RESEARCH & RESOURCES

Question and Answer: The Challenge of Good Performance Management

Users are paying greater attention to features that meet their needs in BI software. What’s behind good organizational performance management?

Ongoing changes in the BI landscape include a growing portfolio of user-focused features, such as location intelligence and virtualization. Those technologies point to the growing attention being paid to user needs in BI software. As capabilities continue to expand, BI business users can expect greater functionality, accessibility, and control, all strengthening the foundation for optimizing performance management.

What’s behind good organizational performance management? How can companies grow and hone their enterprise performance management capabilities? In this interview, we asked IBM’s Peter Griffiths, vice president of worldwide research and development, BI, and performance management, to discuss some of the issues and challenges of performance management.

BI This Week: First of all, what’s your definition of performance management?

Peter Griffiths: Performance management combines BI and enterprise planning tools to answer three fundamental questions for organizations: How are we doing, why, and what should we be doing about it?

To answer the “how are we doing” question, decision-makers have to be able to measure and monitor the business -- to really dig down and determine why the situation is what it is. That, in turn, calls for good reporting and analysis capabilities, which give you the ability to look at historic data and understand trends, to look at anomalies and understand why something has occurred.

Planning is the lynchpin between the two questions. Planning takes information on what’s going on and sets a forward-looking view of the business, which you measure and monitor against actual performance. Planning answers that third question: What should we be doing?

When you have the ability to measure, monitor, and then analyze, you can deliver targeted information to decision-makers in the organization whenever and wherever they need it. You can equip people -- regardless of where they sit -- with the specific information they need in order to have a tangible impact on business performance.

It sounds straightforward enough. Why do companies struggle to achieve good performance management?

The first challenge is this: People need to make decisions. Many companies are data rich but information poor. They’re trying to improve their transactional processing by making it more efficient. They’re trying to understand how to connect data and drive to the next level. They’re doing that by bringing in relevant information from a multitude of external and internal sources, and in a way that makes sense and can lead to better decision making. The challenge is getting this relevant information to the company’s decision makers across all lines of business.

The key is to enable performance areas relevant to those within the company by creating business models that integrate historical facts.

This leads us to the second challenge for companies. Companies need to invest to try to enable a more persona-centric performance management vision and provide an environment where core information is provisioned through well-structured processes. How do they act on the fundamentals of performance management? Performance management solutions provide that foundation for understanding -- and create a scalable platform for cross-company input.

The third challenge for organizations is the economic climate, which will continue to force businesses and governments to achieve higher levels of efficiency and performance. Now more than ever, performance management can help organizations of all types and sizes achieve greater levels of accountability, innovation, and agility. The key is to avoid standing still or succumbing to the temptation to scale back on the very investments that can best position the organization to withstand rough economic times. Instead, the proper course is to move forward, with performance management providing the information executives and managers need to navigate.

You’ve said that two key issues are central to performance management. What are they, and why are they so important?

There are many different factors affecting performance, but one factor stands out as critical -- and the most fluid. That critical factor is the decision making that happens at every level, in every function, in every region of your organization.

Every day, decisions are made based on the information people have on hand. If that information is on target and reliable, timely and easy to consume, better decisions result. Information that is inaccessible or incomplete, late or inaccurate has a direct and negative impact on decision making, and ultimately, business performance.

Optimization also plays a role. We all have different management responsibilities, whether it’s the sales pipeline, production volume and inventory levels, reducing system complexity, risk exposure, budgets and plans, or retaining your best customers. Optimizing business performance is the common denominator for all of us. The key question is fundamental reporting. Everyone in the organization should be linked to information. If you can connect people to processes with a view of information that is relevant to them and consistently connected to the enterprise, you are on the road to business optimization.

What are some initial steps for a company trying to move toward better performance management?

Focus on what is achievable and what will give you the greatest initial return. Decision makers might want to start with the ability to measure and monitor the business and share current status of projects -- progression towards company goals or operations. Whether the organization applies performance management solutions to operational or to financial performance, these solutions are designed to be implemented incrementally.

Some organizations we work with start in a single department with BI, providing their decision makers with reporting or analysis capabilities. From there, they often add planning capabilities. After establishing targets for resource allocations, they add in a scorecard to deliver a snapshot view of actual performance against expectations.

Take the case of one of our customers who started with reporting, analysis, and scorecards. They wanted to monitor on-time customer shipments via a scorecard. If the shipments didn’t arrive on time, a red flag was set on the variance to let them know. They could then drill through to a report directly from the scorecard to receive more information. The report showed that a shortage in materials was causing a production bottleneck and contributing to late shipments.

Once they understood the issue, the logical question became “What should we do about it?” They went directly to the plant production plan and reallocated and adjusted production, removing the production bottleneck. That corrected production delays and restored customer shipments to an on-time status. The original scorecard will be used to monitor progress on an ongoing basis.

Given what we’ve discussed here, what does IBM bring to this space?

First, incredible leadership and continued innovation. There’s no question that business intelligence and performance management are now strategic technologies. At IBM, Cognos software is a segment within the Information On Demand division of IBM. This team is focused on the four key things that organizations require to unlock the business value of their information.

Organizations need the ability to manage data and content over its lifecycle and be able to use data and content as part of business processes and applications across the enterprise. These two requirements are addressed by IBM’s data and content management capabilities.

Organizations then need to establish an accurate, trusted view of information across these different processes and applications. They also need a “flexible” architecture that can leverage all of their existing investments. Accurate, trusted information is established through IBM’s information integration, data warehousing and master data management capabilities.

Finally, with the acquisition of Cognos, IBM can now provide customers with the ability to leverage that trusted information to build their plans, understand how their business is performing, and focus on optimizing performance.

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