One of the keys to a successful career is meeting and exceeding your goals and objectives. As long as there have been managers and staff, there have been reviews based on performance. Often the incentive for obtaining the specified objectives and goals are monetary if expectations are met or exceeded, employees are rewarded.
The same holds true for organizations. Performance management being able to measure and optimize performance based on a clearly articulated and communicated organizational strategy is critical to successful business. One study, conducted by the American Management Association, showed that out of 203 companies (ranging in size from $27 million to $50 billion) organizations that are "measurement managed" rank in the top third of their industry.
Performance management helps companies reach that "top third" status by enabling them to clearly articulate their business strategy, align their business to that strategy, identify their key performance indicators (KPIs) and track progress, and deliver the information to the desktops of decision-makers. Like the employee who sets his annual objectives, organizations have to delineate their corporate strategy and communicate it effectively to their employees so there is a clear link between the strategic objectives and every work group within the organization. But, how do organizations monitor and manage this process?
Balanced scorecard is an effective technology for measuring and monitoring organizational performance. It enables the assignment of KPIs and provides the ability to track and optimize performance based on those indicators. KPIs are measured based on a set of metrics that consider multiple interdependent perspectives (not based solely on traditional methods of performance rating, such as financial data alone), and they help organizations balance their focus on more than just the "bottom line." This approach ensures that customer service, employee satisfaction, and sales and marketing are weighted appropriately, resulting in well-rounded and successful companies. Until recently, however, balanced scorecard was limited in reference to the level of information it provided and the degree to which it enabled drill down of presented information for the purpose of heavy analysis. The data warehouse is virtually eliminating those limitations.
The balanced scorecard and data warehousing are a perfect combination to achieve the greatest, most efficient and accurate performance analysis and management yet. The combined technologies enable organizations to balance their resources and manage their business functions according to process and key performance indicators. The data warehouse is the effective infrastructure that supports the performance management process, and it provides a means for collecting and storing the data. Marrying balanced scorecard and data warehousing technology provides decision-makers with the ability to drill down on the data delivered to their desktops by the balanced scorecard.
The data warehouse provides companies with the ability to compare and analyze identified KPIs against actual data, allowing for benchmarking and performance improvement tracking. This is a critical piece of performance management knowing where you have been, where you are now and where you are heading. Unlike the annual performance appraisal, the data warehouse-supported balanced scorecard system enables organizations to monitor their progress continuously.
The best balanced scorecard systems are not necessarily the ones with the fanciest desktop. There are a few critical components in an effective balanced scorecard system:
* Real-time updates: Getting last month's results 30 days late doesn't cut it in today's rapidly changing world of e-commerce. Some measures should be tracked to the second; some are acceptable at month end. Determining what is needed when and why should be driven by the cost-to-value ratio of the information and the process.
* Feedback loop: Presenting the measures of the business is one element of the balanced scorecard, but a communications tool that supports the upward and downward feedback at management level and across business functions will turn the dashboard into a true management cockpit.
* Extensive detail: A good balanced scorecard system should contain the finest level of detail in order to craft the complete picture of the measure. For instance, it should contain measures (e.g., customer satisfaction), sub-measures (e.g., number of surveys, number of customers, customers surveyed, customer rating) and component level data (e.g., customer, location, product, service, etc.).
There is considerable analysis involved in implementing a performance management solution. Businesses must be carefully examined, and the metrics must be broken down by:
- Time dimensions
- Information dimensions
- Data availability
- Data access requirements
- Completeness and requirements
- Frequency of use
That information translates into the architectural components that deliver the warehouse and, ultimately, the balanced scorecard to the desktop. Therefore, the initial commitment to defining the appropriate strategies and measures at every level of the business (not just at the top) is critical.
KPIs are the primary means of communicating performance across the organization. KPIs should be balanced and not just focus on the traditional financial measures used to monitor performance. The combination of data warehousing and balanced scorecard technology deliver KPIs to the desktop, helping companies better satisfy customers, monitor progress, benchmark process and activities, drive change, show signposts of improvement, create balance and provide relevant information.
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