Chapter 5
Business Performance Management
Learning Objectives
 Understand the all-encompassing nature of
business performance management (BPM)
 Understand the clo...
Learning Objectives
 Understand the role of methodologies in BPM
 Describe the basic elements of the balanced
scorecard ...
Business Performance
Management (BPM) Overview
 BPM Defined
 Business performance management (BPM)
A real-time system th...
Business Performance
Management (BPM) Overview
 BPM and BI Compared
 BPM is an outgrowth of BI and incorporates
many of ...
Business Performance
Management (BPM) Overview
 Summary of BPM processes
 BPM encompasses a closed-loop set of
processes...
Business Performance
Management (BPM) Overview
Strategize:
Where Do We Want to Go?
 Strategic planning
 Tasks common to the strategic planning
process:
1. Conduct a cu...
Strategize:
Where Do We Want to Go?
 Strategic planning
 Critical success factors (CSF)
Key factors that delineate the t...
Strategize:
Where Do We Want to Go?
 Strategic planning
 Strategic objective
A broad statement or general course of acti...
Strategize:
Where Do We Want to Go?
 The strategy gap
 Four sources for the gap between strategy
and execution:
1. Visio...
Plan:
How Do We Get There?
 Operational planning
 Operational plan
Plan that translates an organization’s strategic
obje...
Plan:
How Do We Get There?
 Operational planning
 Tactic-centric plan—tactics are established to
meet the objectives and...
Plan:
How Do We Get There?
 Financial planning and budgeting
 An organization’s strategic objectives and key
metrics sho...
Monitor:
How Are We Doing?
 A comprehensive framework for
monitoring performance should address
two key issues:
 What to...
Monitor:
How Are We Doing?
Monitor:
How Are We Doing?
 Pitfalls of variance analysis
 The vast majority of the exception analysis
focuses on negati...
Monitor:
How Are We Doing?
Act and Adjust:
What Do We Need to Do Differently?
 Hackett Group’s benchmarking process
divides planning and management
...
Act and Adjust:
What Do We Need to Do Differently?
 Each sub-process is evaluated in terms of
five dimensions of efficien...
Act and Adjust:
What Do We Need to Do Differently?
 The Hackett Group’s benchmarking results
indicate that world class co...
Act and Adjust:
What Do We Need to Do Differently?
 The Hackett Group’s benchmarking results
indicate that world class co...
Act and Adjust:
What Do We Need to Do Differently?
 Paucity of analysis
 The overall impact of the planning and
reportin...
Performance Measurement
 Performance measurement system
A system that assists managers in tracking
the implementations of...
Drawbacks of solely using
Financial Data
 Financial measures are usually reported by
organizational structures and not by...
Effective Performance
Measurement
Basic ingredients include:
 Measures should focus on key CSF’s
 Measures should be a m...
BPM Methodologies
 An effective performance measurement
system should help:
 Align top-level strategic objectives and bo...
BPM Methodologies
 An effective performance measurement
system should:
 Delineate responsibilities, understand actual
pe...
BPM Methodologies
 Balanced scorecard (BSC)
A performance measurement and
management methodology that helps translate
an ...
BPM Methodologies
 The meaning of balance
 BSC is designed to overcome the limitations of
systems that are financially f...
BPM Methodologies
BPM Methodologies
 In BSC, the term balance arises because the
combined set of measures are supposed to
encompass indicat...
BPM Methodologies
 Aligning strategies and actions
• BSC enables an organization to align its actions with
its overall st...
BPM Methodologies
 Strategy map
A visual display that delineates the
relationships among the key organizational
objective...
BPM Methodologies
BPM Methodologies
 BSC certification
• BSC Collaborative offers software vendors the
opportunity to have their applicatio...
BPM Methodologies
 Six Sigma
A performance management methodology
aimed at reducing the number of defects in
a business p...
BPM Methodologies
 Six Sigma
 The DMAIC performance model
A closed-loop business improvement model
that encompasses the ...
BPM Methodologies
 Six Sigma
 Limitations of Six Sigma
• The lack of integration among the various Six Sigma
projects ac...
BPM Architecture and Applications
BPM Architecture and Applications
 BPM architecture
 System architecture
The logical and physical design of a system
 A...
BPM Architecture and Applications
 BPM architecture
 Database tier designs include:
• Transactional data stores
• Applic...
BPM Architecture and Applications
 BPM architecture
 BPM applications:
1. Budgeting, planning, and forecasting
2. Profit...
BPM Architecture and Applications
 BPM architecture
 BPM user interface
• The user interface is the bridge between the B...
BPM Architecture and Applications
Performance Dashboards
 Dashboards and scorecards both provide
visual displays of important information
that is consolida...
Performance Dashboards
Performance Dashboards
 Dashboards versus scorecards
 Performance dashboards
Visual display used to monitor operational
...
Performance Dashboards
 Dashboards versus scorecards
 Performance dashboard is a multilayered
application built on a bus...
Performance Dashboards
 Dashboards versus scorecards
 Three types of performance dashboards:
1. Operational dashboards
2...
Performance Dashboards
 Dashboard design
 “The fundamental challenge of dashboard
design is to display all the required
...
Performance Dashboards
 What to look for in a dashboard
• Use of visual components (e.g., charts,
performance bars, spark...
Performance Dashboards
 What to look for in a dashboard
• Enable drill-down or drill-through to underlying
data sources o...
Business Activity Monitoring (BAM)
 Business activity monitoring (BAM)
A real-time system that alert managers to
potentia...
Business Activity Monitoring (BAM)
 BAM depends on a wide range of
technologies working in concert including:
 ETL techn...
Business Activity Monitoring (BAM)
 Benefits of BAM
 Real-time data access in a usable format
 Access to tools to colla...
Business Activity Monitoring (BAM)
 BAM Issues
 Executives fail to consider the readiness of
technology or of the busine...
Upcoming SlideShare
Loading in …5
×

BPM, EPM - IBANK

429 views

Published on

IBANK, DUE DILIGENCE, OFSAA, EPM, HYPERION

0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total views
429
On SlideShare
0
From Embeds
0
Number of Embeds
3
Actions
Shares
0
Downloads
3
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide

BPM, EPM - IBANK

  1. 1. Chapter 5 Business Performance Management
  2. 2. Learning Objectives  Understand the all-encompassing nature of business performance management (BPM)  Understand the closed-loop processes linking strategy to execution  Describe some of the best practices in planning and management reporting  Describe the difference between performance management and measurement
  3. 3. Learning Objectives  Understand the role of methodologies in BPM  Describe the basic elements of the balanced scorecard and Six Sigma methodologies  Describe the differences between scorecards and dashboards  Understand some of the basics of dashboard design  Understand the potential uses of business activity monitoring (BAM)
  4. 4. Business Performance Management (BPM) Overview  BPM Defined  Business performance management (BPM) A real-time system that alert managers to potential opportunities, , impending problems and threats, and then empowers them to react through models and collaboration
  5. 5. Business Performance Management (BPM) Overview  BPM and BI Compared  BPM is an outgrowth of BI and incorporates many of its technologies, applications, and techniques  BPM is an enterprisewide strategy that seeks to prevent organizations from optimizing local business at the expense of overall corporate performance  BPM is part of the daily work of managers
  6. 6. Business Performance Management (BPM) Overview  Summary of BPM processes  BPM encompasses a closed-loop set of processes that link strategy to execution in order to optimize business performance, which is achieved by: • Setting goals and objectives • Establishing initiatives and plans to achieve those goals • Monitoring actual performance against the goals and objectives • Taking corrective action
  7. 7. Business Performance Management (BPM) Overview
  8. 8. Strategize: Where Do We Want to Go?  Strategic planning  Tasks common to the strategic planning process: 1. Conduct a current situation analysis 2. Determine the planning horizon 3. Conduct an environment scan 4. Identify critical success factors 5. Complete a gap analysis 6. Create a strategic vision 7. Develop a business strategy 8. Identify strategic objectives and goals
  9. 9. Strategize: Where Do We Want to Go?  Strategic planning  Critical success factors (CSF) Key factors that delineate the things that an organization must excel at to be successful in its market space  Strategic vision A picture or mental image of what the organization should look like in the future
  10. 10. Strategize: Where Do We Want to Go?  Strategic planning  Strategic objective A broad statement or general course of action prescribing targeted directions for an organization  Strategic goal A quantified objective with a designated time period
  11. 11. Strategize: Where Do We Want to Go?  The strategy gap  Four sources for the gap between strategy and execution: 1. Vision 2. People 3. Management 4. Resources
  12. 12. Plan: How Do We Get There?  Operational planning  Operational plan Plan that translates an organization’s strategic objectives and goals into a set of well-defined tactics and initiatives, resources requirements, and expected results
  13. 13. Plan: How Do We Get There?  Operational planning  Tactic-centric plan—tactics are established to meet the objectives and targets established in the strategic plan (used by best practices organizations  Budget-centric plan—a financial plan or budget is established that sums to the targeted financial values
  14. 14. Plan: How Do We Get There?  Financial planning and budgeting  An organization’s strategic objectives and key metrics should serve as top-down drivers for the allocation of an organization’s tangible and intangible assets  Resource allocations should be carefully aligned with the organization’s strategic objectives and tactics in order to achieve strategic success
  15. 15. Monitor: How Are We Doing?  A comprehensive framework for monitoring performance should address two key issues:  What to monitor  How to monitor
  16. 16. Monitor: How Are We Doing?
  17. 17. Monitor: How Are We Doing?  Pitfalls of variance analysis  The vast majority of the exception analysis focuses on negative variances when functional groups or departments fail to meet their targets  Rarely are positive variances reviewed for potential opportunities, and rarely does the analysis focus on assumptions underlying the variance patterns
  18. 18. Monitor: How Are We Doing?
  19. 19. Act and Adjust: What Do We Need to Do Differently?  Hackett Group’s benchmarking process divides planning and management reporting into four sub-processes: 1. Strategic planning 2. Operational and financial planning 3. Reporting 4. Forecasting
  20. 20. Act and Adjust: What Do We Need to Do Differently?  Each sub-process is evaluated in terms of five dimensions of efficiency and effectiveness: 1. Strategic alignment 2. Partnering 3. Process 4. Technology 5. People and organizations
  21. 21. Act and Adjust: What Do We Need to Do Differently?  The Hackett Group’s benchmarking results indicate that world class companies:  Are significantly more efficient than their peers at managing costs  Focus on operational excellence and experience significantly reduced rates of voluntary employee turnover  Have hybrid sourcing strategies that combine shared services and outsourcing
  22. 22. Act and Adjust: What Do We Need to Do Differently?  The Hackett Group’s benchmarking results indicate that world class companies:  Provide management with the tools and training to leverage corporate information and to guide strategic planning, budgeting, and forecasting  Closely align strategic and tactical plans, enabling functional areas to contribute more effectively to overall business goals
  23. 23. Act and Adjust: What Do We Need to Do Differently?  Paucity of analysis  The overall impact of the planning and reporting practices of the average company is that management has little time to review results from a strategic perspective, decide what should be done differently, and act on the revised plans
  24. 24. Performance Measurement  Performance measurement system A system that assists managers in tracking the implementations of business strategy by comparing actual results against strategic goals and objectives
  25. 25. Drawbacks of solely using Financial Data  Financial measures are usually reported by organizational structures and not by the processes that produced them  Financial measures are lagging indicators, telling us what happened, not why it happened or what is likely to happen in the future  Financial measures are often the product of allocations that are not related to the underlying processes that generated them  Financial measures are focused on the short term and provide little information about the longer term
  26. 26. Effective Performance Measurement Basic ingredients include:  Measures should focus on key CSF’s  Measures should be a mix of past, present, and future  Measures should balance the needs of all stakeholders (shareholders, employees, partners, suppliers, etc).  Measures should start at the top and flow down.  Targets must be based on facts and reality; arbitrary measures do not work in the long run.
  27. 27. BPM Methodologies  An effective performance measurement system should help:  Align top-level strategic objectives and bottom- level initiatives (goal congruence)  Identify opportunities and problems in a timely fashion  Determine priorities and allocate resources based on those priorities.  Be flexible to adjust measurements as the underlying processes and strategies change
  28. 28. BPM Methodologies  An effective performance measurement system should:  Delineate responsibilities, understand actual performance relative to responsibilities, and reward and recognize accomplishments.  Identify opportunities to take action to improve processes and procedures based on data.  Plan and forecast in a reliable and timely fashion
  29. 29. BPM Methodologies  Balanced scorecard (BSC) A performance measurement and management methodology that helps translate an organization’s financial, customer, internal process, and learning and growth objectives and targets into a set of actionable initiatives
  30. 30. BPM Methodologies  The meaning of balance  BSC is designed to overcome the limitations of systems that are financially focused  Nonfinancial objectives fall into one of three perspectives: 1. Customer 2. Internal business process 3. Learning and growth
  31. 31. BPM Methodologies
  32. 32. BPM Methodologies  In BSC, the term balance arises because the combined set of measures are supposed to encompass indicators that are: • Financial and nonfinancial • Leading and lagging • Internal and external • Quantitative and qualitative • Short term and long term
  33. 33. BPM Methodologies  Aligning strategies and actions • BSC enables an organization to align its actions with its overall strategies through a series of interrelated steps: 1. Identify strategic objectives for each of the perspectives 2. Associate measures with each of the strategic objectives; a mix of quantitative and qualitative should be used. 3. Assign targets to the measures. 4. List strategic initiatives to accomplish each of the objectives (i.e., responsibilities). 5. Link the various strategic objectives through a cause-and- effect diagram called a strategy map
  34. 34. BPM Methodologies  Strategy map A visual display that delineates the relationships among the key organizational objectives for all four BSC perspectives
  35. 35. BPM Methodologies
  36. 36. BPM Methodologies  BSC certification • BSC Collaborative offers software vendors the opportunity to have their applications certified against a well-defined set of criteria • The application must offer an end user the ability to view: 1. Strategic objectives from the four perspectives 2. The measures, targets, and initiatives associated with each objective 3. The cause-and-effect relationships among the objectives
  37. 37. BPM Methodologies  Six Sigma A performance management methodology aimed at reducing the number of defects in a business process to as close to zero defects per million opportunities (DPMO) as possible
  38. 38. BPM Methodologies  Six Sigma  The DMAIC performance model A closed-loop business improvement model that encompasses the steps of defining, measuring, analyzing, improving, and controlling a process
  39. 39. BPM Methodologies  Six Sigma  Limitations of Six Sigma • The lack of integration among the various Six Sigma projects across the enterprise • The failure to institute the roles required to support the methodology
  40. 40. BPM Architecture and Applications
  41. 41. BPM Architecture and Applications  BPM architecture  System architecture The logical and physical design of a system  A BPM system needs three components in order to contribute to the successful implementation of strategy: 1. Database tier 2. Application tier 3. Client or user interface
  42. 42. BPM Architecture and Applications  BPM architecture  Database tier designs include: • Transactional data stores • Application data marts • Centralized data warehouse
  43. 43. BPM Architecture and Applications  BPM architecture  BPM applications: 1. Budgeting, planning, and forecasting 2. Profitability modeling and optimization 3. Scorecard applications 4. Financial consolidation 5. Statutory and financial reporting
  44. 44. BPM Architecture and Applications  BPM architecture  BPM user interface • The user interface is the bridge between the BPM applications and the end user • The Web browser is currently the primary tool for accessing information in a BPM system • Spreadsheets are a popular alternative when a rich user interface is needed to support the analytical and computation needs of the user • BPM interfaces should provide is guidance to the end user
  45. 45. BPM Architecture and Applications
  46. 46. Performance Dashboards  Dashboards and scorecards both provide visual displays of important information that is consolidated and arranged on a single screen so that information can be digested at a single glance and easily explored
  47. 47. Performance Dashboards
  48. 48. Performance Dashboards  Dashboards versus scorecards  Performance dashboards Visual display used to monitor operational performance  Performance scorecards Visual display used to chart progress against strategic and tactical goals and targets
  49. 49. Performance Dashboards  Dashboards versus scorecards  Performance dashboard is a multilayered application built on a business intelligence and data integration infrastructure that enables organizations to measure, monitor, and manage business performance more effectively (Eckerson)
  50. 50. Performance Dashboards  Dashboards versus scorecards  Three types of performance dashboards: 1. Operational dashboards 2. Tactical dashboards 3. Strategic dashboards
  51. 51. Performance Dashboards  Dashboard design  “The fundamental challenge of dashboard design is to display all the required information on a single screen, clearly and without distraction, in a manner that can be assimilated quickly" (Few, 2005)
  52. 52. Performance Dashboards  What to look for in a dashboard • Use of visual components (e.g., charts, performance bars, sparklines, gauges, meters, stoplights) to highlight, at a glance, the data and exceptions that require action. • Transparent to the user, meaning that they require minimal training and are extremely easy to use • Combine data from a variety of systems into a single, summarized, unified view of the business
  53. 53. Performance Dashboards  What to look for in a dashboard • Enable drill-down or drill-through to underlying data sources or reports • Present a dynamic, real-world view with timely data refreshes, enabling the end user to stay up- to-date with any recent changes in the business. • Require little, if any, customized coding to implement, deploy, and maintain
  54. 54. Business Activity Monitoring (BAM)  Business activity monitoring (BAM) A real-time system that alert managers to potential opportunities, impending problems, and threats, and then empowers them to react through models and collaboration
  55. 55. Business Activity Monitoring (BAM)  BAM depends on a wide range of technologies working in concert including:  ETL technology  Process modeling technology  Rules engines  Messaging servers  E-mail in-boxes, portals, dashboards, and Web services
  56. 56. Business Activity Monitoring (BAM)  Benefits of BAM  Real-time data access in a usable format  Access to tools to collaborate and model the problem, leading to a quick solution
  57. 57. Business Activity Monitoring (BAM)  BAM Issues  Executives fail to consider the readiness of technology or of the business processes they want to monitor  Change management issues are paramount  Effective BAM requires working closely with the business units to identify the key indicators (CSF) and analytical techniques that provide reliable early warnings of impending issues  Executives must let the responsible managers on the frontlines deal with their problems and issues in a timely manner before reacting

×