There’s a lot of interest in performance management these days. Implemented properly, it can focus and align efforts; improve responsiveness and customer service; increase productivity; and drive down costs. It also enables supervisors and managers to make the transition from being functionally proficient to more effective business managers. Systems integrators who see performance management as the “next big thing” are offering Business Intelligence (BI) solutions as the next step in the evolution of performance improvement.
Yet, despite its improvement capabilities, challenges with using BI solutions in performance management remain. And organizations who want to maximize on their BI investment and achieve wanted results need to not only contain the data and metrics but incorporate them into their management processes to achieve effective performance management.
Today, strong similarities are present between the current climate and the expectations and promise of transformational performance improvement resulting from Enterprise Resource Planning (ERP) of the late ‘90s—the then-favorite solution whose role is now played by BI solutions.
There is no doubt that BI applications offer potentially significant financial and operational performance improvement capabilities. They are certainly worth considering and can offer an exceptional return on investment (ROI). But “potential” and “actual” are very different and the road from one to the other is often long, expensive and arduous.
The challenge with using BI solutions in performance management is that the numbers are perceived to be personal. People are frequently measured, evaluated and paid based on the data. If the information is wrong or the human dimensions of the implementation are not adequately provided for, employees will avoid using the BI system and will start making their own—or not using anything at all, which is far more costly to the organization and unreliable to boot.
While most organizations have a lot of metrics, they are not always the right metrics or used in the right way. Organizations do not always put enough time and thought into defining the correct Critical Success Factors; Key Performance Indicators (KPIs); Performance Indicators; and Results Indicators. And even when companies do have the right metrics, they are often not incorporated into the management processes in an integrated, level-appropriate way. Metrics have to be applied continually every day at each level in the organization in order to translate into actual performance improvement—the essence of performance management. A BI system can enable this process but it will not in and of itself deliver the required outcomes.
Additionally, some organizations are allergic to accountability. If transparency and accountability are lacking, the transition to effective performance management can be difficult. It will take time for the organization to assimilate the necessary level of transparency and it generally requires professional change management support. However, if implemented properly, these processes will become fully embedded into the organization’s ethos and the outcomes will be substantial.
Get the right performance management process
While the best organizations often achieve stellar results, it involves far more than integrating a new application such as business intelligence. Converting data to reliable, actionable information; having effective business processes; and having a full understanding of how to drive performance in an enterprise environment are all critical to success.
An effective performance management process delivers quantifiable improvements in customer service, productivity and financial performance. Follow these 11 tips to implement an effective performance management process that is right for you:
- Start with the answer—Be clear about how you compete, the specific financial outcomes you are looking for and the operational capabilities required. Then, determine which metrics are required at the strategic, operational and tactical levels in the organization. If you don’t know how to do this, get help. Good metrics are really important to the success of your process.
- Reporting is overrated—Most metrics packages are heavily oriented toward what happened (results indicators), as opposed to what is happening or will happen (performance indicators). Lean toward managing proactively versus reactively—that's where the money is.
- Balance is overrated—There’s no doubt that trade-offs have to be managed and the best organizations excel at it. But know what matters most to your performance and drive it home. Too much emphasis on balance can result in stasis at suboptimal performance levels.
- Metrics are not results—Many organizations do not incorporate metrics into their daily management practices to the degree that they could, especially performance indicators. Additionally, they also don’t know how to use metrics effectively. If you are going to implement performance management, spend enough time on training to ensure that your people know how to use the information and that the process is effectively embedded in your organization.
- Don’t boil the ocean—Implementing enterprise-wide performance management can be a bear, especially if your data is not readily accessible or accurate. It’s usually necessary to walk before you run and there’s no need to wait to get started. Figure out the areas that matter most and begin there.
- Be realistic—If your enterprise system data is not highly accurate or functioning effectively, hooking a BI solution up to it is only going to add to the problem. The foundational data and processes are key.
- Use the right tools—There are some great BI solutions available. Find the one that meets your business requirements and make sure it works in your system’s environment.
- Use what you have—There is definitely a place for BI solutions but don’t underestimate the enterprise systems you already have. Know your capabilities and gaps before spending big on new solutions.
- Prove the prototype—Make sure the process works before rolling it out. This includes not only the system and data but also the metrics, processes, behaviors and results. If you get good results, performance management will sell itself, which makes it a lot easier to implement.
- Focus on the business—BI solution providers know a lot about their applications but not always as much about your business. Technology is a performance management enabler, not the complete solution. Make sure those responsible for the project understand the business as much as the application.
- Don’t sweat the culture—There are a lot of factors that influence the culture of an organization. While an increase in visibility, transparency and accountability is often met with some resistance, the friction doesn’t last forever. Performance management is one of the most practical and effective tools available for aligning effort to purpose, and that—regardless of cultural differences—is what any organization is all about.
David J. Nape is the Founder, President and Chief Executive Officer of Centris Consulting Inc., Scranton, Pa. With over 30 years of operating consulting experience working with Fortune 500 companies and the United States Military, Nape’s primary expertise is developing and implementing management solutions for complex organizations.