PRAGMATEK Consulting Group, Ltd. 2000 Alignment of Executive Strategy with Operational Execution through Performance Dashboards Association for Strategic

PRAGMATEK Consulting Group, Ltd. 2000

Alignment of Executive Strategy with Operational Execution

through Performance Dashboards

Association for Strategic Planning

Minnesota ChapterDecember 19, 2006


Agenda

Value Proposition Which Metrics? Project Approach Technology Pitfalls Question and Answer


Disconnected Organizations

Shipping

$$

TreasurerQuality Assurance

Manufacturing Marketing Warehouse

Motorpool

Research & Development

Management

Strategic Vision

Daily Execution

Disconnect


Enterprise Performance Management

Strategy + Execution Success

1. Prioritize Initiatives2. Allocate Resources3. Identify Key Metrics4. Communicate to All Employees5. Measure Results6. Analyze and Adjust


Result of Alignment

Shipping

$$

TreasurerQuality Assurance

Manufacturing Marketing Warehouse

Motorpool

Research & Development

Management

Strategic Vision +Performance Visibility

Daily Execution +Purpose


Enterprise Performance Management


Why Build a Dashboard?

Single, consistent version of truth for performance management Executive visibility Employee alignment

Easily accessible throughout organization Up-to-date information Flexible solution

Simple for casual users Advanced drill down and analysis for power

users


Return on Investment (ROI)

Proactively identify potential issues Exceptions – red, yellow, green Knowledge Mgmt – send email notification

Support root-cause analysis Learn from competitive analysis

Which business unit is best in class? Explain performance results for future learning Streamline communication efforts Focus operational excellence


Case Study: Metric Cockpit

After Single source of results stored

centrally in data warehouse Current results accessible via web Results collected automatically Some results input through web

interface Trending information readily

available Projections included Commentary included regarding

discrepancies

Before Inconsistent measures of

key performance indicators

Data sourced from multiple locations

Manual effort to collect results

Periodic distribution via email or physical printouts

All data is historical

Impact Enhanced management

communication “Single source of the truth” Eliminated reporting processes


Agenda



Key Performance Metrics

Should be actionable and/or manageable Must be understood by every member of

the audience Remember to include a definition link from

the dashboard! In many cases, the ultimate source will be

dependent upon company-specific definitions and application system usage

Value is found when showing trend, targets, or relationship with other metrics


Human Resources Metrics

Headcounts New hires Outgoing employees Average length of service Minority percentages Full-time vs. part-time Hiring rates Open positions


Finance Metrics

Budget vs. actual spent Cost center Internal order or project

Plan vs. actual financial statements Profit center Company code

Profitability Economic Value Added (EVA) Production cost variances Days sales outstanding (A/R vs. Sales) Miscellaneous cross-functional possibilities


Sales Metrics

Incoming orders, shipments, and invoices Order fulfillment (production and delivery

performance) Sales backlog (open orders) Cycle times (order processing) Pricing variations Returns Product sales mix Quotations close rate


Procurement Metrics

Average delivery time Order performance Contracted purchases Vendor dependency Purchase order quantity Ordering technology Invoice quantity Purchase price variances Minority spending


Agenda



General Statement of Direction

Start with the end goal in mind Consider developing front-end first – then

fill in the technical details Favor Strategic Iterations over “Big Bang”

or “Uncoordinated Projects” approaches Maximize Return on Investment (ROI) and

reduce Total Cost of Ownership (TCO) Capture and sustain momentum through

entire project lifecycle Provide many opportunities to refine

requirements


Strategic Iterations — Measured Success

Destination


The Great BW Balancing Act

Launch individual projects as budgeted

Analyze and deliver complete warehouse

Good individual ROI

Builds local momentum

Inability to analyze

Considerable rework

Poor performance

Costly support

Optimize decision support

Efficient build process

Long time to market

Huge investment

Continuous scope creep

Risk of turnover

“Big Bang”“Uncoordinated”


Uncoordinated — Individual Projects Approach

Destination

Unknown!


Big Bang — Complete Warehouse Approach

Like driving with a microscope – you may arrive at your

destination, but the journey will be slow

and inefficient


Strategic Iterations Process

1.Confirm overall strategyStated mission, values, objectives as

starting pointPrioritize aspects of performance — can’t

be all things• Low cost• Exceptional product or service• Innovator

Use this overall position as a baseline in setting project priorities and goals


Strategic Iterations Process (cont.)

2. Decompose to manageable level What performance is required to meet

expectations?• Customers• Shareholders• Employees

What operational or financial information supports realizing these expectations?• Measures of past performance• Current metrics and trends• Indicators of future success



3. Identify decision points Investment in promotional activities

• Sales information• Competitor data

Continuous improvement opportunities• Returns• Customer feedback

Inventory carrying cost reduction• Forecast accuracy• Production lead times• Order fulfillment performance



4. Build core metric matrix Measure Characteristics Source Value

• How well does this support decisions?


Core Metric Matrix

Measure

TimeCust.

Product

Product-ion Org.

CompanySource(s)

Value

Sales Daily Ship SKU PlantSales Org Company

SAP COPA H

Returns Weekly Ship SKU PlantSales Org Company

SAP SD H

Inventory Weekly SKUSloc Plant

Plant Company

SAP MM H

Scrap Weekly SKUSloc Plant

Plant Company

SAP PP M



5. Identify prerequisites and dependencies• For example, must have sales before

forecast accuracy

6. Derived metrics Identify cross-functional relationships Validate level of detail is supportive For example, order fulfillment by

material, but forecast accuracy by material group



7. Group by source of data• Efficiency in analyzing entire source at once• Minimize rework for future requirements

8. Prioritize by cost vs. metrics delivered• Develop rough estimate of duration and

resources required• Consider pre-requisites• Remember there is an opportunity cost to

delays



9. Develop draft of master plan• Further details to come in “Project Planning”

10.Staff project• Further details to come in “Project Planning”

11.Complete initial iteration through delivery to users• Ensure the information is accurate and users

are ready• Announce the completion of phase and

related milestones


Milestones

Tangible outcomes for each iteration Training for target users

Classroom Personal Announcement

Visible delivery Enterprise Portal SEM Management Cockpit BI Web applications Excel-based analytics



12.Revisit project plan• Nothing is set in stone• Continuous adjustments are expected

13.Repeat for subsequent iterations• Keep a vision of the desired end point in mind

• Never let the momentum fade too much


Eliminate redundant communication Reduce time gathering reports Gain ability to make rapid, informed decisions

Key Performance Indicators identified Measurement data available Hunger to improve data visibility

Management Cockpit Project

Duration: 2-4 Months

DIFFICULTY

RETURN

Low

LowHigh

High

GEMExtra Effort

Caution Quick Hit

Internal: 1 IT Bus Analyst

Prerequisites

External: 1 Functional ConsultantBW Requirement: Low-Medium

1 Business Resource

Return on Investment


Agenda



Sample Dashboard


Management Cockpit Demo


Interactive Simulation Model


Executive Console


Enterprise Performance Mgmt System

Only a part of the comprehensive solution.


Key Dashboard Components

Branding Status reporting Navigation tutorial Visibility to metric definitions Easy-to-consume information Detailed analysis capability Data validity statistics (last refresh

time)


Data Input Capabilities

Simple, integrated interface


Formatted Printing

Web-based solutions are notoriously poor as printing platforms

Export to Excel Export to .pdf Modify font size, formats, or layout Copy-and-paste to PowerPoint

presentations


General Technology Considerations

Stop light concept to call out exceptions

Maintenance by power users Data collection capabilities


Agenda



Metrics Pitfalls

Information overload Functional bias Hindsight Limited perspective Inconsistent definitions Irrelevant metrics


Approach Mistakes

Strategic confusion Destination unknown No executive mandate Misalignment Big bang Incorrect results Unguided exploration


Technology Red Flags

Complex user experience Only ad hoc research No knowledge retention Inflexible Segregated Dead-end audit Outdated information


Key Points to Summarize

There are real opportunities for Return on Investment (ROI) through dashboard implementations

You can quickly deliver a dashboard solution The application designer should be usable by

power users and developers Web applications can incorporate a variety of

sources and publish to many different destinations

Outputs can be simple or complex to fit the audience


Question and Answer

How to contact me:Matt Christensen

[email protected]

Documents

PRAGMATEK Consulting Group, Ltd. 2000 Alignment of Executive Strategy with Operational Execution through Performance Dashboards Association for Strategic