Unfortunately, it’s not uncommon for business departments to underestimate the complexity of managing both information and information technology (IT). “How hard could it be?” is a frequent question. It’s as if the IT department is a “black box” and the information required to effectively run the business should just flow – that is, we turn on the faucet and the information pours out. The complexity of the “plumbing” (logical and physical architecture) and the quality of the water (information) are both separate and related issues that must be addressed to successfully meet the demands of the business in supporting key business measurements.

This alignment between the information the business requires to support key business processes / performance measures and the “black box” of IT is central to the success of business intelligence (BI) initiatives. This key intersection lies in defining the key metrics and supporting them with timely, quality information. Whether the business is initiating a project to improve performance measures or IT is attempting to better understand business priorities, these tips should help to create alignment between business and business intelligence / data warehousing (DW) initiatives.

1. Understand the Strategic Planning Approach
   
   The business needs a framework to define and communicate strategic direction and plans. There are a number of approaches, and they typically include “measurement” as a key component. Kaplan and Norton’s balanced scorecard framework recommends no more than 20 key performance indicators (KPIs) within 4 perspectives: financial, customer, internal, learning and growth. Hope and Fraser, the management guru proponents of enhancing key measurements by removing the traditional budget process, recommend less than 10 KPIs. David Parmenter’s framework recommends the 4 balanced scorecard perspectives plus 2 more related to employee satisfaction and environment/community. Parmenter’s framework recommends a 10/80/10 rule, which spreads the key measures between past, current and future. Regardless of the approach you select, you should adopt and communicate a strategic planning framework that will fit your business and help identify the key measurements.
   
   
2. Define the Terms
   
   Define the terms related to the planning approach you’ve adopted. Because the employee population you are working with has probably come from a variety of other organizations with their own planning approaches and vocabularies, do not assume that common terms mean the same thing to everyone. Examples of different terms with different meanings might include: performance indicators (PIs), KPIs, result indicators, scorecard, business process, best practice, performance measurements, financial metrics, etc. In fact, you may want to even consider renaming terms if they have a negative connotation to management or employees. For example, balanced scorecard might have a negative connotation if it was not previously successful in a particular environment, so you might rename it strategic road map or vision map. You’ll ultimately save time by taking time up front to make sure everyone is on the same page about the meaning of the terms being used.
   
   
3. Secure Commitment
   
   Senior management commitment in defining key performance measures is critical. However, it is impossible to gain commitment if there is lack of understanding about the implications of that commitment or unwillingness to make the project a priority. There are always competing activities, so management must be willing and able to drive the measurements through the organization. Education is frequently required to understand the issues, the benefits, time requirements and interview schedules; provide feedback; and suggest appropriate (typically new/different) measurements than the ones currently being used. Real commitment can only be in place if there is understanding of what is actually involved.
   
   
4. Build the Team
   
   Beyond senior management, the working team selected to define new measurements should be comprised of two to four (2-4) core people, plus an external facilitator. Criteria for profiling the working team should include: knowledge of the organization, understanding of the market, good presentation skills, positive attitude, innovation and communication skills. These individuals need to actively participate in the process and remain open to new information and ideas. They need to do the homework required and follow through on commitments. Ideally, this team reports directly to the CEO. This core team needs to be committed full time for the duration of the project. The extended team would also include a liaison person for each business function that has detailed knowledge about their area of operation.
   
   
5. Timebox the Process
   
   Regardless of the size and complexity of the organization, sixteen (16) weeks is sufficient time to establish key performance metrics. The exact implementation of the key indicators is rarely right the first time, so it is better to establish a timebox and reserve the opportunity to provide subsequent iterations beyond the initial 16 weeks.
   
   
6. Engage an External Facilitator
   
   The external facilitator plays an important role through the process. Key criteria for selecting the facilitator include: objectivity, experience in performance measures, solid consulting skills and good communication skills (especially with senior management). The “wisdom” to complete the project lies within the organization, and the use of the external facilitator helps to drive the project according to the timeline. The role of the facilitator is to create the approach and manage the process from start to finish. They need to stay emotionally uninvolved and refrain from giving personal opinions on content issues. They should be expert at group process and problem solving and keep the approach on track. The role of the team is to actively participate and provide the content that leads to the desired outcome: KPIs that are relevant to business success.
   
   
7. Acquire Appropriate Information
   
   The mantra in business intelligence is to provide the “right information to the right people at the right time.” Based on the key measurements involved, analysts can dissect the information needs through techniques such as data modeling and dimensional modeling. Those approaches support the analysis, extraction and integration of the right information to support the key measurements. The information provided could be historical, actionable and/or predictive. It would typically reinforce or change the course of action or behavior of the people performing the business process.
   
   
8. Communicate
   
   As the team works through different examples of measurements, it is important to document the current measures, as well as those that have been discarded. Some examples of information about the measurements that could be tracked might include: description of the measure, how the measure is calculated, role responsible for measuring, information source, type of presentation, frequency, usage, etc. Depending on the strategic framework used, there could be anywhere from 10 to 100 measurements that need to be understood and communicated. For example, Parmenter’s 10/80/10 approach divides performance measures into three (3) types in a framework that is easy to communicate:
   
   
   
   • Key result indicators tell how you have done (10)
     
     
   • PIs tell you what to do (80)
     
     
   • KPIs tell you what to do to increase performance (10)
     
     
9. Monitor Progress
   
   Based on the information provided for the measurements, monitor the progress of the business in achieving its objectives. Have the outcomes improved? Has performance increased? What actions are being taken as a result of the information?
   
   
   
10. Iterate
    
    Rinse and repeat! Process improvement is a journey, and the measurements will need to be modified and changed as priorities change. The rapid pace of change warrants that the measures be reviewed quarterly or at least annually.

For business to succeed, it must be clear about measures that matter. It must take into account measures that look at the past, current and future to create behavioral alignment in a balanced way. Those measures must be supported by timely, accurate information. However, the complexity of information and technology management required to support those measures should not be discounted. Rather, BI initiatives should be aligned to support meaningful measures. When that happens, BI evolves into a critical, integrated business process that supports multiple other business processes.

Bibliography:

Jeremy Hope and Robin Fraser, Beyond Budgeting: How Managers Can Break Free from the Annual Performance Trap. Boston: Harvard Business School Press, 2003.

Robert S. Kaplan and David P. Norton, The Balanced Scorecard: Translating Strategy Into Action. Boston: Harvard Business School Press, 1996.

David Parmenter, Key Performance Indicators: Developing, Implementing and Using Winning KPIs.  John Wiley and Sons, 2007.

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