Week 3: Business Performance Management

Business Performance Management

Definition: business processes, methodologies, metrics and technologies used by enterprises to measure, monitor and manage business performance

Key Components

set of integrated, closed-looped management and analytic processes, supported by technology, that addresses financial as well as operational activities

tools for businesses to define strategic goals and then measure/manage performance against them

Closed-Loop Process

Step 1: Strategize - Where do we want to go?

Tasks common to the strategic planning process

Conduct a current situation analysis

Determine the planning horizon

Conduct an environmental scan

Identify critical success factors

Complete a gap analysis

Create a strategic vision

Develop a business strategy

Identify strategic objectives & goals

Step 2: Plan - How do we get there?

Operational Planning

translates an organization's strategic objectives and goals into a set of well-defined tactics and initiatives, resources requirements and expected results for some future time period

Step 3: Monitor/Analyze - How are we doing?

What to monitor?

Critical success factors

Strategic goals & targets

Key performance indicators

How to monitor?

Balanced Scorecard

Step 4: Act & Adjust - What do we need to do differently?

Success depends on new projects

Creating new products

Emerging new markets

Acquiring new customers

Streamlining some process

Many new projects and ventures fail

Performance Measurement System

Definition: a system that assists managers in tracking the implementation of business strategy by comparing actual results against strategic goals and objectives

Performance Management - KPIs

KPIs represents a strategic objective and metric that measures performance against a goal

Features

Strategy: strategy objectives

Targets: measures performance against specific targets

Ranges: targets have performance ranges (above, below target)

Encodings: ranges are encoded in colours for visual displays

Time frames: targets are assigned time frames by which they must be achieved

Benchmarks: targets are measured against a baseline or benchmark

BPM Methodology: Balanced Scorecard

a holistic measurement system for aligning strategies with actions based on 4 perspectives: Financial Perspective< Customer Perspective, Internal (process) Perspective & Learning & Growth Perspective

PESTEL Analysis

Political

war, terrorism, election changes & public policy sniffs

Economic

consumer confidence, inflation, economic growth & trends, government funding, new business formation rates, job growth, unemployment, exchange rates & foreign competition

Social

demographics of workforce & the target customer, fashion & lfestyle shifts, population movements, immigration & emigration, occupational trends & needs, economic profiles & health shifts

Technical

new production methods, new fuels and energy sources, communication methods and channels & outsourciing

Environmental

environmental regulations, public opinion, environmental risk/accidents & recycling

Legal

employment law, industry law & lawsuits, consumer protection law & international law and regulations

SWOT Analysis

Strengths: what your organisation is strong in?

Weakness: what your organisation is weak in?

Opportunities: where your organisation has great potential?

Threats: where your organisation could be at risk

Strategic Themes

Tips on selecting strategic themes

select no more than 3 to 5 strategic themes

Give them memorable & motivational names of 3 to 5 words beginning with a verb

Complement each other

Bridge the strategic gap to your destination

Defined with good execution

Columns in BSC Perspective

Strategic Maps: shows strategic objectives and casual links for one strategic theme

Objectives: listing the objectives as bulleted text makes its easier to align measurement & initiatives in the table

Measure: unit by which process to the objective to be evaluated. It can be lag/lead

Target: quantitative value at a given point in time needed to achieve the objectives

Initiatives: collections of actions/projects designed to achieve the strategic objective

Strategic Map

Visual representation of what the execution team believes will drive its strategy

Shows a chain of objectives that will lend to successfully executing the strategy

4 perspectives: Financial, Customer, Internal Operations, Learning & Growth

Setting Target Values

Historical tracking & benchmarking of organisational data

Horizontal comparison between similar business units in your organisation

Association benchmarks

Best practice surveys from private consulting firms

Best estimates from a panel of experts

Regulatory benchmarks set by legislative agencies