The economy is down, and many people are wondering what to do to keep their businesses alive. They ask everyone they know for clues and ideas that might lead to new business. However, without details of what is working and what is not working, how can they expect to make the right decision? There are a host of automated techniques for measuring and reporting on the health of a business that executives can use to obtain key business indicators. But independent of the technology used, the need to develop a corporate culture of performance has never been more urgent.
What is a Culture of Performance Management?
First, successful organizations understand that tracking business indicators is key, and most important is establishing indicators that are aligned with an organizations strategies. Businesses focused on performance understand that sharing information is adventageous. Transparency and open communications are key concepts to foster the development of new ideas spurring growth.
It isnt just a concern of the CEO. Executives throughout an organization should dedicate time to discuss and analyze business indicators. However, few executives will do so if the information is not immediately available, especially at a crucial time of day when they can squeeze a meeting in with their co-execs.
Some companies spend a great amount of effort to gather data - forcing an immense administrative burden upon employees at every level of the organization - but then skimp on the crucial analysis of the data gathered. It is through analysis that a company gains the insight needed to adjust to future changes in the marketplace. Such insight comes from understanding how changes in data affect the bottom line. Only by bringing together key business information in a timely fashion can executives produce actionable, forward-looking conclusions necessary to make the proper adjustments during todays economic crises. In other words, data gathering must be automated. If data gathering is not automated, this time-sensitive, high-level insight is difficult, if not impossible, to obtain.
The industry term for automated gathering and analyzing of corporate performance data is performance management. I define performance management as the process that a company follows for improving its financial results, utilizing business intelligence tools as the enabling technology to automate the gathering and analysis of data.
Senior executives who want to improve the performance of their company must recognize that driving accountability through the organization often requires changing behavior. For example, there may be information hoarders in the organization who stand as gatekeepers, impeding the flow of information. Or the CEO may feel that s/he has everything s/he needs. However, both of these cultural roadblocks prevent executives from peeling the onion or digging deeper to understand the critical factors that are responsible for their success (or lack of it).
In a fully functional performance management environment, a companys executives have alignment with each other and are able to focus on the factors that matter most, relating to the performance of their business. Accountability is established because key information is readily available, shared and transparent. With business indicators being updated as information events happen, the opportunity for analysis and accurate prediction of future results becomes very realistic in time for those future results to still be affected favorably for the company. Companies with automated performance management tools consider them key resources to achieve competitive advantage. Executives in a performance management environment are able to focus their time on moving the business forward.
How do companies evolve their culture to foster performance management? Often, it starts with an internal champion who can demonstrate the value of the new paradigm. Picking the right champion is a critical success factor. The champion should be a business optimist, because changing the company culture is never a simple thing. The champion needs to be someone who can think of performance management as the art of the possible.
Appoint a Champion
The ideal champion will be at the CXO level, preferably someone who already has trouble keeping up with the information flowing through his department, someone with influence across the other executives in the company and who has a keen interest in solving not only his/her own problems but the problems across the company. This person should realize that the information they need often exists within the company, if they could only get at it. Of course, the ideal champion is the CEO who serves as the spark to launch a performance management culture change, realizing that s/he cannot get the data that s/he needs.
Where to Begin
Establishing a performance management culture is much more than creating reports for the executives to ignore. It requires understanding the business model and fundamental strategies that drive success within the company and the industry. Expect to take a couple of months working through the following four-step analysis process:
- Get ready to adopt performance management. (Establish a new culture of open, transparent measurement and analysis of business data.)
- Know where your business is today. (Establish a baseline.)
- Know where you want your business to go tomorrow, next month next year. (Establish realistic, ever changeable, but achievable stretch targets lots of key concepts here.)
- Open up the discussion of options for reaching those strategic goals. (Establish cultural change by bringing together all of the involved players.)
Conventional wisdom says that 70 percent of large projects fail. There are two key reasons for this. One reason is the lack of sponsorship from a champion who is capable of corralling sufficient resources and support from the whole of the organization. The other reason is the lack of buy-in from the organization as a whole. Performance management is a cultural change. Data must come from across the organization, be automated and continuously updated. This can only be done when everyone is on board and recognizes the value to the business, their jobs and the company as whole. A fully functioning performance management environment can be a game-changing influence to a company. But it requires top management to lead the adoption of a new culture of performance management to be successful.
Example of a Performance Management Dashboard
Figure 1 is an example of a performance management dashboard taken from a company in the oil and gas industry. Executives were looking for a way to better monitor their operating margins. They wanted to understand which geographies needed more attention in order to reduce costs and increase margins and top-line revenues. A dashboard was created so that executives could view key indicators, and through the graphical representation, quickly and easily see where their attention was needed. The information is updated regularly, drawn from the companys many customer and accounting systems. Because data is automatically collected from across the entire company, the dashboard is viewed as a key tool, replacing gut-feel management with management based on facts.
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