between fiction and reality. Alchemists proposed to use the philosopher's stone (materia prima), a mysterious, unknown substance that they believed to have the power to transmute base metals into gold. So does contemporary performance management byhailing IST as its “Magnus Opus”. Without a doubt, it is high time to rebuild a firm foundation of performance management. We need a consistent framework addressing the relevant aspects of performance management from the abstract level to the concrete level. Only than IST will be able to unfold its full potential, and deliver on its promises. The strategic potential of IST does not lie in empty automation that enforces unrealistic and oppressive processes. It lies in enabling better decision making in a highly complex environment of change, uncertainty, risk, and urgency. 1. Introduction There is a common understanding that performance management is of paramount importance for success in any field. Be it business, politics or any other humans’ activity – it’s a must-have. The size of the performance management market ranges from several 154 billion dollars in annual revenue to much more depending on which products and services are included. In contrast to this, performance management reality seems to be still far from fulfilling its original promise, to pro-actively and efficiently support the management of performance. Despite it, Cadence Design Systems has proved that performance management can be of extraordinary value as long as some fundamental guidelines are considered. This is true even if the results have to be interpreted and justified by referring to sometimes intuitive understanding of business factors. The main guidelines are: (a) always seek to be very targeted rather than general; (b) move beyond the mere representation and reflection of data towards providing evaluation and prediction capabilities; (c) comprehensive modeling is the key to the design of performance management systems. To our opinion providing a comprehensive theoretical framework for performance management in these settings may bring unquestionable competitive advantage. The pity is that such a “silver bullet” is still missing today. Even worse, performance management is a field where it is not unusual that fact and fable are blurred beyond distinction. The paper is focused on the case of engineering design performance management at the project level. Presented theoretical developments will be backed up by the software tool implementation and evaluation results, which address one of the key performance metrics – the productivity. Productivity is assessed through simulating and analyzing the dynamic character of an engineering design process in integrated circuit (IC) design with appropriate level of granularity. The primary focus of this paper is to create the awareness for a strategic opportunity to significantly mature performance management in engineering design. The reminder of the paper is divided into four sections. In section 2 we sketch the elements and contour a rigorous framework for performance management inspired by an “axiomatic system” of economics. Section 3 deals with the relevant performance management background concerning semiconductor industry and IC design. A typical engineering design performance management system will be described. Section 4 focuses on modeling IC design performance. Multi-agent approach is being used to model real, complex design systems and their environments. This is where the strategic opportunity for Information System Technologies through exploiting agents (ISTa) comes in. The final section of the paper summarizes the intermediate results of our research and offers some concluding remarks. Furthermore, it proposes follow-up activities in the context of a larger integrated approach focused on the development of an engineering design performance management system. 2. A Rigorous Framework for Performance Management This section places special emphasis on the definition of “performance”. It also covers the essence of somemain concepts around “performance”. The framework for performance managements is rigorous in the sense that we rely on self-evident axioms of various schools of economics. These axioms are then be used, along with some rules of inference, to derive several corollaries of interest. That is, the rigor comes from logical formalism. The framework supports modularity and reusability 155 of results in the sense that one can always use results established previously and in different context without having to prove those results from scratch. 2.1 Performance The term "performance” is heavily used nowadays. For example, Google yields approximately 393.000.000 hits1 for “performance”. Assuming a positive correlation between the number of hits on the World Wide Web and the importance of a term in contemporary society, “performance” is definitely among the top terms used. To compare the search for an undeniably important term like “human” results in 418.000.000 hits2, which is only marginally ahead of “performance”. It seems that “performance” is considered tobe a magical formula for human success. “Performance” lurks all around us. One can’t escape from it; there is nowhere to flee. It's everywhere and in everything one does - cradle-to-grave.There are seemingly countless word-combinations with the word “performance” in it. To give a glimpse of this, here are a few examples of what is available: high-performance baby wipes (from cradle!), kindergarten performance, performance school, performance university, performance institute, performance bike, performance agreements, performance poetry, performance period, network performance, environmental performance, computer performance, performance poetry, performance objectives, performance agreements, performance appraisal, performance art, performance grave (to grave!) and many more. So, why becomes “performance” that popular? And, being such an ultra-popular termthese days, doesn’t “performance” become almost completely meaningless? If anything, what is it that people are trying to say when they speak of "performance"? Perhaps the definition of “performance” will lead to some answers. This, however, turns out to be a somewhat naive hope. More then ten years ago, Meyer and Gupta [MG94] pointed out that there is “massive disagreement as to what performance is”. A recent review of existing definitions of “performance” conducted by Ivasiva [Iv05] confirms their finding and highlights two main points: (1) there are many definitions of “performance” and new ones are continuously added; and (2) the “performance” definitions proffered by the performance proponents – whether from academia or industry – suffer from a persistent inability to provide unique, complete , unambiguous, and, acceptable definitions. Of all these attributes, perhaps the last one is the most important one. A definition is acceptable when a number of people agree on it or commit to it. However, the consensus upon the definition of “performance” is still missing. On the contrary, the trend towards opting for ‘seductively vague’ definitions continues unbroken to this day. A few recent examples – chosen from the vast supply of “performance” definitions – are: (cid:16) Baldvinsdottir et al [Ba03]: “Performance is defined as carrying out tasks in a situation that allows optimal outcome.” The issue that immediately arises with this definition is the exact meaning of “a situation that allows optimal outcome”. We don’t 1 As of April 7, 2005. 2 As of April 7, 2005. 156 know. Seemingly, the authors have chosen to employ a tautological conception of optimality. Under such a conception everything is adjusted to everything else given all relevant constraints. Saying that a situation allows for optimal outcome means that it allows exactly what it allows given all situational constraints. (cid:16) Faulk II [Fa02]: “Performance is defined as the accomplishment of job duties as required by the organization.” This is a much too-narrow definition. For example, what about any accomplishments for the organization that are above and beyond the required job duties? According to the above definition those accomplishments would not be attributed to “performance”. However intuitively we know that this can’t be the case. In fact, what is done above and beyond the job duties generally accepted as a major contribution to “performance”. (cid:16) Hall [Ha03]: “Performance is defined as the combination of competence in job skills and high levels of productivity.” This attempt of a definition combines two disparate concepts – competence, which is a human ability and productivity, which is a neo- classical economic metric - into a single “mechanism” called “performance”. What is the author trying to define here? (cid:16) Melchert and Winter [MW04]: “Performance is defined as valued contribution to reach the goals of an organization.” This is just another approach of defining “performance” that is seemingly both limited and inadequate. Who valuates a contribution?What happens if a contribution is not valued? Fromthe above definition it follows that any contribution that is not considered to be a valued contribution – by whomever – is not “performance”. This will be true, regardless of the significance a contribution has to reach the goals of the organization. Too bad if it is just not valued. (cid:16) Andersen and Fagerhaus [AF02]: One of the most remarkable definitions of “performance” is the null-definition by Andersen and Fagerhaus. According to them it is simply not reasonable to strive for the “performance” definition: “We believe it is sufficient to have reached a point where performance has replaced productivity and is generally accepted to cover a wide range of aspects of an organization – from the old productivity to the ability to innovate, to attract the best employees, to maintain an environmental sound outfit, or to conduct business in ethical manner.” “Performance“ has replaced productivity? But were we not educated that high-levels of productivity determine “performance” [Ha03]? There are alchemists out there. O’Donnell and Duffy [OD02] suggest “In summary, the research in performance has been hindered by a lack of clarity on its meaning.” We agree wholeheartedly with this statement. But there is always hope: (cid:16) Harkema [Ha02]: “Performance is defined as a number or series of activities directed toward an outcome.” This definition comes closest to encompassing all of the wide and varied sorts of “performance”. Yet it is not perfect, as it contains the ambiguous phrase “number or series of”. Furthermore, “directed” seem to indicate some “outside” control or intention. This is an unnecessary restriction, which results in a too-narrow definition of “performance”. In a situation like this, it is advisable to go back to the roots and use the etymology of “performance”. In addition it is sensible to pin down the standard dictionary definitions. This information can then be used as a framing device for a comprehensive “performance” definition. According to theChambers Dictionary of Etymology [Ba88], 157 “performance” was formed around 1500 AD from the English “perform“ and the suffix “-ance”. “Perform” is derived from the Old French “par“ (completely) + “fornir“ (to provide, furnish). The suffix “-ance” labels “performance” as a noun of action. As for the standard dictionary definitions we have: (1) the Oxford-English-Dictionary-Online3 defines “performance” as “the action of performing” or “something performed”, (2) the Miriam-Webster-Online Dictionary4 refers to “performance” as “the execution of an action”, or “something accomplished”, and (3) the American Heritage Dictionary5 says “the act of performing”, or “the state of being performed.” The etymology and the standard dictionary definitions of “performance” suggest that “performance” is derived from the root concept (or summum-genus) for intentional action. Therefore, we arrive atthe following definition of “performance”: Definition 2.1.1 (Performance): Performance is intentional action. This definition of “performance” is valid under all circumstances and for all context- specific situations. However, all other “performance”-related concepts have to be defined as specialization of this root-concept. This is of central importance as the “performance” of something is always context based. It should further be noted that not all actions are intentional. The notion of intentional action can be contrasted with accidental as well as with unintentional action. 2.2 Performance Management Performance is intentional action. It is self-evident that any means, which supports the realization of intentions, is relevant in the context of performance. Management is said to be such a means. Therefore, performance should be managed. In a nutshell, this is what performance management is all about. From the point of general concept, management has two basic dimensions. One, “linear management”, centers on striving to continually improve practices and processes. Along this dimension managers plan, budget, organize, staff, direct, supervise, control, etc. Linear management is solely applicable to situations of relative stability. For historical reasons (industrial society), most of the contemporary management knowledge is about linear management. An example for a linear management technique is Total Quality Management (TQM). The other dimension,“non-linear management”, centers on coping with change. Along this dimension managers respond to and anticipate change by aligning, motivating, and inspiring humans. Non-linear management has to be adaptive, whereas linear management is mainly plan-driven (“plan-pushed”). Non-linear management has to be “environmentally-pulled”, that is, managers are directed more by responses to their environment than to a central command authority. Linear management prescribes what to do. Non-linear management enables how to determine what to do. Unmistakably, non-linear management is considerably more difficult than linear 3 http://www.oed.com/ 4 http://www.m-w.com/ 5 http://www.bartleby.com/61/ 158 management. Examples for non-linear management techniques can be found under the topic of “Agility” (the ability to perceive changes and establish appropriate techniques to cope with them). Ubbesen6 provides the following metaphor to describe the significant difference between linear and non-linear management: “We could imagine that we have a line, and then we put a cross at one end and write the word problem. In accordance with our ordinary way of thinking, the word solution should consequently be placed at the other end. What do we do if the good solution is somewhere outside the line? As a matter of fact, creative consciousness is not bound to the line, it moves within a larger field of solution methods." In today’s business reality both management dimensions are present and necessary. However, the ratio between them is what makes the difference. Changewas always with us, it always will be. We have to cope with change. We always have been and we always will be. But the pace and breadth of change have exceeded the response methods that once worked.That is linear management tendsto “ignore” or “discourage” change until serious problems vent in a “volcanic eruption”. With change more rampant today than ever, companies are required to utilize increasingly non-linear management techniques. However, the reality looks quite different. Most companies are “over”-managed in the linear sense and “under”-led in the non-linear sense. As for IST it is important to note, that the it’s benefits can’t be realized until non-linear management becomes as well understood as linear-management that has been taught to every manager since the maturation of industrial organization practice in the early part of the last century. Given the popularity of “performance” in modern society it is not surprising that performance management is very much in vogue amongst in virtually every area of human activity. Journalists, management consultants, and performance management solution providers alike seem to be overly excited by the topic. But performance management as a discipline of management theory is still in an embryonic state. In fact, “performance management as an identifiable subject for academic study and research arguably began in the mid-1990” [TB04]. We find myriads of papers on performance management, we find a significant and fast growing performance management market, but we don’t find a mature, or even a suitable framework of the non-linear management of performance. Despite the significant research efforts, the result is not the expected one. Probably the main reason for this unsatisfactory situation is the highly interdisciplinary nature of performance management research, involving many fields of varying states of maturity and methodological practice. Disciplines that play a vital role in performance management research are for example: economics, engineering science, management theory, cultural anthropology, psychology, education, artificial intelligence, philosophy, and so on. Additionally, there are professionalsmissing that are particularly skilled at integrating multiple research disciplines into a single perspective. The enforcement of IST in such an immature environment is contra-productive. Automating a mess, leads to an automatedmess. High-tech cannot bring order where there is disorder or cannot "improve" people behavior. For example, experiences in Western (and 6 http://www.aaa.dk/aaa/ledelse-og_organisationsudvikling.eng.pdf 159 increasingly Eastern) countries have shown again and again, that the introduction of IST into a company with organizational problems does not solve the problems and does not increase performance. On the contrary, it tends to make the situation worse. 2.3 Performance Management Market The performance management market is basically an IST market. However, the lack of clarity around the definitions of performance and performance management means that almost anybody can claim to provide solutions in this space. Consequently, each vendor seems to have a self-serving flavor of performance management as indicated by the bewildering acronyms that come with “performance management solutions”. There are APM (Asset Performance Management), Business Intelligence (BI), BPM (Business Performance Management), CPM (Corporate Performance Management), EPM (Enterprise Performance Management), FPM (Financial Performance Management), HPM (Human Performance Management), OPM (Operational Performance Management), PPM (Project Performance Management), SEM (Strategic Enterprise Management), WPM (Workforce Performance Management) and so on. Some of these appear to be different acronyms for the same thing (e.g., CPM and EPM), but others are fundamentally different concepts. For example, FPM targets budgeting and planning, while WPMrefers to compensation and motivation planning for employees. In any case, it is obvious that there are alchemists out there. In this world of performance management hype, even a simple project management tool can make it to the status of a PPM solution. So, is it all hype? Absolutely not. There are quite some real solutions to real performance management problems. However, most of these solutions are restricted to deal only with deterministic, sequential processes. However, they represent only a subset of the performance management problem space. For example, all types of reporting systems that are targeted to eliminate hand-tinkered, labor intensive processes information processes used to produce reports and consume their contents fall into this category. As these processes are usually expensive, slow, and error-prone, an IST solution is may be more than adequate. Whatever information demands investors, regulators, and managers have, clearly there is a need for the corporate reporting supply chain to eliminate the hand-tinkered, labor- intensive processes currently used to produce reports and consume their contents. It's expensive, it's slow, and it's error-prone. Consequently, there is a market for performance management solutions. Despite their differences, almost all performance management solutions have three main deficiencies in common: (1) they only reflect and represent data (as opposed to evaluation and prediction capabilities), (2) they focus creating metrics based on available date (as opposed to let a sound metric system drive the data collection), and, (3) they enforce unrealistic and oppressive processes (as opposed to reflect the real-world dynamics). Technology for technology's sake is a sure path to failure. Technology for sheer business’ sake is even worse. Automating a mess helps only to get the wrong answer faster. We have heard this many times before. Though we have heard this many times, most of us seem to be unable tocomprehend it. 160 Copland7 indicates a first step out of this mess: “The first task facing the … industry is that it needs to tidy up its terminology and clearly express what it means by performance management and the technical solutions necessary to support it.” However, the development of ontologies for performance, performance management, performance measurement, etc. is only the beginning. Much more research has to be done toprovide a solid basis for the development of performance management solutions. Here, special attention has to be paid to the modeling of performance. Obviously this is the weakest point in today’s performance management solutions. Due to the heterogeneity and complexity of the problemthis requires a focus on manageable pieces as opposed to all-in-one solutions. Consequently, the industry needs to refrain from using oversimplified approaches and promising total solutions. Sure, it will be a laborious way, but if we can paint an idea of the success that can be reached by it we shouldbe ready to take the pains. To summarize the main lessons of the current commercial performance management solutions: (1) always seek to be very targeted rather than general (small is the next big thing in performance management solutions), (2) move beyond the mere representation and reflection of data towards providing evaluation and prediction capabilities, and, (3) comprehensive modeling is key to build successful performance management solutions. 2.4 An Axiomatic System of Economics After having analyzed performance and related concepts, we can start building a rigorous framework for performance management. Kay [Ka96] argues that it is economics that can provide the science that management presently lacks, that economics is the natural backbone of business management. In fact, economics provides an integrative conceptual framework for much of management science. The language of economics is therefore the first language in which we will articulate a framework for performance management. Economics is a social science. In social sciences, the subject of inquiry and analysis is the behavior of a human or a group of humans. So should it be in performance management, which professes to be founded upon and be the part of the social sciences. But when it comes to technology, all too often this is forgotten. Despite all performance management rhetoric human beings are modeled at best as statistical entities, at worst as mere phantoms of empty abstraction. Whether we like it or not, this mechanistic view of the world drives much of what we experience in industrial performance management practices today. It should be noted, that economics could – with the notion on “could” – be viewed as pluralistic discipline. As such it should not support the “dangerous delusion” of a universal economic theory applicable to human behavior in all societies, at all points in time. In fact, there are many different and competing schools of economic thought and methodology. Unfortunately, barriers between them are substantial. For the sake of 7 http://www.fsn.co.uk/feature_articles/testing_time_ahead_for_performance_management_vendors.htm 161 developing the performance management framework we will ignore any boundaries between potentially entrenched schools of economics. We defined performance as intentional action. It is therefore only consequent to look for an economic school, which puts action at its heart. This leads us to the so-called Austrian School of economics, a controversial school standing to some extent outside of the mainstream of economics. The school of Austrian economics is well known for its “realistic” approach to the study of human action. Ludwigvon Mises, one of the fathers of Austrian School, states in his landmark work on Human Action [Mi63]: “Human action is purposive behavior. Or we may say: Action is will put into operation and transformed into an agency, is aiming at ends and goals, is the ego’s meaningful response to stimuli and to the conditions of its environment, is a person’s conscious adjustment to the state of the universe that determines life.” Perhaps as amazing as von Mises’ economic thinking was the fact that the economiccommunity largely ignored his work until about 20 years ago. This is symptomatic for the general lack of mutually beneficial exchange of ideas between the various economic schools. Praxeology8, a methodology of the Austrian School, rests on the axiom of action (see Axiom 2.4.1), the proposition that humans act, that they display intentional behavior9. The axiom, qualifies as a priori synthetic knowledge because (1) the axiom cannot be denied since the denial would have to be categorized as an action, and (2) the axiom is not derived from observation — there are only bodily movements to be observed but no such thing as actions — but stems instead from reflective understanding [R076]. The most distinctive feature of praxeology is its intrinsic a priori approach. Corollary axioms must be logically deduced from antecedent axioms, so that – provided the initial axiom is true – “the conclusions reached are just as valid as any result in Euclidian geometry”10. Since “praxeology begins with a true axiom, A, all the propositions that can be deduced from this axiom must be true. For if A implies B, and A is true, then B must also be true.” [Ro76]. Axiom 2.4.1 (Axiom of Action):Man acts (intentionally). In anticipation of Chapter 4, where we shall discuss the modeling of a Dynamic EngineeringDesign Process (DEDP), it shouldbe noted that this axiom evidently points out that a software agent is a good metaphor to model humans. Indeed, agents also act – i.e. they do it intentionally and, moreover, pro-actively pursuing their goals. The second major axiom is the axiom of scarcity (Axiom 2.4.2). Ironically, neo-classical economics, which considers itself as superior to Austrian economics, begins with the premise that resources are scarce. Axiom 2.4.2 (Axiom of Scarcity): Scarceness is rewarded. 8 The term praxeology was first applied by Ludwig van Mises [Mi63]. 9 The relationship between the axiomof action (Axiom 2.5.1) and performance (Definition 2.1.1) is obvious. 10 http://www.mises.org/story/1304 162 The axiom of scarcity is one of the fundamental axioms in economics, yet it is often not well understood as demonstrated by the famous diamond-water paradox (Paradox 2.5.1) and Drucker’sstatement about the end of economic theory (Misconception 2.5.1). Paradox 2.4.1 (Diamond-Water Paradox): Diamonds are inessential to life, yet they command a high price. Water is essential to life, yet it commands a low price. This paradox depicts the difference between a price and a utility. One would think that the more essential, the higher the price. But this is not the case. The importance of water is reflected in its total utility, which is much more than the one of diamonds. But price is proportional not to total utility, but to marginal utility. And because water is so much more abundant than diamonds the marginal utility of water is much lower than the more scarce diamonds. Peter F. Drucker, is the world's most widely read and influential thinker on business and management. He is considered to be "the father of modern management"11 and "the man who invented corporate America."11 So, what does he have to say? Misconception 2.4.1 (Drucker’s End of Economic Theory)12: “… there is no doubt that we are at the end of economic theory as we know it for three reasons. One is that information and knowledge don't fall under the law of scarcity and under the law of diminishing returns. That's a very important reason. When I sell you my book, you have it, and I don't have it anymore. When I give you information, I still have it. In fact, I have more, because now you have it, and we can work together. For that, we have no economics.” Given Drucker's immense influence on the management community we should be scared about the performance management future, not to mention economics. But Drucker is not alone. Saul Bellow, the 1976 Nobel Laurate of Literature, philosophizes in the Wall Street Journal, January 1, 200013: “So there does seem to be some possibility that mankind's long war with scarcity may be tapering off.” Thomas Petzinger Jr. quotes in an article with the suggestive headline “So Long Supply and Demand” [Pe00] several witnesses for the end of economics in general and the axiom of scarcity in particular. For example, Mark McElroy, a principal in International Business Machines Corp.'s Global Knowledge Management Practice said: "Conventional economics is dead. Deal with it!” Of course, it is easy to recognize that all of the above claims are complete nonsense. However, the problemis that these claims conformto the prevailing fashion of business management “theology”. The problem is that notable authorities, newspapers, books etc evangelize them. The problem is that they seem to be perfectly reasonable to a broad business community. The problem is that these claims develop real enforcement power: Anyone who doesn’t believe in them just doesn’t get it. There are alchemists out there. In a may be more comprehensible way, the axiom of scarcity states that people want more of what they can’t have. Scarcity is and always will be with us – it is simply part of 11 http://www.pfdf.org/leaderbooks/drucker/bio.html 12http://www.contextmag.com/setFrameRedirect.asp?src=/archives/199903/Feature1ECONOMICSGOESTILT.asp 13 http://www.greenstar.org/Jan00-Update/ 163