Performance management systems are essentially tools used to evaluate activity and steer companies. When implemented correctly, it’s basically an objective based management tool used for business purposes. We should establish a fair difference between the management of the company and the Business Intelligence tools that will serve this purpose.
There are many methodologies that will serve the same purpose, and let us consider some of them: Balance Scorecard, Corporate Performance Management, Enterprise Performance Management, Objective Based Management, and so on. They all do share some common principles, as we will briefly explain bellow.
By definition strategy is a set of action that together will take a given company on the road from Point A to Point B on a given period of time. Sounds easy? It is certainly not.
First step is establishing ‘de facto’ situation, a current snapshot of the basic activity, while considering all core business, financial statements, company assets, and human resources. Second step is decoding on what has lead to the specific situation and why. Consider this as being ‘Point A’.
Even further, some may rightfully try to understand and predict what will happen if nothing will change during the considered time frame for the strategy. Then others would try to establish the objectives and goals to be present and the end of strategy time frame. Further decoding that will give you ‘Point B’.
It may be or may not be possible to reach Point B from Point A in the amount of the time given, but if you are willing to do so you you must set a correct set of actions to be taken. And that’s quite fine, at least in theory. How deep should you go into details, and who should take ownership for that actions, that is in fact the hard part for defining the strategy execution.
Key Performance Indicators
Key indicators are metrics used to describe current situation. Stock levels, cash flow, number of transactions, they are all examples of indicator used to measure quantitative measures. Service availability, customer satisfaction, and merchandise return rate, are indicators used to describe qualitative measures.
The practice is to take the goals from the strategy and brake them apart into KPI’s, and then cascade them all into management levels. Therefore, it will be clearer for all key decision makers about their role and their contribution to the organization. Such a diagram it’s called an indicator’s tree, strategy map or impact diagram.
Best practice evaluate that every individual working in an organization will be measured and evaluated, eventually made responsible for up to 5-7 different indicators. Thus, each individual, team and organization performance will all be transparently available.
We consider the evolution of indicators throughout time ad we are plotting graphs thus representing trends. Whether these are past or future tenses they can assist in setting targets and make predictions. Such analysis are usually done over medium and longer periods of time, and they are useful among others to identify market potential, market trends and company performance, all at once.
Two very useful and over used scorecards are YoY (year-over-year) and B2T (budget-vs-target). YoY analysis will show trends over past 24 months, taking into account seasonality, while B2T analysis will look closely at company’s results over forecast.
There are many other types of scorecards available, among that we mention Balanced Scorecard that will look at your company using projections: business results, financial results, fixed assets, and human resources performance.
Some companies will monitor up to 2000 indicators on regulate intervals. Some of them are more crucial than the others. Management dashboards are known virtual cockpits and by using them managers are able to to steer the business exactly in the same way a pilot would steer a plane or a car using proper instruments of their cockpits.
And exactly as in a plane’s cockpit, a EWS (early warning system) of alerts it’s being used to notify managers of potential and existent issues. Usually every KPI has at least two known levels: warning and critical one. These thresholds will trigger the alarm whenever an indicator meets its set requirements.
Planning & Executing
As part of the strategy design the planning phase enables managers to allocate budget to tasks and at the same time acquire their resources. Planning process is an enterprise-wide assignment that will involve many people with independent skills. Collaboration and coordination in required to govern this process whether this may be a production planning or a financial planning and a budgeting exercise.
The planning process in an ongoing process that will be constantly be adjusted with results and re-allocation of resources / funds, throughout the entire budgeting cycle.
Go Mobile !
Mobile solutions have been increasingly been made a part of our life. Performance management systems are alive Eco-systems, enterprise-wide, and available at all times. Therefore it only makes sense that mobile interaction is active part of collaboration.