Performance Mgt Overview

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Performance Management: Overview

Aligning Execution with Strategy

TM

www.pilotsoftware.com

Market Drivers Organizations have spent billions of dollars automating historically manual systems without being able to quantify the value or optimize processes. Most current attempts to analyze the effectiveness of operational systems fail to put results in the context of a company’s goals and objectives. Add to the mix a massive push for performance accountability and real results across businesses and organizations alike – and it should come as no surprise that organizations are now emphasizing effectiveness over mere efficiency.

Transition from Efficiency to Effectiveness 1950 - 80s

1980 - 90s

1990s

2000s

Computer Automation

Functional Operations

Monitoring & Measurement

Strategic Alignment

Databases

ERP/CRM

Business Intelligence

Performance Management

Efficiency

Effectiveness

While the move towards effectiveness has roots in business intelligence technology designed to measure and monitor operational systems, performance management is a new term used to describe both the methodology and technology that takes effectiveness to a new level by ensuring that day-to-day execution is aligned with strategy. Invoking a new way of managing and operating, performance management goes beyond measuring and monitoring by helping companies answer questions such as:





Are we working on the right initiatives to achieve our goals? Does the entire team view objectives the same way? Which conflicting tasks should have emphasis? How can we leverage other peoples’ experience?

What is Performance Management? According to Ventana Research, performance management is the business strategy and methodical process to manage execution of an organization to a common set of goals and stakeholder objectives. Simply speaking, performance management uses both methodology and technology to help motivate and manage your organization by aligning execution with strategy.

Strategy

Pilot's

Execution

Approach to Performance Management

Alignment

A performance management solution can help organizations align organizational units, operational processes and individuals with predefined goals and objectives, born of a common strategy. With the continual loop of insight provided by performance management solutions, organizations can easily manage their ongoing effectiveness to improve overall performance against their goals and objectives.

Related Technologies The term “performance management” is beginning to show up in more and more situations, creating confusion about seemingly conflicting meanings. How does business intelligence differs from performance management? When should you use a scorecard versus a dashboard. The following section is designed to help you understand the words that are most commonly used around performance management.

Business Intelligence and Performance Management Business intelligence is technology that helps you measure and monitor your organization’s performance to understand organizational units, business processes, and individuals. Dashboards and reports provide convenient presentations for business intelligence. On the other hand, performance management combines both technology and methodology – explicitly tied to strategy – to help companies motivate and manage an organization to meet goals and objectives by aligning the execution with strategy. Strategy plans, scorecards, dashboards, and reports are all needed for performance management.

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Pilot

Performance Management: Overview

SOFT WA R E

Aligning Execution With Strategy

TM

www.pilotsoftware.com

Dashboards and Scorecards Dashboards are designed for specific functional roles to monitor progress against individual objectives while scorecards help organizations manage progress against both short- and long-term strategy. When used for performance management, scorecards also typically include views that track progress to initiative milestones. PilotWorks

PilotWorks

TM

TM

View Dashboard:

Strategy

Scorecard

Dashboard

Reports

Ad Hoc

H e lp

Admin

Pr e f e r e n c e s

Strategy

Marketing Dashboard

Scorecard

Dashboard

Update View

Reset

Reports New

Ad Hoc Save

Admin

Organize

H e lp Print

Pr e f e r e n c e s

Mail

Export

EDIT

Key Marketing Metrics Nov 30 - 2003

Target

Variance

140

Safety Rating

EDIT

Number of Online Orders

7.33

8.5

-14%

120

Style Rating

8.11

8

1%

100

Imaginative Rating

8.33

7

19%

80

Brand Recognition

45.61

35

30%

60

EXPAND

Objectives View - Pilot Motors Scorecard Focus on CUSTOMER: TOTAL CUSTOMER COO Strategy Financial Increase Market Share

!

40 20

Increase Profitability

0 Nov 03 Nov 06 Nov 09 Nov 12 Nov 15 Nov 18 Nov 21 Nov 24 Nov 27 Nov 30

!

Daily Online Orders

EDIT

Customer Segment Targets

SUBURBAN METRO CITY SMALL TOWN

EDIT

Market Share Across USA Nov - 2003

% of Total

Cum. %

Lewis and Sons Pilot Motors

52.17

10.50%

10.50%

Bell Pilot Motors

38.37

7.72%

18.22%

Sanders Pilot Motors

29.75

5.99%

24.21%

Anderson Pilot Motors

24.47

4.92%

29.13%

Rogers Pilot Motors

16.93

3.41%

32.54%

Provide No Bargaining Price Structure

! Reduce Cost of Service

Customer

Internal Processes

Create sustainable brand worthy of premium pricing

Product

Service

Improve Product Customizability

Drive continuous process improvement

!

!

Increase mindshare of customer segment

!

!

Add innovative features to delight the customer

Develop new distributor relationships

!

Learning & Growth

Create BestIn-Class Dealer Network

!

Align dealer network to Pilot Motor strategy

!

Improve Customer S a t i s fa c t i o n

!

Infras tr uct ure to improve info rmation ava i l a b i l i ty

!

Enhance safety features

Delight the customer

! Understand buying preferences of target audience

!

RURAL 50

60

70

Nov-2003 R e p o r t o n : C u s t o m e r Ta r g e t R a t i o %

80

90

100

110

120

130 % o f To t a l

0-10%

11- 2 0 %

21-30%

31-40%

41-%

Report on: Market Share

Dashboard example

Scorecard example

Strategy Plans A strategy plan is a visual representation of an organization’s strategy and includes the processes and systems needed to implement the strategy. Strategy plans are used to communicate, motivate and align the organization to ensure successful execution. Strategy maps (such as those used in Balanced Scorecard solutions) and cause-andeffect diagrams (such as fishbone or weibull) are all types of strategy plans.

Pilot Motors Strategy Vision: Pilot Motors will be one of the top automobile manufacturers in the world. Motors will become one of the top three providers of fun, stylish, powerful automobiles for the Mission: Pilot urban professionals by 2006.

Financial

Customer

Increase market share

Provide price structure to support “no-bargain” pricing

Improve product customizability

Add innovative features to “delight” the customer

Reduce cost of service

Create sustainable brand worthy of premium pricing

Enhance safety features

Drive continuous process improvement

Product

Performance Management is More than Financial Data Many people consider performance management a natural evolution of financial analysis and the primary domain of the chief financial officer. After all, bottom line results are typically financial and legislation for performance accountability and compliance like Sarbanes-Oxley or HIPAA has been targeted at CFOs. However, financial measures alone do not provide a complete view into an organization’s performance.

Increase mindshare of customer segment

Delight the customer

Internal Process

Develop new distributor relationships

Understand buying preferences of target segment

Services Create “best-in-class” dealer network known for customer service and quality

Improve customer satisfaction

Skills & Capabilities

Align dealer network to Pilot Motors strategy

Provide technology infrastructure to improve information availability

Strategy plan example

Because for many decades, the world’s economy has been dominated by tangible assets, financial data alone historically was sufficient to describe the state of an organization. Today, however, intangible assets such as intellectual property and internal processes drive the performance of many organizations; these are extremely difficult to manage using classic financial measures. In addition, as financial measures are lagging indicators that report on the outcomes of past actions, leading indicators that provide a view into future performance are needed to complete the picture. As an example, imagine an organization with a strategic objective of maintaining consistent sales growth of a new product in a new market. From a financial perspective, this organization might measure progress towards this objective using quarterly increases in revenue – a classic lagging indicator. Using a performance management approach, however, the organization might recognize that repeatable momentum is more important than just dollars and instead use the number of units that were sold compared to the number forecasted to close at beginning of that quarter as the lagging indicator. Instead of measuring output using revenue (financial), the organization is now measuring the effectiveness of its sales forecasting (an internal process). Presumably, if the organization consistently achieves a high target on this measure (e.g., 85% of the units forecasted to close actually close), it will have greater confidence that forecasts for future quarters – which are leading indicators – will also be accurate. To learn more about performance management, visit Pilot’s free resource library at www.pilotsoftware.com.

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