Whitepaper Business Performance Measurement For Success

Business

Performance

Measurement

For

Success

Effective, Realisable and Usable Business

Performance Information to Increase Your

Business Intelligence Quotient

Alan McSweeney

Business Performance Measurement For Success

Contents Business Performance Management..................................................................3 The Data and Information Gap........................................................................3 The Data, Information and Action Cycle..........................................................5 Benefits of Effective Business Performance Management .................................5 Designing and Implementing a Successful Business Performance Management Programme ......................................................................................................6 A Business Performance Management Measurement Framework......................7 Operational Business Performance Management Framework............................9 Summary and Next Steps............................................................................... 10

Measuring business performance and presenting the resulting information for action is one aspect of achieving business success. This whitepaper defines an approach to implementing a measurement framework to improve your Business Intelligence Quotient (BIQ). Implementing business measurement can be hindered by practical issues such as the all too common gap between the theory of effective business performance management and the measurement of information needed to enable this and the systems and processes to achieve it. Closing the information gap is often the first step in implementing business measurement. Realism and pragmatism are needed when implementing a measurement framework. There are many practical issues to be addressed. Real success from implementing measurement is achieved by business and IT working together collaboratively. Business commitment and sponsorship is vital. There is little benefit in creating a complex measurement and reporting infrastructure without it being used to deliver real business benefits. Together business and IT must productionise BPM and embed its use in the business.


Business Performance Management Business Performance Management (BPM) is an umbrella term for a well-defined collection of processes that assist organisations optimise business performance. The techniques that exist, are well-proven and supported by a wide range of effective software. It is not the intention of this paper to provide details on these techniques. The objective of this paper is to identify a practical approach to using performance measurement to achieve business success. There is all too frequently a gap between the theory of effective business performance management and both the measurement of information needed to enable this and the systems and processes to define, collect, manage and enable access to information. This gap is the first practical hindrance to implementing successful measurement. The reasons for the gap are two-fold:

1. The business does not know or define what measurements and indicator metrics are to be provided

2. The information technology infrastructure does not exist to collect data

to enable the measurements to be generated The business imperatives for BPM include:

• Dynamic and challenging business conditions

• Greater expectation of value from clients

• Changing competition and business models

• Automation driving higher speed business

• Need to reduce costs and do more with the same or fewer resources

• Greater need for business transparency

The purpose of this whitepaper is to define a framework for closing this gap from both sides. It is only through collective action and co-operation that effective IT systems will deliver effective information. It describes an overall structure for improving your Business Intelligence Quotient

(BIQ).

The Data and Information Gap Within most organisations, there is a noticeable information gap. The key issues common to many organisations are:

• Timely access to information

• Access to accurate and complete information

• Access to information at an appropriate level of detail

• Inconsistent and patchy information from various business systems and units

How important are budgeting, forecasting and reporting to the success of your business?

Source: BPM Forum

How agile and adaptive are your budgeting, forecasting, reporting and analysis processes?

Source: BPM Forum


The core information requirements of any organisation are accuracy, completeness and timeliness. All too frequently some or all of the following statements are true:

• The data is there but getting access to it is complicated or not possible

• Finding and collating data across different information sources is often very difficult

• Performance data is not available quickly enough to act on it effectively

• There is excessive information that conceals what is really needed or important

• Some of the information required is simply not being captured The range of information required varies but includes key measures such as:

• Overall financial performance • Overall operational performance

• Performance of partnerships and alliances

• Performance relative to competition

• Product and service line profitability

• Delivery of profit and value to clients

• Client profitability • Client satisfaction

• Client acquisition and retention • Staff performance Each of these metrics should be available consistently and quickly and at a high-level and then be available to be analysed to an appropriate level of detail. The metrics need to be defined by the business and must be appropriate and useful.

Closing the information gap is an essential pre-requisite to implementing effective and usable Business Performance Management. This is the responsibility of both the business and IT working collaboratively.

How satisfied are you with your company’s ability to respond to change?

Source: BPM Forum

How do your actual expenses compare with your budget?

Source: BPM Forum


The Data, Information and Action Cycle The data, information and action cycle within the overall Business Performance Management Framework consists of three elements:

1. Data refers to the source figures and numbers. It is the raw material for analysis. The data gap is the absence of the tools and operational processes to consistently collect, store and manage the data and make available tools to perform analyses.

2. Information is the value extracted from the raw data. The information

gap is the absence of insight caused by the lack of defined metrics and indicators and their timely and accurate availability and usability.

3. Action is the need for operational business processes to ensure that the

information presented is used and acted upon.

The Data, Information, Action cycle means that there must be a continuum from collecting the raw data to using it effectively. The

process to achieve this must be embedded in the organisation.

Benefits of Effective Business Performance Management The core benefit of successful Business Performance Management is a greater focus on value added activities such as business decision support rather than the collection, reconciliation, and preparation of financial and business data. A balanced performance measurement system:

• Promotes focus and alignment, enables communication, enables and encourages people to modify their behaviour in a way which is consistent with corporate goals.

• Is comprehensive and contains key measures from all operational areas including financial and non-financial measures, indicators of past results and conditional forecasts of future performance and metrics encompassing the areas of time, cost and quality

On a scale of 0 to 100, where 100 is the best, how do you rate the financial IQ of your company or organisation?

Source: BPM Forum

What is the level of anguish and frustration associated with budgeting in your organisation?

Source: BPM Forum


The specific detailed benefits include: Data Analysis and Reporting Facility

• Supporting informed and quality decisions

• All data consistent and integrated with financials

• Actuals integrated with budget

• Graphical analysis and trend data readily available

• Flexible reporting to support investigation Improved Integrity • One version of the truth

• Integrated data validation

• Business ownership of relevant data

• Reconciliation within and between data sources Enhanced Efficiency • Improved use of resources

• Reduced time spent on non-value added activities

• Streamlined reporting

There are genuine business benefits to BPM when it is implemented successfully.

Designing and Implementing a Successful Business Performance Management Programme Achieving a successful BPM programme requires buy-in from both business and IT. It is not just a matter of buying and implementing software. Successful BPM requires that the business defines what measurement and associated source data are needed. The software tools are a small part of the overall project. In implementing BPM, it is important to be practical and realise that there may be a real data and information gap as described above. BPM can be a major initiative so it is important to start small and with a practical focus. Some of the key success factors for achieving BPM are: Management Sponsorship

Management sponsorship at the beginning is important to ensure the project is allocated the resources needed and there is a willingness to overcome resistance to change. The sponsor should have commitment, authority and respect required to drive the project.

The Right Team This is ideally a cross-functional, collaborative team of capable, committed people. Both business and IT staff should be on the team. The business owners should drive the project.

Define the Measures

Define what is required to be measured and the raw source data needed to create these measures.

Planning A well-planned approach delivers benefits throughout the life of the project and ensures success.

Data Infrastructure

A data infrastructure – data warehouse, data load tool, data marts, is a key piece of IT infrastructure.

Quality of Analysis

Gaining an effective understanding of what is required and what is available is important. Frequently too much detail detrimentally affects delivery.

Software Appropriate, functional software that can deliver both on

What factors most impact your company's level of alertness?

Source: BPM Forum

How would higher levels of alertness help differentiate your company?

Source: BPM Forum


initial and future requirements. Iterative Delivery Deliver initial high-level results quickly – ideally within 3

months. Repeat and extend thereafter. Manage Change Recognise and manage the change associated with adopting

BPM and the impact this will have or be perceived to have on people.

Education Provide training to begin to build support for the BPM initiative.

Advertise Success Advertise what has been achieved to create awareness and acceptance of the BPM approach and encourage further initiatives.

It is important to be pragmatic and realistic in your approach to implementation. You need to address the practical issues such as the information gap as well as implementing the appropriate technology

infrastructure. Business commitment and sponsorship is vital.

A Business Performance Management Measurement Framework At a very high level, a BPM measurement framework involves a hierarchy of activities:

The concept of a Scorecard has existed for a considerable amount of time. Commonly a Scorecard consists of a set of relevant performance indicators across a set of views of different dimensions of organisation activity:

• Business and financial dimension

• Customer or client dimension

• People and internal process dimension

• Organisational health dimension

What are the leading factors requiring you to modify business processes and introduce applications?

Source: BPM Forum


Together these four dimensions combine to form an overall picture of the business. The Scorecard is the headline indicator.

Business and

Finance

Customer

and Client

People and Internal

Processes

Organisational

Health

The business must be able to drill down into the detail of any performance indicator to gain insight and diagnose problems. Developing an effective Scorecard typically includes four processes:

• Translating the business vision into operational goals

• Communicating the vision and link it to specific performance

• Business planning

• Feedback and learning, and adjusting the measurement accordingly Ensuring BPM and Scorecard success means:

• Ensuring clarity and that it is linked to overall business strategy

• A balance of measures and indicators

• Quality business analysis and management of issues during the development process

• Sponsorship and acceptance of the Scorecard as a management tool

The Scorecard defines the “What” of BPM and is specified by the business. Now IT must define and enable the “How” and the associated operational processes. Together business and IT must productionise BPM

and embed its use in the business.

Do you have the ability to get real-time views into the state of critical business processes?

Source: BPM Forum

What are the obstacles to quickly modifying core business processes?

Source: BPM Forum


Operational Business Performance Management Framework The logical components of an operational BPM system consist of a number of layers and their individual constituent parts: 1. Operational Data

Sources Data needs to be available from a variety of sources across the operational business systems and from external data sources.

2. Data Extraction Facility

The process for extracting, normalising and transforming data needs to be automated. This is commonly referred to as the ETL (Extract, Transformation and Load) component.

3. Data Warehouse The DW is the corporate data store - single, consistent and with information stored over time. Implementing a data warehouse facility requires significant involvement of and input from IT.

4. Data Models and Metrics

This reflects the input of the business in defining what is being measured and what metrics are being generated. This is where input from the business is vitally important.

5. Business Intelligence Facility

This software layer provides analysis, reporting, mining and data access facilities. This is commonly off-the-shelf software from a variety of vendors, customised to suit requirements.

6. Business and Subject Area Data Marts

This optional component stores information for specific business areas into separate data stores for ease of access and use.

7. Specific Operational Business and Process Analysis

This element of the overall implementation allows business specific detailed analysis to be performed. This type of analysis focuses on identifying and resolving operational issues and trends.

8. Scorecard View This presents the high-level scorecard view of the agreed performance indicators.

9. End-User Access to Reports and Data Analysis

End-users will have appropriate access to information – from viewing to access to analysis facilities.

In what way would real-time operational data improve business outcomes?

Source: BPM Forum


This view of an Operational Business Performance Management Framework will help to identify the individual components required of an overall system and to recognise those components that may already be partially or completely in place.

Surrounding the operational framework of BPM must be a commitment to ensure that the information presented is used and acted upon. There is little merit in creating a measurement infrastructure without it being

used to deliver real business benefits.

Summary

How burdensome/time-consuming is the budgeting process currently?

Source: BPM Forum

What are the top three pitfalls that derail, delay or disrupt your budgeting process?

Source: BPM Forum


The successful implementation of Business Performance Management can deliver real business benefits, especially in today’s challenging business environment. Effective performance management is not just about numbers. BPM is the logical evolutionary next step for organisations looking for ways to drive business performance. Any BPM programme and initiative should be benefits-led: identification, measurement and realisation of benefits is basic to success. Success cannot be measured purely on factors such as delivery on time and on budget. That excludes the realisation of actual benefits. There is a real information gap within most organisations. BPM can fill this gap. Producing the scorecard pack or report is the start of the process and not the end. Software tools are a means to an end not the end in themselves. You should select a tool based on what is required and not what is available. Successful BPM requires organisational change. Sufficient education for the use of BPM software and how BPM can be used to improve roles in the organisation is important to allay people’s concerns about the impact of a BPM programme on them personally. It is crucial that business and operational objectives are part of the scope from the start of an implementation of BPM. There may be a significant investment required in IT infrastructure to ensure that BPM systems operate effectively. IT involvement is therefore important. There is a demand from the business for BPM so the right supply will be welcomed. Success is based on a mix of long term vision and short term wins.

What are the reasons you will put more effort into budgeting and planning?

Source: BPM Forum


For more information, please contact:

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Whitepaper Business Performance Measurement For Success

Technology

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