OVERVIEW
MANAGEMENT
PERFORMANCE
POSSIBILITIES
CAPITALS
ACTIVITIES
ACTORS
BURGESS
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MANAGEMENT METRICS
METRICS FOR CORPORATE BUSINESS / IBM IBM ... Monitor. Manage. Perform Scorecarding with IBM Cognos Business Intelligence See Paper: IBM_MonitorManagePerform.pdf Peter Burgess COMMENTARY (from November 2012) The following is a White Paper prepared by IBM to market a software solution for corporate performance management. It is surprisingly similar to a 'manual' system that I helped design and implement in the corporate environment about 40 years ago. While the technology to manipulate data has changed, the underlying ideas have not, nor has the needed data changed very much. Interestingly, the issues I have faced in the long distant past seem to be similar to the problems being addressed by this software. After a conference on management and organization I attended in 1991, I wrote that the progress of technology was impressive, but the use of the data by senior management remained quite dysfunctional because little of the available data was easily accessible to the decision makers. This was not a problem of technology, but a gap in the communication between the manager cadre and the technology teams. Clearly, this problem is still in play more than twenty years later. From the TrueValueMetrics perspective, this software has the same weakness that plagues money profit corporate accounting and reporting. While the business may be better off by better use of the money profit based metrics, the larger society is still being ignored. This is problematic, and I am totally convinced that the US economy, the European economy and the global economy will not progress in an optimum manner unless these broader performance metrics are incorporated into the primary metrics for all economic activity. It is a very long time since Adam Smith wrote about the capitalist market system, and many things have changed. It is time for the money profit accounting and reporting system to change, together with other metrics like the money based GDP for macro-economic performance. Peter Burgess Peter Burgess COMMENTARY (update January 2023 ) In some ways my thinking has not changed very much over the past 10 years, but the urgency for much better corporate management metrics is way greater now than it was in 2012. One of the good impressive things about the modern economy has been the massive increase in corporate productivity during the past 40 years, but this has not been matched by an equivalent improvement in quality of life for people nor much improvement in the multiple issues associated with environmental degradation. This is a result of choices that are being made by top management in the corporate world as well as by investors. I would argue that this is also being enabled by the teaching that is goind on at the well-known business schools which have an unhrealthy focus on the primacy of financial profit. While young students may be concerned about the environment and quality of life, the focus on profit in the 'real world' serves to nullify good intentions as soon as these young people become employed in the corporate world. At the moment (January 2023) corporate organizations control the information that gets distributed about their performance, and while there is some regulation and oversight about what they say, the reality is that it is very difficult to discern much of importance in what companies report. The reporting rules work quite well for smaller simple companies, but for the very big multinational companies very little of importance can be gleaned from what companies publish. A solution to this could be independent external 'scoreboards' that relate to specific parts of the company such as an individual plant or an individual product. For me, this idea had its origin when I was a young CFO and was involved with the development of 'Responsibility Accounting' to make all the ky managers take ownership of their work and the results being delivered into the company. Poor managers never liked 'responsibility accounting' but good performers were happy to have their performance recognised. Modern managers seem to get rewarded for profit performance, but other key performance parameters seem to be almost totally ingnored. This is dangerous and needs to change. Peter Burgess | ||
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IBM ... Monitor. Manage. Perform.
Scorecarding with IBM Cognos Business Intelligence Abstract Scorecards help you define, monitor and manage your company’s critical metrics. By translating tactics and strategies into specific, measurable objectives, scorecards help you link corporate strategy to operations and ensure that your company’s goals are consistently defined, understood and communicated. IBM Cognos® Business Intelligence. Scorecarding can pull data from diverse sources and let you present your metrics in a consistent manner across the enterprise—from discrete tactical projects to company-wide initiatives. Overview All companies juggle a variety of competing priorities: developing new markets, launching new products, improving quality, serving customers, managing human resources, driving innovation and ultimately, increasing shareholder value. These priorities, in one form or another, make up the basic elements of almost any company’s strategy. Executives and managers determine the value that each of these priorities delivers for the particular situation, their relative importance, and the interactions among the processes that drive them. Once these have been determined, executives can integrate these priorities into a strategic plan and communicate that plan to employees throughout the organization. Historically, companies have relied primarily on financial metrics to set priorities and guide decision-making. But this approach is proving increasingly ineffective. Financial metrics reveal only the effect of decisions made in the past. In a complex and challenging economy, companies need to pay more attention to forward-looking or “leading” metrics that are tied to the company’s value drivers. Companies need to integrate leading metrics into a performance management environment that can be deployed across the entire organization. Leading metrics, such as customer satisfaction, are based on cause-and-effect relationships. They can alert companies to problems before they adversely affect the bottom line. For example, declining customer satisfaction can point to an eventual drop in sales and a loss of market share. Many departments’ activities affect customer satisfaction and employees in each department need to know their roles and responsibilities and where they fit into the overall customer satisfaction strategy. Until now, this has been easier said than done. One of the biggest challenges companies face has been in consolidating performance information from disparate data sources into a coherent system that people can trust. Each data source—ERP, CRM, spreadsheets, flat files, data marts and others—provides important information about a particular aspect of the company’s performance. But each collects, defines, and displays the information in a different way. Disparate data creates confusion and inefficiency, and diffuses accountability. Metrics based on this data are often incomplete, conflicting, or limited to a particular department or function. A common problem among managers working with this data is that they spend more time discussing the validity of the data than using it to manage performance. Metrics may show that a problem exists, but not who is responsible for solving it. In addition, managers may interpret metrics differently from what executives intend. As a result, their teams may focus on objectives that conflict with overall strategic goals. Without commonly understood definitions and a consistently defined view of performance, executives have difficulty understanding how the company is performing overall, whether the company is going in the right direction, and who is responsible for taking corrective action. Managers have no way of monitoring their departments’ performance relative to the overall strategy, and risk misallocating resources. Employees have little opportunity to collaborate for effective decision-making. So despite an abundance of performance data, companies still make many key decisions based only on gut feel and best guesses. Business problems Three common business pains Experts identify three common pain-points for companies operating in today’s ultra-competitive business environment. Lack of alignment When they lack a commonly shared and understood strategy, companies risk wasting resources and effort. In the absence of commonly shared metrics, managers may measure performance in areas not related to the corporate strategy or aligned in the correct way. This usually leads to managers suggesting different priorities or providing conflicting solutions to performance problems. In “Using the Balanced Scorecard as a Strategic Management System,” Balanced Scorecard creators Drs. Robert Kaplan and David Norton described how the 25 executives at a then recently merged bank agreed “to provide superior service to targeted customers,” only to find out later that each executive had a different definition of “superior service” and a different image of “targeted customers.” Disagreement on what is important Without a shared understanding of corporate goals, there is no clarity as to what is or is not a priority. Human and financial resources can be spread too thin and managers can be distracted by those opportunities that are easiest to capitalize on (the proverbial “low-hanging fruit”). But the managers may do little to pursue higher-level strategic goals and individual employees may be caught between competing or conflicting initiatives, lacking both the context and information they need to decide where to focus. Lack of accountability and ownership Every employee knows they are responsible for some part of driving corporate performance. But not every employee knows when or if they are responsible for solving a specific performance problem. Many problems persist or go unaddressed simply because no one person, team, or department has been specifically assigned to solve them. Also, many problems span departments and functions. So people in each department need to understand how their decisions affect other departments. Yet few employees have the means to look beyond their respective silos. A scorecarding system can help address all three of these business pains. Business drivers What is scorecarding? Scorecarding is an approach to monitoring, measuring, and managing performance at a tactical or strategic level for an organization, a team, or an individual employee. At the tactical level, employees and managers use scorecards to monitor performance against quantifiable targets for discrete, specific projects. At the strategic level, scorecards can be a valuable tool in a corporate-wide performance management system that executives use to map out the overall corporate strategy and communicate it throughout the organization. A scorecard typically consists of a list of key performance indicators (KPIs) or metrics that present performance data for a business process or strategic goal. Most scorecards include a variety of graphical elements and feature a color scheme and trend arrows that indicate whether performance is on or off target and whether it is trending up or down. Most scorecards, such as those used in Balanced Scorecard implementations, use a mix of financial and non-financial information, including leading and lagging (financial) indicators, and corresponding strategy maps. The Balanced Scorecard first appeared in the Harvard Business Review in 1992. In their seminal article, The Balanced Scorecard: Measures that Drive Performance, Kaplan and Norton asserted that a company’s financial metrics reflected the effects of only a small proportion of the decisions made within a company.2 They said that a company’s true value could be more accurately evaluated and increased by identifying the value created by the interplay of people, processes, and other intangible assets such as customer relationships, employee skills, and brand. These dynamics would be aligned with the overall strategy and progress could best be measured with metrics grouped into four interconnected perspectives: financial, customer, internal processes, and learning and growth. These perspectives help companies answer fundamental questions about their business performance. For example:
Scorecarding software applications Some companies have tried to support their scorecarding initiatives with a mix of purchased and homegrown software applications. Many of these solutions are connected to ERP systems in a manner that requires extensive coding to modify. This can make them more of a burden than a benefit when the company changes its priorities and benchmarks in response to changing market conditions. Home-grown applications consist primarily of static HTML pages and usually offer only limited analytical capabilities. They rarely deliver the functionality required to adequately address performance issues. They may show that performance is off track, but rarely provide any insight as to why this might be the case. Companies need a scorecarding application that can be delivered to every employee so they can monitor their own performance. Companies also need an application that provides the necessary analytic capabilities that will enable managers to understand why performance is on or off track. The solution Managing performance with Cognos Business Intelligence Scorecarding Cognos Business Intelligence Scorecarding is software that lets you create, manage and present your company’s critical metrics and help users throughout the organization understand the dynamic cause-and-effect relationships of the key processes behind those metrics. Cognos Business Intelligence Scorecarding drives accountability and lets you create a consistent and reliable source of metrics for individual employees, managers and executives. Most important, it links individual decisions and tactics to corporate goals and strategy. You can use Cognos Business Intelligence Scorecarding to manage the full scope of business processes: from discrete projects at the tactical level to corporate-wide strategies. It can be deployed to a few users or across business units, operating subsidiaries and geographic regions. And it can be used to manage performance along with a range of other methodologies mentioned earlier: Six Sigma, Total Quality Management (TQM), Activity-Based Costing (ABC) and Economic Value Added (EVA). Cognos Business Intelligence Scorecarding helps business users quickly find answers to common questions, regardless of the management methodology they use. For example:
Part of a complete business intelligence solution Scorecarding is a core capability of Cognos Business Intelligence, the only BI solution to provide complete BI capabilities for all users, from a single product, on a single architecture. While many scorecarding initiatives fail because of a lack of adoption by middle management, connecting scorecards to a broader BI environment can increase adoption within this key audience. Cognos Business Intelligence Scorecarding provides direct access to BI reports, analysis, and alerts that help business users go beyond their metrics to analyze and understand the factors that drive performance. It provides managers with the relevant tactical information they need to translate strategy into action. IMAGE Strategy map with associated metrics How Cognos scorecarding solves business pains Ensuring alignment Reliable and consistent information You can use Cognos Business Intelligence Scorecarding to create the single and trusted source of performance data that business users need to monitor their performance against targets. Administrators can create a metric, process diagram, or scorecard once and use it across the organization to ensure that everyone is sharing the same definitions and working toward the same targets. Understand key relationships Strategy maps and impact analysis diagrams help users understand the cause-and-effect relationships of key processes and metrics. Administrators can create these directly within the application using intuitive wizards and design tools. IMAGE Cause-and-effect diagram Build metrics and scorecards easily Metrics can integrate a range of cross-functional data from any source, including OLAP and dimensionally aware relational data, ERP and CRM systems, spreadsheets, flat files, legacy and mainframe data, and user-entered values. Intuitive wizards guide administrators through the metrics and scorecard design process. Increase focus on key issues Flexible viewing options Cognos Business Intelligence Scorecarding lets users organize and view their scorecards in different ways to focus attention on key issues. Users can group metrics and scorecards:
Immediate awareness of issues Users can choose to be notified any time the status of a metric changes. Alerts can be automatically delivered through email or to a user’s mobile device, allowing the user to see at a glance which metrics need immediate attention. If performance falls below a designated threshold, users can be alerted and take immediate action. They can also access related business intelligence sources and reports to analyze the underlying causes, and collaborate with others to find a solution. Ensure ownership and accountability Metric ownership Every metric within Cognos Business Intelligence Scorecarding has an identified primary owner to ensure that performance issues are not overlooked. Manage corrective actions Embedded initiative tracking and collaboration capabilities help users manage actions or projects they undertake when a metric turns red or begins a downward trend. IMAGE Initiative tracking Embedded business intelligence capabilities Users can access BI reports, analysis, dashboards, and other content from within the scorecarding environment to analyze the factors that affect performance. Users can also access Microsoft® Word documents, websites, and other information without leaving the scorecarding application. Conclusion Good decisions are the building blocks of great business performance. And Cognos Business Intelligence Scorecarding helps organizations of all sizes, in all industries make smarter decisions. Scorecards link strategy to operations and provide business units, departments and individuals with a common understanding of metrics and actionable information about basic, day-to-day business performance: Cognos Business Intelligence Scorecarding is built on a proven technology platform, designed to upgrade seamlessly and scale for the broadest of deployments. It is part of a complete performance management system that connects forecasts, plans, targets and actuals with underlying operational data. And in today’s challenging economy, Cognos Business Intelligence Scorecarding can be an invaluable tool to help guide you from the leading indicators of your daily business to a leadership position in your industry. About IBM Business Analytics IBM Business Analytics software delivers complete, consistent and accurate information that decision-makers trust to improve business performance. A comprehensive portfolio of business intelligence, advanced analytics, financial performance and strategy management and analytic applications gives you clear, immediate and actionable insights into current performance and the ability to predict future outcomes. Combined with rich industry solutions, proven practices and professional services, organizations of every size can drive the highest IT productivity and deliver better results. For more information For further information or to reach a representative: ibm.com/cognos Request a call To request a call or to ask a question, go to ibm.com/cognos/ contactus. An IBM Cognos representative will respond to your enquiry within two business days. Endnotes
Smarter Decisions. Better Results. Cognos 10 delivers a revolutionary new user experience and expands traditional business intelligence (BI) with planning, scenario modeling, real-time monitoring and predictive analytics. With the ability to interact, search and assemble all perspectives of your business, Cognos 10 provides a limitless BI workspace to support how people think and work. Cognos 10 enables organizations to outperform by providing:
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