By Gary Cokins, Founder of Analytics-Based Performance Management LLC
What might C-level executives write in their diaries in the future? My crystal ball is crystal clear. Seven years from now in 2021 here are the personal diary entries of the executives of a fictitious corporation reflecting on their experience implementing a performance management framework. As you’ll see, the last diary entry written by the CEO is the most surprising.
Dear Diary of Sales Commissions,
Recalling 2014, I did not believe our CFO’s claim that some of our long-term customers were very unprofitable for us. That is until I saw the facts in her customer profitability reports. Also, I could not believe that our customer with the highest sales volume was much less profitable than many of our midsize customers. But then she proved that all the extra work we work did for that No. 1 customer substantially dragged down our profit. When the CEO and CFO ganged up on me to change our sales force’s commissions and bonuses to also include targets for customer profits, I thought they had flipped out. Everyone knew the name of the game was increase market share and sales growth. Now I realize the goal is growing sales profitably – what we call smart growth. You live and learn.
Dear Diary of Chaos,
I remember back in 2014 when my solution to reducing the cost of our dysfunctional operations was to attempt to standardize processes. But as the years progressed, I realized that our research and development organization was increasingly tailoring differentiated products and services to each customer segment – and accordingly they kept micro-segmenting our customer base and future sales prospects! These customized services grew into a huge tsunami wave that standardization of processes could not overcome. Now I am thankful we shifted our efforts towards attaining much higher forecasting accuracy. The better our forecasts became, the less uncertainty we experienced – and the better our scheduling and capacity planning. What was I thinking back then in 2014?
Dear Diary of Spray-and-Pray Advertising,
My MBA marketing courses taught me the current fads of the time: Put your money into branding, spend heavily entertaining your largest customers, and use gimmicks to retain existing customers and acquire new ones. But then fortunately I discovered the secret to maximizing the yield the money we spent was by better understanding the unique preferences of our individual customers then targeting new customers with similar traits to our most economically valuable customers. My big “ah-ha” was when I saw how powerful analytics, such as statistics, correlation, regression, segmentation, forecasts – could provide us better answers. At first I feared that the administrative cost and effort to collect, understand, and apply all the necessary data would be galactic and that I would have to replace my street-smart marketing staff with PhD geeks. But then I saw my team gain competency in precision targeting of their marketing campaigns and optimizing deals, offers, discounts, and service levels based on the new intelligence we gained about our customers and their unique traits and preferences.
Vice-President, Human Resources
Dear Diary of Employee Turnover,
My staff and I reminisced today about how proficient we were back in 2014 processing paperwork for exiting employees and stacking inbound resumes in piles. I am so glad those days are over. The big breakthrough in our mindset was when we seriously applied workforce analytics to retain employees by predicting which employees were most likely to next quit so we could optionally intervene to prevent them from resigning – also to hire new employees that would truly fit our current and future needs as well as our culture. Now my challenge is growing our employees’ brains to accelerate their pace to innovate.
Chief Financial Officer (CFO)
Dear Diary of Jail Prevention and Bean-Counting,
When we built our second cafeteria in 2014 just for the on-site external auditors, I thought then that any aspiration for me to actually help improve our business would be consumed with a life of compliance and governance duties to satisfy the external investment community. Thank you, thank you, thank you for the software systems that have made those responsibilities just a minor part-time job. I now recall my excitement these past years to use my freed-up time in a much more value-adding way to help our work force and executives make better decisions and improve our profit performance. This new twist has been a rewarding surprise. Also, I love my expanded role contributing to the Green and Sustainability movement to enable my organization to achieve a negative carbon footprint with money to spare to reduce global poverty. We are now only a year away from hitting our target. Yesterday my kids told me they want to grow up just like me. I’m a hero in their eyes.
Chief Information Officer (CIO)
Dear Diary of Spreadsheet-itis,
I still laugh about the prior CIO I replaced in 2014, who was fired when our business nearly collapsed from the week that all of our spreadsheets converged into an infinite closed loop system. All our laptops kept endlessly calculating and calculating. No new data could be input or information reported. Our company logo could have been replaced with the hourglass symbol. Exclusive dependence on spreadsheets is an addiction. They are OK in moderation but not in excess. I resolved our obsession with business intelligence systems. I wish I could laugh today about the dwindling size of my IT department – all the line and staff departments now do what we used to do for them. I guess buggy-whip makers somehow found new careers. I’ll survive.
Chief Executive Officer (CEO)
Dear Diary of Relentless Pressure,
My fellow CEOs in 2014 dreamed that boards of directors would return to those ceremonial jobs for which you just showed up at quarterly board meetings to pick up your director’s check. In contrast, my board was certainly an activist one in 2014. I vividly recall trying to turn around my sagging business by training everyone with Six Sigma quality and lean management techniques. With hindsight, I am glad I shifted our attention to strategy execution and our culture to embrace measurements with accountability. Those strategy maps, scorecards, dashboards, and other enterprise performance management systems saved my tail. I realize now that Six Sigma and lean programs, though relevant, are limited in that they only teach employees how to think, but our strategy management methods and enabling software technologies taught us where to think. Better yet, they gave us the focus, traction, torque and yield regarding what actions to take to continually optimize to dynamic change. My next challenge? Grow the analytic skills and capabilities of my employees. I hope my VP of human resources is thinking about that, too.
With perfect hindsight, these 2021 diary entries could be true ones. With imperfect foresight, these C-suite executives would probably have far less successful accomplishments to write in their diary. To sustain long-term success, an embrace of the full vision of the enterprise performance management framework is not optional – it is essential.
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.
email@example.com; phone +919 720 2718
Linkedin.com contact: http://www.linkedin.com/pub/gary-cokins/0/15a/949.