The Importance of Business Performance Management By Mauricio Mulé CMLgroup

Transcription

1 The Importance of Business Performance Management By Mauricio Mulé CMLgroup

2 Organizations are Failing to Execute their Strategy Less than 10% of strategies effectively formulated are effectively executed In the majority of cases we estimate 70 percent the real problem isn t bad strategy It s bad execution - Ram Charan

3 How are Organizations Executing their Growth Strategy? 1. Which has grown faster since 1997: Intel or inflation? 2. After spending $100 billion on acquisitions over five years, AT&T s CEO Michael Armstrong achieved higher or lower revenues? 3. In 1997, Procter & Gamble s CEO vowed to double its business in seven years. If it continues to grow at the same pace, how many more years will it take to reach its goal? 4. When Chris Galvin become Motorola s CEO in 1997, the company earned more than $1 billion a year. By how much have the corporation s profits since exceeded Galvin s compensation? Source: Double Digit Growth 2003 by Michael Treacy

4 Why are Organizations Failing to Execute their Strategy? No consistent way to describe the strategy 67% of HR and IT organizations are not aligned with the strategy 85% of executive teams spend less than one hour a month discussing strategy 60% do not link budget to strategy 70% of middle managers do not have incentive compensation linked to strategy 95% of the typical work force does not understand the strategy Source: Adapted from material developed by Robert Kaplan and David Norton

5 Organizations are working towards resolving this issue Enterprise Resource Management ERP Critical Chain Six Sigma Enterprise Project Management EPM Applied Behavioral Science ABS Total Quality Management TQM Hoshin Kanri Theory of Constraints TOC Economic Value Added EVA Theory of Profound Knowledge TPK Baldrige Service Oriented Architecture SOA Balanced Scorecards BSC Customer Relationship Management CRM

6 These are great initiatives, but organizations are still failing. Why? These initiatives were created to eliminate specific constraints, and not as a means of executing the organization s strategy There is NO single initiative capable of aligning Strategy to Execution with Sustainable Performance Improvement over Time

7 What is the market direction? "The BPM analytic applications market performance exceeded expectations in 2004, and double-digit growth is expected to continue. Information transparency and performance management initiatives are a top priority from both a business and IT standpoint, and they will play an increasingly important role in enterprise wide transformation initiatives that reduce information silos and optimize performance management processes." BPM software sales are growing at an annual rate of at least 10% right now faster than any other application-software sector. Patrick Mason Pacific Growth Equities Enterprise Performance Management (EPM) spending remains strong in 2006, with nearly $23B planned for software, hardware, labor (internal and external), and integration services. John Hagerty, Fanella Sirkisoon March 16, 2006 AMR Research

8 Business Performance Management Translates Strategy into Execution BPM Solution - Executing the Organization s s Strategy Define: The Strategy Measure: Results Manage: Performance Balanced Scorecard Performance Management - Enterprise Project Management (EPM) - Business Process Improvement (BPI) - Applied Behavioral Science (ABS) - Enterprise Communication Portal (ECP) - Other Initiatives Closed Loop Process of Continuous Improvement

9 The Cranfield University Research Data source from 780 CEOs and CFOs, US organizations BPM is the organizational approach to assess and monitor performance in relation to set goals and objectives. It encompasses methodologies, frameworks and indicators that are used to help organizations in the formulation and assessment of the strategy, to motivate people and to communicate or report performance to external stakeholders. Data Collection Report Firms reporting good quality of measures Measures collected consistently BPM systems has improved our decision making Better decision Quality Execution Quality Performance against competitors Without Formal BPM Approach With Formal BPM Approach 33% 68% 24% N/A 57% 43% 47% 73% 72% 71% 60% 72%

10 BPM Solution Framework Definition: a systematic, integrated management approach that links enterprise strategy to core processes and activities. Continuous and realtime reviews to help businesses discover efficient use of their resources and intangible assets BPM Solution Core Services Define Balanced Scorecard (BSC) Measure Performance Management (PM) Manage Enterprise Project Management (EPM) Business Process Improvement (BPI) Applied Behavioral Science (ABS) Enterprise Communication Portal (ECP)

11 Conclusion Larger enterprises will increasingly adopt a business performance management operation philosophy, where business goals are set, plans/budgets are formulated to enable those goals, and actual data is assiduously compared to forecasts. A change in management philosophy such as this requires extensive leadership skills to ensure successful execution

12 Contact Information Mauricio Mulé CMLgroup Ltd. 14 Wall St, 20th Floor New York, NY mmule@cmlgroup.com