Fostering the Culture of Accountability

Fostering the Culture of Accountability Three Approaches to Creating Performance Management Systems An Expert Series White Paper Table of Contents 1 Executive Summary 3 Introduction: Achieving Organizational Success 6 Performance Management Technical Alternatives 8 Performance Management in Action: The Component Steps 16 Best-of-Breed Frameworks: What to Look For 21 Conclusion 22 About Information Builders Executive Summary Maximizing performance is every business’ top priority today. Companies that can clearly identify, articulate, and execute their strategic goals are well positioned to compete and succeed. To effectively achieve these goals, companies must measure and manage actual business performance against them in a highly coordinated manner. In the process, it’s critically important for management to foster a culture of accountability, clearly communicating both strategy and goals, meeting all data access and information delivery requirements, and including everyone in a closed-loop process of continual improvement. Technology is a key element in enabling that culture of accountability to succeed. Three current technical approaches based on the strategic deployment of business intelligence technology are compared in this paper: I Tailor-made – solution constructed from the ground up to meet unique needs I Shrink-wrapped – packaged application that allows for very limited customization I Framework – modular components easily and quickly customized and maintained Framework For Performance Management Success Based on a comprehensive, integrated enterprise business intelligence suite (EBIS), the technical framework approach is the best way to support successful performance management initiatives because: I It uses technology designed for enterprise-level integration I It assumes a customized implementation, not out-of-the-box usage By flexibly customizing performance management solutions that are integrated into a corporation’s infrastructure, a framework approach reduces risk and expense and is easily extensible and maintainable. Just as important, this approach can substantively contribute to a culture of accountability by directly involving people at all levels in the performance management initiative, and also by making individual contributions transparent to the entire organization. The solution that accomplishes that must easily scale to meet the needs of the entire enterprise, with interfaces customizable by role in the company and easy, integrated access to any enterprise data. It must 1 Information Builders be flexible enough to work within any performance management methodology and be easily and centrally deployed and managed, with security provided through centrally administered access privileges. A framework based on the right EBIS provides all these advantages. Framework-generated performance management functionality should include: I Reporting, financial reporting, and analytics for detailed analysis and auditability I Automatic, continuous business process optimization using objective and subjective measures, closed-loop feedback, and metrics linked to project planning technology I Tailored metric feeds from all enterprise data, via ETL for most needs and EAI when real-time feeds are required I Scheduled or event-based alerts for solving problems in a timely manner I Excel integration for usability and analytical power I Mobile access for full participation regardless of location I Forecasting and planning capabilities that coexist with or bypass cube building Available – and Integrator Ready The most important characteristic of a performance management framework is its readiness to flexibly customize highly scalable solutions that deliver comprehensive and integrated functionality at low TCO for large deployments. Framework-based performance management solutions are available directly from certain EBIS vendors or from systems integration firms. 2 Fostering the Culture of Accountability Introduction: Achieving Organizational Success In a business recovery that’s tentative at best, managing business performance takes the driver’s seat. Don’t expect performance management to take a back seat as things get better: it’s there to stay, steering companies through a future dominated by such things as accountability, regulatory and industry standards compliance, and information-endowed profitability. Companies that can clearly identify, articulate, and execute their strategic goals are well positioned to compete and succeed. But while developing and communicating a strategy is one thing, successfully executing it is another. Fortune magazine studies show that in more than 70 percent of cases where businesses fail, it isn’t the strategy but the execution that went awry. In fact, fewer than 10 percent of effectively developed strategies are effectively implemented. To ensure that they execute their goals successfully, companies must measure and manage actual business performance against those goals in a highly coordinated manner by: I Clearly communicating both strategy and goals I Fostering a culture of accountability I Meeting all data access and information delivery requirements I Involving as many people as possible in a closed-loop performance management process What Is Performance Management? Performance management (PM) – a.k.a. corporate performance management (CPM), business performance management (BPM), and enterprise performance management (EPM) – is the sum of the methodologies, metrics, processes, and technology used to carry out the four tasks listed above. A corporate or business unit initiative, performance management incorporates both top-down and bottom-up accountability and visibility by generating tactical processes and metrics throughout the organization that roll up and directly execute the strategic goals. Three things complete the picture. First, a measuring system allows immediate and constant review of these metrics against the goals. Second, communication is key in a culture of accountability – the “social glue” that holds it all together. And third, execution is continuously mapped back to the original strategy so everyone remembers the game plan. 3 Information Builders A corporate performance management system should be capable of obtaining data from anywhere in the enterprise and delivering it as usable information to any type of user. The Full Picture, Versus the Financial View Alone Some people believe that if you gain control over an organization’s financials, you’ve done enough. Unfortunately, that belief is not consistent with today’s business realities. Financial measurement tends to look backward, not forward (like driving while looking through the rearview mirror). It also tends to limit people’s attention to the current quarter or fiscal year, rather than opening it up to the longer or ongoing view. Financial measurement often takes place in processes and technical silos whose walls are reinforced by the finance-only view. And financial measures don’t tell the whole story about the organization. 4 Fostering the Culture of Accountability Performance management and its balanced scorecard (BSC) underpinnings take a view of management that extends beyond financial control and planning to measure performance in the larger sense, beyond profit and loss. For most organizations, that means achieving control over finance, customer satisfaction, internal business processes, including the supply chain, and human resources. Every dimension of the organization is visible and managed in a timely fashion. And since performance management’s full-picture view is not limited to events after they happen, forecasting also has its place throughout the process. Who Should Be Involved? Originally, the idea of performance management was for management to simply retrieve relevant information and run with it. But that hasn’t worked very well, because as we’ve discovered in recent years, people generally know their own jobs better than anyone else. That means management should include as many people as possible in the measurement aspect of the process – and (many believe) even in the review cycle. If the business systems say there’s plenty of inventory on hand, but someone in the warehouse knows differently, then that person should be able to correct the measurement and explain it in a comment. (See “Closing the Loop” on page 12.) Motivation is another important reason to deploy the performance management initiative widely. Making individuals’ successes or failures in meeting goals transparent to others gives teeth to the culture of accountability. No one wants to be seen (by everyone else) as personally responsible for a corporate or workgroup problem, and many want to be publicly recognized for leading the pack. These psychological factors are powerful reasons to involve everyone and can drive the requirement for maximum scalability in the technical approach taken. In some cases, not everyone should be privy to detailed information about the company. That point of view dictates access based on detailed criteria – role, name, or hiring status, for example.