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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.
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. 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.A performance management solution can help organizations align organizational units, operational processes and individuals with pre-defined 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.
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Aligning Execution with Strategy
TM
Performance Management: Overview
Databases ERP/CRM BusinessIntelligencePerformanceManagement
Transition from Efficiency to Effectiveness
Efficiency Effectiveness
1950 - 80s1980 - 90s1990s2000s
ComputerAutomationFunctionalOperationsMonitoring &MeasurementStrategic Alignment
Approach to Performance Management
Pilot's
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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.
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-and-effect diagrams (such as fishbone or weibull) are all types of strategy plans.
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. 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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www.pilotsoftware.com
Aligning Execution With Strategy
TM
Performance Management: Overview
Align dealer networkto Pilot Motors strategyEnhancesafetyfeaturesImproveproductcustomizabilityAdd innovativefeatures to“delight” thecustomerIncreasemarket shareProvide pricestructure tosupport“no-bargain”pricing Reducecost of serviceCreatesustainablebrandworthy of premiumpricingDelightthe customerUnderstandbuyingpreferences of target segmentIncreasemindshare of customersegmentDevelop newdistributorrelationshipsDrivecontinuousprocessimprovement
Create“best-in-class” dealer network known for customer service and quality
ImprovecustomersatisfactionProvide technologyinfrastructure to improveinformation availability
Pilot Motors Strategy
Pilot Motors will be one of the top automobile manufacturers in the world.Pilot Motors will be one of the top automobile manufacturers in the world.
Vision:
Pilot Motors willbecome one of the top three providers of fun,stylish,powerfulautomobiles forthe urban professionals by 2006.Pilot Motors willbecome one of the top three providers of fun,stylish,powerfulautomobiles forthe urban professionals by 2006.
Mission:Mission:
FinancialCustomerProductInternal ProcessServicesServicesSkills & Capabilities
Strategy plan example
PilotPilot
WorksWorks
TM
Dashboard example
View Dashboard:Marketing DashboardKey Marketing MetricsNov 30 - 2003TargetVarianceNov - 2003% of TotalCum. %
Daily Online OrdersLewis and Sons Pilot MotorsBell Pilot MotorsSanders Pilot Motors Anderson Pilot MotorsRogers Pilot Motors52.1738.3729.7524.4716.9310.50%7.72%5.99%4.92%3.41%10.50%18.22%24.21%29.13%32.54%
% of TotalReport on: Market ShareReport on: Customer Target Ratio%0-10%11-20%21-30%31-40%41-%
Nov03020406080100120140Nov06Nov12Nov09Nov15Nov18Nov21Nov24Nov27Nov305060807090100110120130Nov-2003
Safety RatingImaginative Rating
Style Rating
Brand Recognition7.338.33
8.11
45.618.57
8
35-14%19%
1%
30%Number of Online OrdersCustomer Segment Targets
SUBURBANMETROCITYSMALLTOWNRURAL
Market Share Across USA
EDITEDIT
EDIT
EDIT
HelpPreferencesScorecardStrategyReportsAd HocAdminDashboard
PilotPilot
WorksWorks
TM
Increase MarketShareIncreaseProfitabilityProvide NoBargaining PriceStructureReduce Costof ServiceCreate sustainablebrand worthy of premium pricingIncreasemindshare of customer segmentDelight thecustomerUnderstand buyingpreferences of target audienceDrive continuousprocessimprovementDevelop newdistributorrelationshipsCreate Best-In-Class DealerNetwork Improve CustomerSatisfaction Align dealernetwork to PilotMotor strategyInfrastructure toimproveinformationavailabilityImprove ProductCustomizability Add innovativefeatures to delightthe customerEnhance safetyfeatures
!!!!!!!!!!!!!!
FinancialCustomerInternal ProcessesLearning & GrowthCOO StrategyProductService
E X P A N D
Objectives View - Pilot Motors ScorecardFocus on
CUSTOMER: TOTAL CUSTOMER
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HelpPreferencesScorecardStrategyReportsAd HocAdminDashboard
Scorecard example
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