My friend Toby Hatch of Oracle (formerly of Hyperion and Sapling) has been doing scorecards for a LONG time. She came up with this a few years ago and I've found it useful as a way to look at the differences:
The first article appears in the first issue of the “Journal of Management Excellence,” a new quarterly publication that has been a dream of Frank Buytendijk’s for a while now.
Certainly the evolution of Enterprise Performance management will take us into better/deeper systems integration, but, more importantly, it will focus on processes. Just as transactional systems have focused on transactional processes, such as Order-to-Cash, Procure-to-Pay and so on, EPM systems will focus on those management processes that move organizations from strategy to execution in a repeatable, sustainable way.
They define the overall management process as Strategy-to-Success (or “S2S”) and use it as the framework to address each step of the value chain in an organization. They include the following areas in the S2S chain:
Market model (combining competitive intelligence with business intelligence)
Business model (including scenario analysis)
Business Plan (with an emphasis on rolling forecasts)
Business Operations (including benchmarking, cross-domain analysis and master data management)
All of which lead-to and are driven by business results, with corresponding performance indicators on scorecards and dashboards.
We will see more of this on EPM maturity models and client’s roadmaps.
Bottom line: this is a very good book on the business benefits and high-level “how to” of enterprise performance management (EPM).
While the authors refer to this domain simply as ‘performance management’ (more on this here), it’s not to be confused with the annual Human Resources review process, but rather all of the people, process, and technology involved in sustainably executing your strategy.
This book is not too technical nor too theoretical. It has the right balance of business perspective, systems enablement, and process maturity to give a good overview of the promise of EPM and strategy execution. It makes liberal use of case studies, examples and stories to illustrate points and give more depth to the insights.
Fact-based, data-driven decision making (p.12)
Strategic, Operational, and Tactical Decisions (p28)
The Foundation for Decisions: information & trust (p32)
Competitive Benchmarking (p16)
The ‘right’ metrics (p49, 69)
Line of Sight visibility (p.93)
Accountability Mapping (p 226) and also how difficult it is to visualize and map metric relationships (p. 69) - of course this area is of special interest to me since it’s what we do
A very good “uber” model for determining where to focus your efforts (p.254)
A few things could be improved (perhaps for the second edition): - There is a disconnect early on in the book between modeling and planning. Financial Modeling is lumped together with scenario planning later on (p. 195, 212, 217) and is probably collapsed early on with “Plan.” But the distinction is important enough that they should be “un-collapsed” and addressed separately in the model from the start. There was an attempt at this on pages 38 & 39, but I think it was buried and not highlighted. On page 38 in figure 2.2 they say Planning answers the question “What do we want to see happen” and at the top of page 39, under Plan capabilities, they say it addresses “how to model what should happen.” I think it would be more helpful to say that: Modeling (financial & operational) helps answer the question “what do we want to happen” (and includes things like strategic objectives/targes, assumptions & constraints), and Planning (financial & operational) helps answer the question “how do we want it to happen” (and includes resource allocation, more specific targets, and accountability down to the planning unit level).
This really is an untapped area of EPM that should be on most people’s roadmaps.
- More detail on statutory consolidation and reporting, especially with the emphasis on IFRS vs. US GAAP happening these days would be good (it’s briefly addressed on page 214)
- I’d like to see real examples of competitive benchmarking and how EPM impacts financial performance (eg: Revenue Growth, Operating margin, cash cycle, etc.)
- Perhaps more on the functional issues of performance management, that is, how points of view differ across marketing, sales, finance, operations, and so on.
- And, of course, more leadership in the use of the term “Performance Management” versus EPM, BPM, CPM, IPM, etc.
All in all, a very good read and certainly belongs on the bookshelf of any EPM manager and any CIO and CFO....hopefully dog-eared and well-worn.
Frank is a VP on Oracle’s EPM strategy team and used to be the lead BI analyst for Gartner, so he’s been at this for some time. And unlike many long-term practitioners in this industry, Frank has a reputation for creative thinking, being a contrarian, and connecting disparate pieces that would otherwise not be connected. He was the first person I heard talk of the behavioral elements of performance measurement, of business interface metrics, and of closed-loop management systems.
While many companies are still in the “meat and potatoes” stage of EPM (or Corporate Performance Management and Business Performance Management to some), meaning Planning, Analytics, BI, Management & Statutory reporting, and Balanced Scorecards are disconnected, Frank gives us an aspirational vision of what EPM can be in this new book. If you work with any sort of industry maturity model to gauge where you stand with EPM, consider Frank’s practices to be on the far right (or top left) of the continuum (or quadrant)!
Here are a few highlights of the content: - Strategy and Organization Alignment - Traditional Methodologies (Balanced Scorecard, Beyond Budgeting, DuPont ratio analysis, activity based costing/management, six sigma) - Driving the right behaviors and balanced metrics - What’s really behind “one version of the truth” - Managing with business interface metrics and key risk indicators - How Stephen Covey has influenced performance leadership - Performance networks/value mapping - a new framework for performance leadership
Frank uses a lot of case studies and industry specific scenarios to explain the concepts in the book, and that helps connect his ideas to the real world. He also gives some specific advice on how to get started on the next phase of your EPM journey. The first step, he says, is to build and understand your own performance network. This will show you (and your senior management) what the key drivers of value are in your organization and in your overall ecosystem or supply and demand chain. This, by the way, is what Business Foundation does.
And in order to at least appear impartial on this review (I used to work with Frank at Hyperion), I had to find a couple of criticisms of the book. Here they are: 1. Frank uses the term “Performance Management” instead of “Enterprise Performance Management” (or “Corporate” or “Business Performance Management”) and here in the U.S., “Performance Management” is still associated with a Human Resources competency or process, so there is still some confusion in the industry. There’s no doubt what domain he’s talking about, it’s just unfortunate that this book won’t help end the confusion, and 2. In table 6.2 on page 85, the first column uses commas for the thousands separator (as in North America), and the second column uses periods (as in Europe).
(It was really hard to come up with that 2nd criticism!)
Oh, and Frank has put up a website here to support the book (read the lost chapters, see a video of his presentation).
Anyone who has or is thinking of having an EPM roadmap for their organization should read this book. Anyone who has never heard of EPM/CPM/BPM, and wants to get better at executing strategy, on improving collaboration, efficiency, and having their organization survive this downturn, should read this book.
activity based costing, balanced metrics, Balanced Scorecard, Beyond Budgeting, business interface metrics, Business Performance Management, Corporate Performance Management, Driving the right behaviors, DuPont ratio analysis, Enterprise Performance Management, Frank Buytendijk, key risk indicators, Methodologies, Performance Leadership, Performance networks, six sigma, Strategy and Organization Alignment, value mapping , “one version of the truth”
I stumbled upon this website over the weekend: FitBit, and wouldn’t have thought about it again until I read this morning’s Wall St. Journal short piece on them and their $2M USD first-round funding led by True Ventures. When it comes out early next year, it will measure how much you exercise (with some limitations) and how much you sleep (and the quality of your sleep). It’s unobtrusive and automatically downloads whenever you are within 25 - 50 feet of to your computer.
Imagine the impact on business if enough people used FitBit and the data were aggregated by age, geography, occupation, an so on:
Health insurers could notice positive and negative demographic trends adjust premiums and preventative care programs accordingly. “Adult Males in this zip code exercise regularly and get an average of 7.5 hours sleep per night - they get a 10% healthy-lifestyle discount on premiums.” “Students in this area are sleep deprived, send out sleep-kits/how-to brochures to their parents.”
Employers could require the use of FitBit and use the aggregated data to negotiate better health care policies for their employees
Health clubs could include this data in their new-club site selection criteria (open news clubs first in areas of higher or lower activity),
Mattress resellers could target direct advertising into low/poor sleep areas
I’m sure there are 100’s of applications.
I had a similar conversation with Safeway CIO, David Ching, last year about the possibilities of using and re-selling point of sale purchase information from their loyalty program. Obviously the main concern is individual privacy, yet if the data is anonymously aggregated, consumers could benefit from targeted discounts and other programs.
The “ah ha” for Performance Management is to take this information we’ve gathered, analyze it to understand the root causes for the performance, debate ways to improve it, and then plan for better performance in the next cycle (day, week, month, quarter, year), and putting those decisions into our systems and processes.
Sustained Innovation: Converging Business and Technology to Achieve Enduring Performance, by Faisal Hoque and Terry Kirkpatrick
Silos, Politics & Turf Wars: A Leadership Fable About Destroying the Barriers that Turn Colleagues into Competitors, by Patrick Lencioni
Connecting the Dots: Aligning Projects with Objectives in Unpredictable Times, by Warren McFarlan and Cathleen Benko
Winning the 3-Legged Race: When Business and Technology Run Together, by Faisal Hoque et al
Many Unhappy Returns: One Man’s Quest to Turn Around the Most Unpopular Organization in America, by Charles Rossotti
For anyone interested in truly aligning IT with the business, and willing to entertain the transformation that that involves,
I would add a few of my own to this list, including:
- The Last Word on Power, by Tracy Goss - business transformation begins with self transformation
- What the CEO wants you to know - business/IT alignment begins with knowing what the business needs
- Leading the Revolution, by Gary Hamel
- The Visionary’s Handbook, by Watts Wacker
- The Art of Possibility, by Ben Zander
XBRL (the extensible Business Reporting Language) will be required by Dec. 15, 2008, for publicly traded company financial document submission to the SEC (10K, 10Q, etc.) 75 of the Fortune 500 already submit using XBRL, including Ford, GE, IBM, Pepsi, UTC and Xerox. The Central Banks of the EU have also already adopted XBRL. (Ref: InformationWeek)
This should allow better reporting, analysis, and data mining of company financial information.