The concept of performance management and the adoption of analytical technologies have come a long way over the years. No one disputes the value and benefit of these kinds of initiatives. They continue to rank as a high priority area for many executives. Nevertheless, even with all the investment, the pay off and benefits remain elusive for many. Why? Is it the strategy itself or the execution? While most would say that execution is the main obstacle, others point to the need for better strategy.
The reality is that typical organizations need improvement in both strategy development and execution while overhauling their business processes. Today’s high-performing organizations can meet and exceed goals (increase profitability, sustain growth, gain market share, and improve shareholder value) by transforming their business culture to align people, processes, and technology to support their performance initiative.
Question 1: Isn’t Having A Business Intelligence Tool Enough?
I feel like enterprise analytics projects should have a warning label on them: "DON'T TRY THIS AT HOME"
The fact is that these projects are complex and require a degree of thoughtfulness beyond the technology. It's true: the right analytical platform is essential to the success of any performance initiative. It provides the tools for planning, analyzing, accessing information, and establishing accountability in executing a sound strategy.
That said, it can’t form the strategy, and it can’t magically make it happen. In many failed technology projects, you hear “it was a bad implementation.” What does that mean? In many cases, the strategy, processes, and organization didn’t change. They just automated what was already dysfunctional.
Successful performance management initiatives involve significant change management, which means not only implementing technology but also an examination and redesign of how people, processes, and technology need to work together to meet strategic goals and improve results. More specifically, organizations need to examine how strategy is created, bring visibility to the appropriate activities, and determine the right measures within the organization to drive optimal results for meeting performance goals.
Homework Required: Successful analytics initiatives require a lot of work before any system or execution is even considered. The number one reason these initiatives fail is that most organizations do not invest the time and resources to properly recognize and plan for the performance gaps that may exist before execution. Consider some basic, yet often overlooked principles that can help increase the likelihood of success:
- Is there methodology behind the way you create and validate strategy (a balanced scorecard approach for example)?
- Evaluate the organization’s ability to execute the plan.
- Translate strategy into weighted performance measures.
These principles can help you understand the factors influencing your organization’s ability to execute beyond the technology and significantly improve your performance results.
Question 2: Have You Validated Your Strategy?
The robustness of your strategy is as important as how you execute it. Many companies proceed with plans that are purely reactive based on Wall Street expectations, customer demands, or competitive pressures, with little thought to whether it is the right strategy or how it will affect the business in the long term. High-performing companies make sure that their strategic plans are formulated based on the real economics of their markets, assessment of the companies’ strengths and weaknesses, costs and benefits of a proposed performance initiative, benchmarking, and careful examination of business drivers.
Think you have a good strategy? Here are some recommended best practices to evaluate the strength:
Competitive Comparison: Success is relative. You may be doing well, but you may not be doing as well as your competition. Understanding how competitors are investing their resources and how efficiently they are deploying them can reveal a lot about their strategy and how your strategy compares.
Cost vs. Benefit: Determine the real costs, as well as long and short-term benefits of a proposed strategy or performance initiative. This should include an examination of not only quantitative measures like TCO and ROI, but also a look at the less tangible value such as improved employee loyalty, increased brand awareness, and customer satisfaction. This kind of cost/benefit analysis can also reveal the areas within your organization that will yield the best results in the shortest period—and you can start your initiative there.
KPI Benchmarking: By comparing your organization against industry and critical line-of-business performance indicators (KPIs), you will be able to determine how current strategies are performing against the industry and peers.
Performance Drivers: Understand what drives the performance of your organization, your competitors, and factors within your industry. Some of these drivers may be internal to the organization and within control. Other drivers are external and outside the realm of influence, but organizations must be able to forecast these factors to manage performance proactively. Identifying, examining, and comparing your performance drivers can help organizations to develop planning models that will provide you with strategic agility.
Question 3. How Ready Are You?
Larry Bossidy, the former Chairman and CEO of Honeywell International, wrote in his groundbreaking book “Execution,” that no important strategy can be planned without understanding the organization’s ability to execute it. Because successful analytics initiatives ultimately cross multiple departments, they have a significant impact on how organizations develop and manage their metrics, systems, processes, and business practices.
It’s necessary to carefully examine the organization to identify “performance gaps,” and then determine if and to what degree changes will be needed to support any analytics initiatives. Organizations taking on these initiatives will find greater success when they equally evaluate process, technology, technique, and experience.