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How Software Vendors Approach Business Performance Management Challenges

Originally published October 10, 2005

Introduction

People generally recognize that large scale “Change Initiatives,” such as Performance-Based Management, require both the commitment and leadership of senior management and a sound technical infrastructure for feedback and communication throughout the organization. The evaluation, comparison and selection of software technologies, however, can be very challenging. This is often like trying to hit a moving target. Change Initiatives are particularly problematic for business performance management (BPM), which has become a recent focus for a wide group of academics, consultants and analysts. It has also become popular for various hosts of technology vendors that see their software solutions as an extension to business performance management.

Developments in the PM Software Market

The software market for business performance management solutions has grown almost exponentially in recent years. As management concepts, such as balanced scorecard, results based management and accountability accords, have become more popular with senior managers and executives, technology vendors have quickly developed or modified their products. This has been done to at least have some type of offering that caters to the basic premises of business performance management. Unfortunately, business performance management must still be considered an evolving concept. Although early adopters have been working with its components for the past 15 years, there remain very few standards or adopted terminologies common with more mature management practices. Because of this, implementing business performance management can be a challenge since most players (including people within organizations and BPM vendor communities) could have different interpretations and connotations around the specific definitions of a BPM framework.

The following framework for evaluating commercially available technologies, which claim to enhance the implementation of business performance management in organizations, is based upon Landmark’s understanding of the types of available software. This framework is also based on our appreciation for what a BPM solution’s main objective is; to communicate, up, down and across the organizational hierarchy, on what's important (goals and activities) and how well these mission critical objectives (measures and scorecards) are being achieved.

Business performance management has evolved from a simple collection of “Key Performance Indicators” (KPI’s), once considered critical to the senior management team of organizations, to advanced strategic planning models. Such models include both financial (budget) and operational (resource) components. These help organizations map and monitor their requirements for achieving success.

After reviewing both the current concepts of business performance management and the available technology solutions, we can classify the types of BPM models into four major categories (as shown in Figure 1). These categories can be defined as:

Dashboard Models

Solutions that collate KPI’s into readily available reports that show how well the organization is doing on previously determined metrics is considered critical to overall success. The systems generally report on the more “lagging” metrics of success (fiscal, customer, internal processes) and are not necessarily linked to any strategic vision for the organization. As such, dashboard models, although powerful in their abilities to “drill down” and/or present graphical analysis of key measures, often lack the linkage to drive change in an organization.

Figure 1.    Performance Management Model Types

 Scorecard Models

Scorecard models have become widely popular, based on the innovative work of groups like the Balanced Scorecard Collaborative and the Centre for Business Performance at the Cranfield School of Management (UK). Scorecard models propose that organizations look beyond short-term KPI’s. This frequently results in more proactive measures, which will actually drive future performance. These are generally linked to high-level strategic objectives that are derived from the organizational strategy. Therefore, scorecard models help organizations achieve their objectives. All scorecard models work on the principle of “balance”; a balance of short-term and long-term objectives, focus (often called perspectives) and leading and lagging indicators. This will measure current and future success.

Performance Logic Models

The third level of business performance management models are Performance Logic Models. The term “Logic Model” is well established in the area of program evaluation and generally refers to a systematic visualization (diagrams, flow charts, maps) of the relationships between operationally managed elements (such as resources, inputs and activities) and longer term objectives (often termed outputs, outcomes and/or impacts).

A Performance Logic Model will use the same graphical representation of “what causes what,” as seen in basic logic model diagrams. The model supplements this through the derivation of performance measures, which were designed to give relevant feedback on each component within the logic model hierarchy. In this fashion, the basic logic model is enhanced and can be used as the backbone for a results-based management approach. Such an approach provides “line of sight” guidance and direct accountability for all levels of an organization. It also lays the foundation for more robust Strategic Management Models.

Strategic Management Models

The most advanced performance management models are “Strategic Management Models.” These models try to make defined linkages between the strategic planning and measurement process and the operational resource requirements necessary to achieve success. Many organizations are realizing that the best performance reporting and strategic planning will not necessarily result in delivering your stated objectives. The plans must be “reality based” and incorporate the current and/or future resource limitations (including personnel, other physical assets and finances).

Strategic Management Models can be considered a cross between standard business performance management and activity-based management (ABM) concepts. These models provide organizations with the ability to “balance” resources across the diverse demands of the enterprise (both strategic & tactical). Along these lines, Strategic Management Models can be used for advanced scenario playing, costs for deliver/serve analysis and replacements for traditional budgeting.

Today, many concepts surrounding resource-based performance methodology are still evolving in both academic and business management literature. Despite this, we feel this will become the next frontier of performance management technology solutions. From our recent study and ongoing reviews, it is evident that no current technology vendor offers a fully integrated solution. But there are many players with fundamental components for implementing Strategic Management Models. Several vendors now have this on their product development radars and there will probably be a truly integrated solution here within the next 6-12 months.

Conclusion

The evaluation and selection of commercially available off-the-shelf BPM software can be a daunting task. An understanding of the evolving discipline of performance management and the various BPM models, the extensive BPM vendor/product community, and most importantly, the organization’s needs, culture and environment is crucial to making the best decisions. This is true for both the current and future enterprise requirements. Most organizations rely on a multi-disciplinary team comprised of executives, finance, key business users, IT personnel and external advisors to help “narrow the field.” These teams develop viable short-lists of suitable technology contenders as well. By doing this, the organization can recognize it is making an informed choice on the investment. This approach and technology will help guide future successes for many years.  

  • Mike Haley

    Mike is the President of Landmark Decisions, a Canadian-based firm specializing in the facilitation of performance achievement solutions. They commonly use such tools as performance management/balanced scorecards and activity based (ABM) and process management. For the past 12 years, Mike has worked worldwide with clients in both the private and public sector in the training, technology transfer and general application of PM/BSC and ABM. He has done this for the telecommunication, manufacturing, food processing, distribution, government and financial service industries. Mike has led PM workshops and implementations in many federal and provincial government departments, including Canada Border Services Agency, DND, Fisheries and Oceans, Justice Canada, Ontario Ministry of Finance, Treasury Board Secretariat and the US Navy. Mike can be reached at  http://www.landmark.ca/ or at 902.835.7861.

 

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