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