By Gary Cokins, Founder of Analytics-Based Performance Management LLC
The focus of my last blog was to examine just what EPM is, and the various methodologies encompassed by the term enterprise performance management. I hope that the blog made you think a little about your own organization’s performance and the systems you have in place. But, have you ever worked for an organization where you doubted the leadership capability of your CEO, Managing Director, division president or head of your agency? Have you ever been disturbed that your organization is not living up to its full potential in terms of its enterprise-wide performance management?
Imagine that I am a journalist reporting on a recent interview with a CEO…
Cokins: What is your position regarding how your organization views quality and waste?
The CEO: The quality community often provides lists about the five or so quality problems, such as non-conformance to product design specifications or insufficient focus on customer service. My observation is these lists always omit a much more critical deficiency: the inability to enable employees to achieve their full potential to contribute toward the organization’s strategic goals. This is a huge waste – and also an opportunity. My position is our manager’s main function is to unleash the power and intellect of our employees.
Cokins: How have you created a work environment that makes this possible?
The CEO: I set the tone at the top as a role model by placing a high priority on three character traits: trust, a high tolerance for dissent, and innovation. This combination is very potent in a positive way. Without trust employees do not feel they are adequately involved in decision making. Without allowing for dissent employees will not feel their opinions aren’t valuable. Without innovation competitors will catch us and leave us chasing them. We highly value innovation, especially information technologies.
Cokins: This sounds like you are big advocate of employee empowerment, but can’t this lead to chaos from employees when teams exhibit departmental self-interests rather than a unified interest in your organization as a whole?
The CEO: Conflict and tension is natural in all organizations. There are always trade-offs. From my view from the top I struggle to properly balance multiple, sometimes conflicting, dimensions such as how to improve customer service levels and cost-saving initiatives while restricted to financial budget constraints and profit targets. I constantly assess balancing our risk exposure with our risk appetite. My belief is the primary role of my executive team is to set the strategic direction; and then secondarily to hire, grow, and retain excellent employees. With empowerment and involvement then our employees are tasked to determine how we get there – to pursue the strategic direction I have set. The autocratic command-and-control style of management no longer works today. My managers and employee teams decide on which initiatives are required and which business processes we must excel at. I then assure them the financial funding of their projects and process improvements – regardless of a temporary dip in our short-term financial results. The bottom line is we must put our money where our strategy is.
Cokins: You side-stepped my question. How do you unify your organization?
The CEO: It’s basic. My executive team communicates our strategy with a strategy map, and then afterwards our workforce constructs and continuously modifies our balanced scorecard of initiatives, processes, and associated key performance measures (KPIs) derived from our strategy map. This aligns our employees’ priorities, plans, and actions with our strategy. With the cascading cause-and-effect linkage of strategic objectives from our strategy map, the tension and conflict I mentioned becomes self-balancing. Our measurements are critical. You get what you measure. I also provide them the latest and greatest information technologies – software – to accomplish their jobs. I’ve made enabling strategy through improved practices and the right software a priority.
Cokins: How do you motivate employees?
The CEO: Leaders like me must motivate through communicating vision and providing inspiration. Not all executives do this well – some poorly. But to get true organizational traction, we link financial bonuses for all employees in a large part to the performance indicators in their cascaded scorecards. Their financial bonuses are also augmented by traditional soft and subjective assessments, such as their professional growth and attitude toward working together cohesively. Bonuses are not always motivational to some employees. I also try to allow them autonomy to pursue mastery and their self-purpose taken right out of Daniel H. Pink’s book, Drive. My job is to remove obstacles that prevent my managers and employee teams from achieving their objectives and to facilitate the conflicts amongst them.
Cokins: OK. So monitoring the KPI dials on your scorecards is obviously important, but how do you move the financial and non-financial dials to achieve or surpass your organizational targets and in turn realize your strategy, vision and mission?
The CEO: That is where business intelligence and our enterprise performance management (EPM) methods fit in. We have invested in robust information technologies such as our enterprise resource planning (ERP) software. This foundation has already given us a performance lift and an impressive ROI. We are now integrating our tools and using modeling techniques and their supporting technologies to make better decisions and further improve performance. We view employee competency with analytics of all flavors – and particularly predictive analytics – as our means to a sustainable competitive advantage. We have shifted from focusing on control to anticipatory planning so we can be proactive not reactive.
Cokins: One final question. Are you winning?
The CEO: Organizational performance improvement is a marathon where there is no finish line. It’s a case of staying ahead rather than winning. Where we are winning is with the hearts, minds and loyalty of our customers, our employees, our suppliers and our governance boards. And there is a bigger stakeholder. Where we all need to win – and that includes all organizations collectively – is with our planet. My organization takes being green and behaving with environmental and community responsibility very seriously. When we talk about sustainability we mean all these things.
Now imagine, what do you think that such an interview would be like with members of your executive team and ask yourself; How would their answers differ? What are the next steps for your organization in in realizing the full vision of enterprise performance management (EPM) methods embedded with business analytics? And, what benefits will these bring it in terms of sustainable performance across the criteria shared by my CEO in the last answer above?
Hopefully this is some food for thought. In my next blog I shall ask what you should look for in exceptional EPM systems.
About the Author: Gary Cokins, CPIM
Gary Cokins (Cornell University BS IE/OR, 1971; Northwestern University Kellogg MBA 1974) is an internationally recognized expert, speaker, and author in enterprise and corporate performance management (EPM/CPM) systems. He is the founder of Analytics-Based Performance Management LLC www.garycokins.com . He began his career in industry with a Fortune 100 company in CFO and operations roles. Then 15 years in consulting with Deloitte, KPMG, and EDS (now part of HP). From 1997 until 2013 Gary was a Principal Consultant with SAS, a business analytics software vendor. His most recent books are Performance Management: Integrating Strategy Execution, Methodologies, Risk, and Analytics and Predictive Business Analytics.
firstname.lastname@example.org; phone +919 720 2718
Hear Gary share some of his thoughts concerning EPM innovations and best practices at the SAP Conference for EPM in Chicago, October 13/14, 2014