World Applied Sciences Journal 24 (Information Technologies in Modern Industry, Education & Society): 07-11, 2013 ISSN 1818-4952 IDOSI Publications, 2013 DOI: 10.5829/idosi.wasj.2013.24.itmies.80002 Business Performance Management in Small and Medium Businesses and Functional Automation Alexander Germanovich Belov and Alla Grigorievna Kravets Volgograd State Technical University, Volgograd, Russia Submitted: Aug 5, 2013; Accepted: Sep 15, 2013; Published: Sep 25, 2013 Abstract: The article describes the problems of functional automation in the context of performance management, possibility of creating a control system using the balanced scorecard and key performance indicators based on enterprise resources planning systems. Discusses the causes of failures in the implementation of the performance management with the use of performance indicators. The author argues that the functional automation is the key to creating an effective management system. A description of some performance measures derived from automated functional subsystems. An example of implementing a management practices on the basis of performance indicators through the integration of software distribution solutions Volgasoft: Management by objectives and KPI (Key Performance Indicators) with 1C: CRM (Customer Relationship Management). Key words:key performance indicators Business performance management Functional automation Enterprise resources planning, balanced scorecard Financial management Supply chain management Customer relationship management INTRODUCTION expectations connected with KPI-management, in absence of regular management and also are connected with lack Business performance management has gained of automation tools, used to which need for maintain high popularity in scientific community in last 20 years. this management technology [1]. A lot of successful companies use KPI (Key Performance Indicators) and management by Objectives to provide Background: The company, using KPI management business performance. Balanced scorecard concept, emphasizes key-factors of business success and proposed by Norton and Kaplan has become most Objectives for 4 main aspects (finance, clients, internal widespread in practice. As Fortune company claims, processes, learning and growth) [2]. Measurements for BSC (Balanced scorecard) has become the main monitoring the stage of implementation of these targets management instrument in 402 companies from 500, can be de defined from the basis of these selected which rating Fortune-500 consists of. targets. Although, there are not much successful The research, made by consulting company projects, especially in Russian experience, that Baker Tilly Rusaudit in 2008 among Russian companies, implemented such approach in small and medium shows, that 41% of companies use KPI system in business. KPI-management is being received new business management, other 13% use different indicators perspectives and capabilities applying informational without classifying them as Key Performance Indicators. technologies in small and medium business. More than 59% of companies, that still haven t embedded If we take a look at companies, which applied KPI-management, have plans to do it in nearest future. such approaches in their business using KPI, it can be Although only 45% of companies representatives noticed, that there are more unsuccessful projects notice, that their expectations of using KPI have been than successful ones. There are several reasons for met. The reasons of such results are hidden in unjustified that: Corresponding Author: Belov, Volgograd State Technical University, Lenin avenue, 28, 400005, Volgograd, Russia. 7
Firstly, introduction of management by Objectives investment, used on creating competitive advantage, an system with KPI needs complex approach and regular instrument for realization strategic goals of business [5] management. This means, that every functional field and also changing and controlling of dynamics of these should stay on regular and consecutive steps of activity goals. Thus tracking non-financial goals, which can be planning, on their fulfilling and control of this activity used in managing strategic initiative, should be and analyzing and tuning this activity. Very often, a emphasized. company, starting to apply such a system of management, Functioning of the enterprise involves the faces with the fact, that their processes are not enough allocation of functional units, the decisive diverse, but formalized to fully apply on practice management, based complementary objectives. Where in leading staff should on indicators. measure performance and activity estimate as every This readiness is determined not by long-termed department locally, as providing consistency of such working experience, but is determined by using proven activity. It s necessary to evaluate the result created in approaches in operating activity and its automation. business-operations and to consider resources, spent Besides that, management, based on indicators, for this, to evaluate enterprise s activity performance. needs considerable costs to provide the process itself: So, we ll need goal formulating as element of operating starting from target-formulating, indicators selection and and strategic planning and also estimate of resources, coordination with all staff, responsible for these spent to achieve this goal. In this context, requirements indicators. It s impossible to reach reliability and for development and applying ERP-system should be timeliness in calculating of the most important for formulated after detailed designing of Balanced Scorecard business indicators without automation. Absence of and Key Performance Indicators. It s important to notice, actual information about estimated activity and that indicators of strategic goals achievements should be accumulated statistic information won t let management divided into quantitative and qualitative indicators. make timely and reasonable decisions. The latest of them mostly reflect realization of strategic projects and initiatives. First of them, as usual measure Performance Management and Functional Automation: operating activity, that can be easily formalized and Projects, which are oriented on enterprise s efficiency regulate. increasing, should start from formalization and automation In spite of strategy originality of each company, of functional activity. The first step should contain approaches to operating activities assessment are creating an instrument for operating planning and usually standardized. Sets of the best practices find their control, improving the quality of accounting material and reflection into developed software, that was created to other types of enterprise s resources. That is all solve functional tasks (within an enterprise) and sectoral transaction-based ERP-Systems are focused on. ERP specialization. That is especially actual for small-scale and means Enterprise resources planning and this abr. medium-scale business, when usage of replicable Is used for any software, aimed to support and automate software allows reducing costs of development and business processes of medium and large enterprises [3]. implementation of software for decision-making support. Although, some vendor s ERP systems license prices Functional automation makes it possible to assign and maintenance costs are available as for middle as for business processes meters, that show level of process small businesses. control ratio, created within it value and level of expenses, It is known, that the ERP s main goal is to integrate that company bears as a result of production of such as many functions of enterprise management as possible. value. These functions, as usual, are grouped in three fields: It s necessary to take into consideration Financial management (FM), Supply chain management opportunity of integration with functional software (SCM) and Customer relationship management (CRM) [4]. while designing management instruments. Such The majority of companies spend lots of resources integration means an opportunity to regularly receive on creating the system itself and its technical aspects objective information about occurring on enterprise of implementation, wherein special attention is paid processes. Wherein absence of process s automation on development of finance indicators report system. often leads to inability of its adequate measurement, or Although, ERP system should be considered as the costs of providing regular and satisfactory 8
measurement appear to be disproportionately high, systems, developed for different platforms. which prevents penetration of changes in all enterprise s This means not only synchronizing data, but also managing levels. exclusion of its duplication, receiving tasks Software, developed for operations with database connected with its updating and transforming should fulfill several grouped functions. Firstly, these it from different formats in single format. Besides, are tasks, connected with collection, processing and it s necessary to keep actual data translation consolidation of disparate, sometimes non-formalized data algorithms [6, 7]. of business-processes. Measurement sections is appropriate to consider as Such software should cover an opportunity software, developed considering concepts of existing of flexible integration with set of accounting enterprise s management [8]: Abrv Concept Possible factors available for measurement MRP II Manufacturing Resource Planning 1.The regularity and the level of production equipment s loading 2.Availability of raw materials and production materials 3.Terms and traceability of the production FRP Finance Requirements Planning 1.Revenue, profit 2.Level of production costs 3.The use of budgets HRM Human Resource Management 1.Staffing level 2.The professional level of staff and 3.The presence of a personnel reserve APS Advanced Planning and Scheduling 1.Sales and demand forecasts 2.Detailed plan of production capacity 3.The level of inventories SCM Supply Chain Management 1.Terms of the Order fulfilling 2.Delivery dates of inventories PDM Product Data Management 1.Time of preparation design documentation 2.Terms of implementing improvements CRM Customer Relationship Management 1.Indicators of marketing and promotional activities 2.Planning and forecasting sales 3.Conversion of customers and customer loyalty WMS Warehouse Management System 1.The use of storage space 2.Speed??of warehouse operations EAM Enterprise Asset Management 1.Timeliness Logistics 2.The cost level of the technical content CMMS Computerized Maintenance 1.Unplanned downtime of production equipment Management Systems 2.Implementation of regulations on equipment maintenance PM Project Management 1.Dynamics of projects implementation 2.Implementation of the plan expenditure on projects 3.The level of quality and meeting the requirements of product design QMS ISO:9000 Quality management systems 1.The level of customer satisfaction; 2.The level of the cost of rework and complaints 3.The stage of effectiveness of individual processes ECM Enterprise Content Management 1.Timely execution of tasks within a business process management documentation. ITIL/ITSM IT Infrastructure Library/IT 1.Availability of key information resources Service Management 2.Providing an agreed level of services to support information systems 3.The cost level of providing IT infrastructure 9
Pic. 1: Matrix of sales department indicators Pic. 2: Widgets of sales-managers activity indicators Pic. 3: Widget showing indicators of new clients requests with marketing type Implentation and Results: According to the study s 3 companies used an instrument of automation results of 35 Russian companies of small and document workflow and 8 companies considered medium-sized businesses, which requested to purchase the possibility of using the same instruments. the software to automate the management by Objectives, All these companies were interested less in there were following statistics: other presented technologies of enterprise management. All of them had instruments for financial and regulated accounting. From this it may be concluded that small-and 6 companies had CRM module and 18 were seeking medium-sized businesses have higher need for for opportunity to buy and adopt such a module software for automation processes of relationships during the year. with consumers and suppliers. Therefore, the integration 10
process with CRM products should be emphasized ACKNOWLEDGMENTS while developing solutions for performance management [9]. The work was supported by grants 10-3-H1.4-0116, As an example, we ll take integration of software 12-3-H1.3-0067-1-C2 of The Fund of Small Innovative solution from Volgasoft: Management by Objectives and Enterprises in Science and Technology Development KPI and solutions 1C: CRM [10]. Support (FASIE). A ready example of such integration was creating a system for performance management with KPI for REFERENCES IT-Company. On Pic.1 an example of performance indicators for sales department is presented. Measures 1. Baker Tilly Rusaudit, consulting company, 2008. quantity of closed contracts and customers Russian practic introduction of KPI. s.l.: satisfaction -are measurable indicators, received from www.bakertillyrussaudit.ru/. CRM-system. 2. Kaplan, R. and D. Norton, 1992. The balanced Pic.2 using diagram shows extent of occupation of scorecard-measures that. s.l.: Harvard Business every manager and dynamics of fulfilled contacts Review (January-February), 70(1): 71-79. quantity during the period. 3. Pedro Ruivo, Miguel Neto. Sustainable enterprise Distribution of incoming requests from new clients KPIs and ERP post adoption. with dividing by marketing channels, where information ieeexplore.ieee.org/stamp/stamp.jsp?tp=&arnumber about company s products and services was received =5974301&tag=1. from is shown on Pic.3 All these indicators are formed 4. Kumar, V., B. Maheshwari and U. Kumar, 2002. from export and aggregation data from CRM-System. Enterprise resource planning systems adoption Integration of replicable solution from Volgasoft: process: a survey of Canadian organizations. Management by Objectives and KPI with 1C: CRM PROF International Journal of Production Research, allowed implementing practice of KPI management in 40(3): 509-23. short time. The performance of sales managers was 5. Ho, C. and Y. Tai, 2004. Strategies for the adaptation improved 3 times (contact s quantity and amount of profit of ERP systems. Industrial Management & Data from 1 manager) due to automation of routine operations Systems, 104(3): 234-51. and constructing results-motivating system. Performance 6. Jai Ganesh, Sriram Anand, 2005. Web services, of marketing department was improved in 5 times due to Enterprise Digital Dashboards and Shared Data tracking efficient marketing channels and stimulating Services: A Proposed Framework. Proceedings of the marketing manager to find the most effective and cheap Third European Conference on Web Services ways of market-promotion. (ECOWS 05). CONCLUSIONS 7. Velcu, O., 2007. Exploring the effects of ERP systems on organizational performance: evidence from Finnish companies. Industrial Management & Flexible integration of software products, designed Data Systems, 107(9): 1316-34. for Performance Management with transaction systems, 8. Butler, R.H., 1996. Key Indicators can help improve directed to Enterprise Resources Planning and with the performance of your business. Journal replicable solutions for automation particular functional Supervision, 57(3): 3-5. fields (Ex.CRM) has great practical usage. It allows to 9. ScottJudy, E. and VesseyIris, 2000. Implementing resolve the most actual tasks for small and medium-sized Enterprise Resource Planning systems: The role of businesses, designing corporate informational systems, learning from failure. Journal Information System directed to realization business s strategies while keeping Frontiers, 2(2): 213-232. low costs on maintenance and adoption. 10. Belov, A.G., 2011. Development panel business performance indicators. News of the Volgograd state technical University, pp: 77-81. 11