Position the above capabilities as “over and above” the generic PM values common to all departments of the enterprise to Report, Plan, Measure and Monitor -- FPM as a Specialized view of Performance Management “ Three questions” that take on special significance in the of office of finance Well established processes based on failing spreadsheet-only systems in need of renewal Finance is a strategic foothold for Cognos as its one of the areas getting the “lion’s share” of budget Cognos FPM solutions radiate easily and uniquely well beyond finance Planning, Analysis, and Scorecarding for example [Script] The discipline of performance management is about asking and answering three vital questions…often in rapid succession. And these questions play out across all the departments in the enterprise. In the office of finance, these “questions” take on a special significance. It’s the finance department that: Analyzes aggregate and business segment performance as well as profit contribution of products, customers, channels, assets, etc. to understand Why the business is on or off track with “Financial Analytics” And finally, they are a catalyst for better performance by ensuring the alignment of plans, budgets, and forecasts with enterprise objectives Communicates “How are we doing?“ to external stakeholders and must do that with the utmost speed, integrity, and confidence to comply with regulatory requirements and investor expectations –The process is known as “financial consolidation and scorecarding”. Additionally, monitoring and measuring strategy – tracking organizational performance against strategic objectives through scorecarding is managed by the office of finance – the office of finance is tasked with managing the scorecarding process.
Please ask the audience this question to get a sense of how well their corporate strategy is communicated throughout the organization. Just get a rough estimate based on how many customers raise their hands against each response. Most companies do not do this well and the audience should indicated this by responding the strongest against the last possible responses. As you will see in a few minutes this is a very common organizational problem. Cognos 8 Scorecarding helps address this problem for organizations.
According to Fortune magazine, less than 10% of companies successfully execute their strategy. The problem shows up in public-sector organizations as well. As stated in a Barron’s article, a survey of 794 major programs implemented by the federal government revealed that only 15% of these programs carried out their strategies as intended. When companies fail in strategy execution, they pay a high price—in mediocre growth, lost market share, and less-than-stellar profitability. So why do companies fail in strategy execution (lead in to next slide)
Corporate executive don’t fail because they have bad strategies, they fail because of the challenges in consistently and easily communicate strategy throughout a global enterprise so that managers and employees at all levels of the organization are all pulling in the right direction The accounting frauds of the last couple years has also shifted the focus to accountability. How can we ensure our organization is more reliable, visible and predictable in our reporting to the street. The introduction of corporate governance legislation has accelerated the need to focus on performance management. Users are struggling to focus on key objectives that are important. They are inundated with reports and excess information. They have a difficult time determining what should be a priority. Important business information resides in a number of corporate systems making it a challenge to provide your executives and managers with a holistic and consistent view to information that matters most to them in their day-to-day decision-making and management of the business. Most organizations today are stretching IT resources to the limit. The business users are constantly requesting new and customized views of key performance information. The majority of organizations are struggling to find a way for business users to more self sufficient when monitoring key metrics. Companies don’t identify initiatives and projects needed to implement the strategy – companies need to successfully carry out initiatives intended to achieve important strategic initiatives.
No matter where in the world it operates, or in which industry or sector, every enterprise has the opportunity to deliver outstanding performance by mastering the discipline of Strategy Execution – which we will refer to as Strategy Management and is a multi-stage process that requires organizations to implement the following 5 steps: First, winning companies drive Strategy Execution from the top. The executive team takes responsibility for formulating the strategy and communicating it to the rest of the organization. Indeed, the team uses Strategy Execution as its change-management process—presenting the strategy as the picture of where they want the organization to go and how they believe it can get there by changing skills, incentive systems, products or services, and other levers in the organization. Second, such companies translate the strategy into terms everyone throughout the organization can understand. Once people throughout the enterprise can articulate the strategy, they can see how to support the strategy through their everyday actions and decisions. Third, winning companies align every part of the organization behind the strategy so that individuals and teams throughout the enterprise are all pulling in the same direction expressed by the strategy. Fourth, strategy-focused companies motivate their entire workforce to make strategy everyone’s job. These firms achieve this motivation through sharpening companywide awareness of the strategy, helping each employee define personal goals that support the strategy, and establishing incentives and skills development initiatives that also support the strategy. The fifth principle—govern to make strategy a continual process—forms the focus of the rest of this report. As we’ll see, this principle forms the core of the Strategy Execution competency. Companies practice this principle by managing their strategy, resources, and key (strategically vital) processes in disciplined ways— and integrating three arenas through process changes and supportive technologies. Strategy management is a multi-stage process that requires organizations to: • Drive strategy execution from the top. • Translate strategy into terms everyone can understand. • Align every part of the organization. • Make strategy everyone’s job. • Make strategy a continual process.
Scorecarding can help address these additional pains not addressed by reporting and analysis. The following definition helps define what a scorecard is. This slide will help set the stage for the upcoming slides. Next describe Cognos 8 scorecarding to set the stage for the rest of the presentation.
If you think of a typical successful organization, one of the 10% that successfully execute their strategy, all employees are aligned around a single strategy. They focus their efforts to support the strategic objectives derived from that strategy, and are accountable for those actions to drive business performance. Cognos 8 Scorecarding helps you achieve this kind of success by enabling you track organizational performance against strategy, to effectively communicate strategy, provide focus for your employees, ensure ownership and accountability of key metrics to improve overall business performance and link strategy to resource management. A Cognos 8 Scorecard includes a collection of all your important metrics, with targets attached to each one, enabling you to measure their performance. It allows you to take scorecarding to the next level, beyond displaying red, green, or yellow status indicators. You can manage performance by drilling down into supporting details to find out why a metric is performing a certain way enabling you to apply corrective actions where necessary. The comprehensive metric management capabilities included with Cognos 8 Scorecarding provide you with 5 important advantages. First advantage. At any given time, C8 scorecarding provides the oganization’s executives and managers with the status on how they are performing against strategic objectives. They can the focus their efforts on improving performance against any given strategic objective. Second. A common problem facing organizations is the inability to communicate strategy effectively through all levels. With strategy maps and the ability to attach metrics to objectives, Cognos 8 Scorecarding links strategy to execution. This approach ensures that all employees understand what the company’s strategy is, so they can align their projects and activities to drive it forward. Third advantage. Your employees may not know where to focus their activities to maximize their efforts and, ultimately, your company’s performance. Cognos 8 Scorecarding provides the focus your employees need. Watch lists of important metrics and cause/effect diagrams help users to prioritize their activities and maximize their efforts. And the fourth advantage. Your organization may face another common pain: lack of ownership and accountability. Every metric in a Cognos Scorecard can be attached to an owner, ensuring accountability and the correction of performance issues. There will be no debate about who will lead the charge to improve performance around a particular metric or KPI. Additionally, a Cognos 8 Scorecard used with Cognos 8 planning provides a link between strategy management and resource management. C8 scorecarding and C8 Planning used together can link strategy to resource planning (budgeting) through initiatives helping to ensure that planned projects and activities and their budgets are aligned with the corporate strategy Ensures that projects are only planned and budgeted for if they are linked to the corporate strategy
Now we will discuss some of the problems organizations face when they implement scorecarding projects. The point here is show the audience things they should avoid. This sets the stage for the next section of the presentation where we discuss a top down approach to implementing scorecarding. One common pitfall is that data sources are dictating your metrics – companies are measuring and tracking process and therefore can easily place it in a scorecard. In this case metrics are not truly relevant and have not been agreed upon at the executive level. It creates a situation where you have red, green, and yellow reporting – a list of metrics in various colors with no idea which one matters more to corporate strategy. This type of scorecard and its really that red, yellow, green reporting leads to a situation where the company will spend a lot of time determining why those metrics are red. However, if the metrics have not been set as part of the companies strategic objectives, it’s not the best use of company time and resources. Scorecards have the unique ability to focus people’s attention and if this focus doesn’t align with the corporate vision, the scorecard is enabling the very behavior we are seeing to correct, that is not working towards the corporate strategy. There is lot of great value in reports and there are many important ongoing projects and initiatives within any given organization. However, if they are not organize by your strategic objectives, you get a suboptimal execution of strategy. According to our question at the beginning of the presentation, many of you don’t have the company’s strategy top of mind. This means that day to day when someone is asking you what going to cause the success of the business chances are you could answer them in the specific metrics of your area, in the specific goals you have, but not in the broader context of what the company is looking for from strategy execution standpoint. For example, if your organization’s strategy is trying to penetrate new markets, yet all the software projects the IT department is working on is focused on getting a greater share of existing customers business, the strategy in IT is not consistent with the strategy of the organization. And even if the IT dept is really strong at deploying projects that are good at getting more current customer business, the IT department is not helping the organization in getting those new accounts. So in many companies, departments and employees don’t have strategy top of mind which means that there is a possibility that the projects that are getting worked on are not linked to strategy.
Let’s take a look at the right way to leverage scorecarding from a practical point of view. A better approach to scorecarding is a top down approach. Lets take a look at what this might look like as a manager. The issue is that as a manager looks at the business, their thinking starts off at a fairly big picture. The manager starts off with looking at the strategy and how well his or her department is performing against that strategy in order to prioritize their focus. Now lets look at the example I used before, if I’m concerned about market penetration I need to understand how the company is performing against that objective so I can prioritize what questions I’m going to ask the organization around market penetration performance. Once I’ve understood the prioritization question, I need to narrow the scope of questions I’m asking and understand a bunch of data about how we are performing operationally against that objective. So if the company’s objective is to penetrate new markets, the manager responsible for that needs to get a better operational understanding of that objective. Based on that understanding I’m going to narrow the scope of my questions even further for the specific operational issues. As a manager I can begin to notice what’s going on to provide directional input to my subordinates to address market penetration performance (the example we are using here). And once I’ve provided directional input, if necessary, I may need to analyse even more detail around market penetration performance to understand the details as to why we are performing a certain way here. In other words the manager’s thought process goes from broad scope to narrow scope. Metaphorically, 30000 ft – 20000 ft – 10000 ft – ground level. At 30000, you have a lot of horizon with not much detail; at 20000 feet, less horizon and more detail and so on. So that’s how a manager thinks so what we should be able to do now is build our information systems to parallel how the manager think – so lets take a look at that.
A key element of the Balanced Scorecard framework is a strategy map which is a diagram that describes how an organization creates value by connecting strategic objectives in explicit cause effect relationship with each other in the 4 BSC objectives (financial, customer, processes, learning and growth). It describes the strategy in a visual way and helps communicate the strategy among executives and to their employees. In this way, alignment can be created around the strategy which makes a successful implementation of the strategy more easy. Here we are looking at a strategy map showing us what the strategic objectives are across the four balanced scorecard perspectives. This helps us understand what the strategic objectives are and the cause effect relationships between them. The strategy map is a useful tool for communicating strategy thoughout an organization. It lists the specific strategic objectives and also explains how the company is going to get there. In some cases, the strategy map shows a weighting of how important each objective is and finally the indicator status of how we are performing against a target. It visually describes the division’s financial, customer, process, and employee growth strategies, making it easy to understand and communicate them throughout the organization. For those departments and employees that didn’t know what the strategy is, the strategy map enables employees to have it top of mind. A manager can look at this and determine where they should prioritize their focus to improve performance.
Operational Understanding – the best practice is impact diagram. Linked to strategy Not just metrics – projects and initiatives. Impact diagram – once you have an understanding of the strategy, I want to dive into the details to get an operational understanding and here the best practices for that the impact diagram. Take one of those objectives, in this example, Risk and drill into the specific processes and projects out there that underpins or contribute to the success of that objective. The impact diagram shows the cause and effect relationships and allows you to drill into that detail to begin to explain to what things contribute to the success of the company against any strategic objectice. I’ve gone from Big picture strategy to get that operational understanding. I’m going to use different data structures and ways to represent that info to accomplish that need.
Once the manager has a better operational understanding, they need to get to the next level of detail so they can provide direction to their subordinates to address metric performance. Directional info comes from reports and dashboards where you begin to see more data and timelines. You get more diagnostic information to find the underlying details of metric performance and can help answer the question as to why a metric or KPI is performing a certain way.
Once you are able to provide direction, a business analyst can conduct further analysis to get that analytic perspective – understand a specific issue, process or transaction to take a specific action. The analysis provides detailed info around a specific issue. What we’ve done is gone from a big picture, overall strategy to an impact diagram that gives me the operational understanding to a Dashboard that gives me more directional information and finally we need to get to a detailed data cube, down to the bottom, the BI layer to be able to understand specifically what is happening to drive a metric performance . These data structures mirror how the manager thinks and how the info needs to get cascaded and deployed inside the organization. Each of these tools or capabilities with C8 BI has an appropriate role in the management decision making process. And addresses what we observed earlier on
Driving Business Performance with Cognos 8 Scorecarding
Driving Business Performance with Cognos 8 Scorecarding Greg Ferenc Nagy, IBM Cognos, AT/EE, CIS/Russia
FPM – A Specialized View of PM Finance Product Development Operations Human Resources IT/Systems Customer Service Marketing Sales Financial Consolidation and Scorecarding Monitor strategy and report with confidence Why? How are we doing? What should we be doing? Financial Analytics and Reporting Analyze and optimize performance Enterprise Planning Plan, forecast and control enterprise resources Why? What should we be doing? How are we doing?
<ul><li>How well do you know your Corporate Strategy? </li></ul><ul><li>Can lay it out on paper in casual conversation </li></ul><ul><li>Could put it together with a little thought and time </li></ul><ul><li>Not sure it is communicated to my level of the organization </li></ul>Question
Strategy Execution Failure <ul><li>Less than 10% of companies successfully execute their strategy (Fortune Magazine) </li></ul><ul><ul><li>Mediocre growth </li></ul></ul><ul><ul><li>Lost market share </li></ul></ul><ul><ul><li>Lower profitability </li></ul></ul>
Reasons for Strategy Execution Failure <ul><ul><li>Lack of strategy communication </li></ul></ul><ul><ul><li>Lack of ownership & accountability </li></ul></ul><ul><ul><li>Lack of focus on strategic objectives </li></ul></ul><ul><ul><li>Lack of a comprehensive business view </li></ul></ul><ul><ul><li>Lack of strategic initiatives </li></ul></ul>
Strategy Management <ul><li>Drive strategy execution from the top </li></ul><ul><li>Translate strategy into terms everyone can understand </li></ul><ul><li>Align every part of the organization </li></ul><ul><li>Make strategy everyone’s job </li></ul><ul><li>Make strategy a continual process </li></ul>
Gartner Scorecard Definition <ul><li>A scorecard is an application that helps organizations measure and align the strategic and tactical aspects of their businesses, processes and individuals via goals and targets. </li></ul><ul><ul><li>Require a more structured approach and framework than a dashboard, making use of a management methodology such as BSC, TQM, or Six Sigma. </li></ul></ul><ul><ul><li>Helps manage your performance </li></ul></ul>
Cognos 8 Scorecarding <ul><li>Automates the strategy management and scorecarding process allowing an organization to link strategy to execution </li></ul><ul><ul><li>Track the organization’s performance against strategic objectives </li></ul></ul><ul><ul><li>Communicate the strategy across the organization </li></ul></ul><ul><ul><li>Ensure accountability and ownership </li></ul></ul><ul><ul><li>Provide departmental and employee focus </li></ul></ul><ul><ul><li>Link strategy to resource management (budgeting) </li></ul></ul>
Common Scorecarding Pitfalls <ul><li>Too many non-important metrics in a scorecard </li></ul><ul><li>No strategic importance </li></ul><ul><li>Chasing non-strategic reds </li></ul><ul><li>Initiatives/Projects/Reports not aligned with strategic objectives </li></ul>