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President's Insights - White Paper:

The Importance of Driving Business Performance


The Importance of Driving Business Performance:

Today, executives must define business strategy in an extremely challenging marketplace. The company must implement the strategy through plans and budgets that guide the activities of individual business units. However, without the proper tools, strategy implementations can be very challenging.

Implementations fail for several reasons, including lack of focus of enterprise units on common goals, inefficient decision-making processes, and lack of alignment between business unit objectives and the corporate strategy.

An effective performance management program helps achieve corporate strategies by breaking down high-level goals into objectives that drive the actions of employees at all levels of the organization. When individual employees can measure their performance against objectives, it becomes easier to achieve strategic goals. Effective performance management ensures alignment with overall enterprise business goals by driving empowerment, accountability, focus and resolve from the executive team down to managers and information workers across the company.

Leading companies understand the importance of performance management and have implemented several scenarios. However, when implementing these scenarios, companies struggle with operational difficulties such as a lack of information consistency across multiple systems, inefficient access to information, difficulty of transforming data into relevant information that can guide business decisions, and the lack of user-friendly tools that impedes access to actionable insights. These operational challenges result in “multiple versions of the truth” and companies not realizing the full value of their performance management initiatives.

Driving business performance entails an approach that uses performance improvement and organization learning methods, along with information technology, to enhance the performance of an organization. Improved business performance relies on the effective use of all assets including people, processes, information, and technology to achieve the organization's strategic objectives. Managing performance focuses on aligning, optimizing and understanding actions and decisions, both individual and collaborative, across an organization.

An effective performance management program can be framed as a consistent, closed-loop process (from budgeting and planning to consolidation and reporting) and encompasses three fundamental principles: driving effective planning, ensuring alignment, and enabling more effective decision making at all levels of the company. This system also ensures that key business processes are conducted under the guidance of overall company strategy. For example, plans and budgets are developed to align and ensure achievement of strategic goals, and consolidation and reporting processes and systems are designed to provide relevant and actionable information to decision-makers. Key metrics are put in place at all levels to frequently and consistently monitor how the enterprise and its business units are performing against strategy. These metrics, often referred to as key performance indicators (KPIs), derive from analytical models developed to measure the impact of financial and operational decisions on overall strategy achievement.

Successful implementation of performance management relies on fundamentals such as:

  • Clearly identified company strategies in the form of goals and objectives that cascade down throughout the organizational structure
  • Measurable KPIs that derive from these goals and objectives and guide business improvement and value
  • A technology platform that facilitates the rapid building and creation of required planning, analysis and monitoring capabilities, which provide critical insights in the form of forward-looking and historical indicators
  • A governance model to align and manage employee performance measures and incentives to ensure they stay aligned with the enterprise strategies
  • Solutions that enable people to turn data into insight, transform ideas into action, and turn change into opportunity

One of the technological challenges of implementing a performance management program is limitations of traditional business intelligence (BI) systems. Traditional BI systems are designed for trained analysts and suited for subject-oriented query, reporting, and analysis of historical data. However, they fall short in meeting the requirements of today’s business world: providing enterprise-wide, near-real-time, end-to-end performance management information, at the right level of detail and frequency and in a format that is easy for employees across the organization to understand empowering historical and forward looking analysis driving decisive fact based decision making.