With business performance management (BPM) evolving into its next generation, sometimes called BPM 2.0, operational analytics is playing a central role. The potential payback from this area of focus is perhaps richer than any other part of BPM.
Operational analytics, as the name implies, aims to deliver in-depth and focused analysis of the performance of each key operational area of the business. Some call this operational performance management (OPM), but if you say the initials out loud you'll understand why this label hasn't really caught on. Operational analytics utilizes the same core components as the rest of BPM: planning, reporting, key performance indicators and dashboards. It also makes extensive use of multidimensional analysis tools such as high-performance OLAP cubes, already part of most BPM offerings.
The sales department is one of the first operational areas where many companies focus. The reason is obvious: if you can improve the performance of sales, the results will flow directly to the top line - and if it is the right kind of revenue, it should also drive the bottom line. The goal of sales performance management is to understand how well you are doing versus plan by product, by region, even by sales rep. Straight revenue measurement has been a staple of other business intelligence initiatives, but with BPM 2.0, you need to be able to measure revenue as well as profitability. As an example, if one geographic region uses much more sales support help than other regions, that should bring down their profitability measures even if they are leaders in revenue. This may indicate that this region needs more training so they can be more self-sufficient. If a particular product is not selling well in certain regions, it may be an indication that the marketing message does not resonate for certain demographic groups and needs to be modified, or maybe there is a different competitive situation that needs to be better understood and addressed. Having this information readily available, presented via an intuitive dashboard interface, makes it much easier for regional managers to take action that should result in overall improved performance.
It is often hard to quantify the payback of most aspects of BPM. As an example, how do you specify the value of better decision-making? Sales performance management solutions usually include a component that has a very tangible ROI: incentive compensation management. Sales compensation plans are notoriously complex and difficult to administer. Most companies still rely on Excel to calculate incentive compensation. Errors run rampant and salesmen waste valuable time trying to reconcile their own commission tracking with that of the company. If the company makes a calculation error that goes against the salesman, he will certainly notify them, but if the error is in his favor, that notification is less certain. The end result is that companies typically end up overpaying on their sales commission plans. With the compensation piece of sales performance management, they have the opportunity to eliminate those errors in payout as well as the salesman's tracking. Once the company's tracking system is recognized as accurate, the sales force will spend little time checking their commissions. The compensation module can also directly tie back to the sales performance analysis to truly reward people performing in the company's best strategic interests.
Operational analytics can address any area of the company: sales, services, manufacturing, marketing, IT, etc. However, there is one area more than any other that can truly bring a performance culture to the company: employee performance management. This is about taking the company's goals, objectives and measures down to an individual employee level. In some instances, this may mean each employee has his or her own dashboard of key measures that tie back to departmental goals, which in turn tie back to the corporate goals. This series of cascading dashboards is difficult to accomplish but worth the effort because it enforces strategic alignment company-wide. With employee performance management, each person can understand the company's strategy in terms they can relate to: how they can personally help the company to achieve its mission. Once the performance measures for an individual are understood and accepted, compensation can be linked to performance. Do not rush this, as it will create a performance-oriented culture.
Operational analytics gives senior management a more comprehensive and holistic view of the business, which enables them to make decisions that take into account the impact on departments across the company. For the rest of the employees, it makes performance management more personal by taking it down to the department or individual level. This leads to more relevance of employee activity, ownership of results and accountability. The end result is that improving the company's performance becomes everybody's focus.
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