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Course: 0154M Management Support

Systems

Business Performance

ManagementSesi 07

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BRIEF CONTENTS

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Bina Nusantara

Chapter 9

Business Performance

Management

4

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Session Learning O!ecti"es

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

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Session Learning O!ecti"es $continue %%&

Describe the difference beteen performance

management and measurement

Understand the role of methodologies in BPM

Describe the differences beteen scorecards and

dashboards

Understand some of the basic concepts of dashboards

design

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Opening Vignette:

Double Down at Harrah's

Company ba!groun"

#roblem "esription

#ropose" solution

$esults

%nswer an" "isuss the ase &uestions

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Business #er/ormane 0anagement

1B#02 Oeriew Business #er/ormane 0anagement 1B#02 is% real4time system that alert managers topotential opportunities, impen"ing problems,an" threats, an" then empowers them to reat

through mo"els an" ollaboration %lso alle", orporate per/ormane

management 1C#0 by 5artner 5roup2,enterprise per/ormane management 1+#0 byOrale2, strategi enterprise management16+0 by 6%#2

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Business #er/ormane 0anagement

1B#02 Oeriew B#0 re/ers to the business proesses,metho"ologies, metris, an" tehnologiesuse" by enterprises to measure, monitor, an"manage business per/ormane

B#0 enompasses three !ey omponents7 % set o/ integrate", lose"4loop management an"

analyti proesses, supporte" by tehnology 8

7 9ools /or businesses to "ene strategi goals an"

then measure;manage per/ormane against them7 0etho"s an" tools /or monitoring !ey per/ormane

in"iators 1

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B#0 ersus B- B#0 is an outgrowth o/ B- an"inorporates many o/ its tehnologies,

appliations, an" tehni&ues

7 6ame ompanies mar!et an" sell them

7 B- has eole" so that many o/ the original"i>erenes between the two no longer e?ist1e.g., B- use" to be /ouse" on "epartmentalrather than enterprise4wi"e pro@ets2

7 B- is a ruial element o/ B#0

B#0 A B- #lanning 1a unie" solution2

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% Close"4oop #roess to Optimi=e

Business #er/ormane #roess 6teps*. 6trategi=e

(. #lan

3. 0onitor;analy=e

. %t;a"@ust

+ah with itsown proesssteps8

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6trategi=e:

Ehere Do Ee Eant to 5oF 69$%9+5-C #%NN-N57 Common tas!s /or the strategi planningproess:

*. Con"ut a urrent situation analysis

(. Determine the planning hori=on3. Con"ut an enironment san

. -"enti/y ritial suess /ators 1C6G2

. Complete a gap analysis

I. Create a strategi ision

J. Deelop a business strategy

K. -"enti/y strategi ob@eties an" goals

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6trategi=e: Ehere Do Ee Eant to 5oF Strategic objective % broa" statement orgeneral ourse o/ ation presribing targete""iretions /or an organi=ation

Strategic goal % &uantie" ob@etie with a

"esignate" time perio" Strategic vision % piture or mental image o/what the organi=ation shoul" loo! li!e in the /uture

Critical success factors (CSF)

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6trategi=e: Ehere Do Ee Eant to 5oF

L) perent o/ organi=ations /ail to e?eute theirstrategies

9he strategy gap

7 Gour soures /or the gap between strategyan" e?eution:

*. Communiation 1enterprise4wi"e2

(. %lignment o/ rewar"s an" inenties

3. Gous 1onentrating on the ore

elements2. $esoures

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#lan: How Do Ee 5et 9hereF Operational planning

7 Operational plan: plan that translates anorgani=ationMs strategi ob@eties an"goals into a set o/ well4"ene" tatis an"

initiaties, resoures re&uirements, an"e?pete" results /or some /uture timeperio" 1usually a year2

Operational planning an be

9ati4entri 1operationally /ouse"2Bu"get4entri plan 1nanially /ouse"2

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#lan: How Do Ee 5et 9hereF Financial planning and budgeting

7 %n organi=ationMs strategi ob@eties an"!ey metris shoul" sere as top4"own"riers /or the alloation o/ an

organi=ationMs tangible an" intangibleassets

7 $esoure alloations shoul" be are/ullyaligne" with the organi=ationMs strategiob@eties an" tatis in or"er to ahieestrategi suess

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0onitor: How %re Ee DoingF % omprehensie /ramewor! /or

monitoring per/ormane shoul"a""ress two !ey issues:

7 Ehat to monitorCritial 6uess Gators 1C6G2

6trategi goals an" targets

7 How to monitor

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0onitor: How %re Ee DoingF

Diagnosti ontrol system

% yberneti system that has inputs, a proess/or trans/orming the inputs into outputs, astan"ar" or benhmar! against whih toompare the outputs, an" a /ee"ba!hannel to allow in/ormation on arianesbetween the outputs an" the stan"ar" to beommuniate" an" ate" upon.

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#it/alls o/ ariane analysis

79he ast ma@ority o/ the e?eption analysis/ouses on negatie arianes when /untionalgroups or "epartments /ail to meet their targets

7 $arely are positie arianes reiewe" /orpotential opportunities, an" rarely "oes theanalysis /ous on assumptions un"erlying theariane patterns

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What if strategic assumptionsWhat if strategic assumptions(not the operations) are wrong?(not the operations) are wrong?

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%t an" %"@ust:Ehat Do Ee Nee" to Do Di>erentlyF

6uess 1or mere surial2 "epen"s on newpro@ets: reating new pro"uts, enteringnew mar!ets, a&uiring new ustomers 1orbusinesses2, or streamlining some proess.

0ost new pro@ets an" entures /ail7 Hollywoo" moies: I) hane o/ /ailure

7 0ergers an" a&uisitions: I)

7 -9 pro@ets 1large4sale2: J)

7 New /oo" pro"uts: K)

7 New pharmaeutial pro"uts: L) 8

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Harrahs Cose!"#oop Mar$eting Mo!eHarrahs Cose!"#oop Mar$eting Mo!e

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9he Ha!ett 5roupMs benhmar!ing results in"iatethat worl" lass ompanies:

7 %re signiantly more ePient than their peers atmanaging osts

7 Gous on operational e?ellene an" e?perienesigniantly re"ue" rates o/ employee turnoer

7 #roi"e management with the tools an" trainingto leerage orporate in/ormation an" to gui"estrategi planning, bu"geting, an" /oreasting

7 Closely align strategi an" tatial plans,enabling /untional areas to ontribute moree>etiely8


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Performance measurement sstem

% system that assists managers in tra!ingthe implementations o/ business strategy by

omparing atual results against strategigoals an" ob@eties

7 Comprises systemati omparatiemetho"s that in"iate progress 1or la!

thereo/2 against goals

#er/ormane 0easurement

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!e performance indicator (!B")

%

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!e performance indicator (!B")

Outome

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#roblems with e?isting per/ormanemeasurement systems

79he most popular system in use is some arianto/ the balane" sorear" 1B6C2

)4L) o/ all ompanies implemente" B6C7 B6C metho"ology is a holisti ision o/ a

measurement system tie" to the strategi"iretion o/ the organi=ation an" base" on a

/our4perspetie iew o/ the worl":Ginanial measures supporte" by ustomer,

internal, an" learning an" growth metris


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9he "rawba!s o/ using nanial "ata as theore o/ a per/ormane measurement:7 Financial measures are usually reporte" by

organi=ational strutures an" not by the proessesthat pro"ue" them

7 Financial measures are lagging in"iators, tellingus what happene", not why it happene" or whatis li!ely to happen in the /uture

7 Financialmeasures are o/ten the pro"ut o/

alloations that are not relate" to the un"erlyingproesses that generate" them

7 Financial measures are /ouse" on the short4term returns


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5oo" per/ormane measures shoul":

7 Be /ouse" on !ey /ators

7 Be a mi? o/ past, present, an" /uture

7 Balane the nee"s o/ all sta!ehol"ers1sharehol"ers, employees, partners,suppliers, 82

7 6tart at the top an" tri!le "own to the

bottom

7 Hae targets that are base" onresearh an" reality rather than bearbitrary


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B#0 0etho"ologies

%n e>etie per/ormane measurement system shoul"

help:7 %lign top4leel strategi ob@eties an" bottom4leel

initiaties

7 -"enti/y opportunities an" problems in a timely /ashion

7 Determine priorities an" alloate resoures aor"ingly

7 Change measurements when the un"erlying proessesan" strategies hange

7 Delineate responsibilities, un"erstan" atualper/ormane relatie to responsibilities, an" rewar" an"reogni=e aomplishments

7 9a!e ation to improe proesses an" proe"ures whenthe "ata warrant it

7 #lan an" /oreast in a more reliable an" timely /ashion

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B#0 0etho"ologies

Balanced scorecard (BSC)

% per/ormane measurement an"management metho"ology that helps

translate an organi=ationMs nanial,ustomer, internal proess, an" learning an"growth ob@eties an" targets into a set o/ationable initiaties

Q9he Balane" 6orear": 0easures 9hatDrie #er/ormane (HBR, 1992)

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B#0 0etho"ologiesBalane" 6orear"

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9he meaning o/ balane

7 B6C is "esigne" to oerome thelimitations o/ systems that arenanially /ouse"

7 Nonnanial ob@eties /all into one o/three perspeties:

*. Customer

(. -nternal business proess3. earning an" growth

B#0 0etho"ologies

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-n B6C, the term balane arisesbeause the ombine" set o/ measuresare suppose" to enompass in"iatorsthat are:

7 Ginanial an" nonnanial7 ea"ing an" lagging

7 -nternal an" e?ternal

7 Ruantitatie an" &ualitatie7 6hort term an" long term

B#0 0etho"ologies

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%ligning strategies an" ations % si?4step proess

*. Deeloping an" /ormulating a

strategy(. #lanning the strategy

3. %ligning the organi=ation

. #lanning the operations. 0onitoring an" learning

I. 9esting an" a"apting the strategy

B#0 0etho"ologies

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B#0 0etho"ologies

Strateg map% isual "isplaythat "elineatesthe relationshipsamong the !eyorgani=ationalob@eties /or all

/our B6Cperspeties

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Si# Sigma

% per/ormane managementmetho"ology aime" at re"uing

the number o/ "e/ets in abusiness proess to as lose to=ero "e/ets per million

opportunities 1D#0O2 as possible

B#0 0etho"ologies

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Si# Sigma

7 9he D0%-C per/ormane mo"el

% lose"4loop business improementmo"el that enompasses the steps o/

"ening, measuring, analy=ing, improing,an" ontrolling a proess

7 ean 6i? 6igma

ean manu/aturing ; lean pro"ution

ean pro"ution ersus si? sigma

16ee 9able L.( /or a summary2

B#0 0etho"ologies

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$o% to Succeed in Si# Sigma7 6i? 6igma is integrate" with business strategy

7 6i? 6igma supports business ob@eties

7

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B#0 0etho"ologies -ntegrating si? sigma with B6C by79ranslating their strategy into &uantiable

ob@eties

7 Casa"ing ob@eties through the organi=ation

7 6etting targets base" on the oie o/ theustomer

7 -mplementing strategi pro@ets using 6i?6igma

7 +?euting proesses in a onsistent /ashion to"elier business results

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B#0 %rhiteture an" %ppliations

B#0 arhiteture7 9helogial an" physial "esign o/ a system

7 B#0 system onsists o/ three logial parts:

*. B#0 %ppliations

(. -n/ormation Hub

3. 6oure 6ystems

7 B#0 system onsists o/ three physial parts:

*. Database tier(. %ppliation tier

3. Client or user inter/ae

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B#0 appliations

*. 6trategymanagement

(. Bu"geting, planning,an" /oreasting

3. Ginanialonsoli"ation

. #rotability mo"elingan" optimi=ation

. Ginanial, statutory,an" managementreporting

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ea"ing B#0 %ppliation 6uits;Ven"ors7 6%# Business Ob@ets +nterprise

#er/ormane 0anagement

7 Orale Hyperion #er/ormane 0anagement

7 -B0 Cognos B- an" Ginanial #er/ormane0anagement

7 0iro strategy7 0iroso/t8

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#er/ormane Dashboar"s

Dashboar"s an" sorear"s bothproi"e isual "isplays o/ importantin/ormation that is onsoli"ate" an"

arrange" on a single sreen so thatin/ormation an be "igeste" at asingle glane an" easily e?plore"

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#er/ormane Dashboar"s Dashboar"s ersus sorear"s

7 Performance das&boards

Visual "isplay use" to monitoroperational per/ormane 1/ree /orm82

7 Performance scorecards

Visual "isplay use" to hart progressagainst strategi an" tatial goals an"

targets 1pre"etermine" measures82

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#er/ormane Dashboar"s Dashboar"s ersus sorear"s7 #er/ormane "ashboar" is a multilayere"

appliation built on a business intelligene an""ata integration in/rastruture that enablesorgani=ations to measure, monitor, an" manage

business per/ormane more e>etiely

9hree types o/ per/ormane "ashboar"s:

*.Operational "ashboar"s

(.9atial "ashboar"s3.6trategi "ashboar"s

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Dashboar" "esign7 9he /un"amental hallenge o/

"ashboar" "esign is to "isplay all

the re&uire" in/ormation on a singlesreen, learly an" without"istration, in a manner that an beassimilate" &ui!lyQ

1Gew, ())2

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#er/ormane Dashboar"s Ehat to loo! /or in a "ashboar"7 Sse o/ isual omponents 1e.g., harts,

per/ormane bars, spar! lines, gauges,meters, stoplights2 to highlight, at a glane,

the "ata an" e?eptions that re&uire ation79ransparent to the user, meaning that they

re&uire minimal training an" are e?tremelyeasy to use

7 Combine "ata /rom a ariety o/ systems intoa single, summari=e", unie" iew o/ thebusiness

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#er/ormane Dashboar"s Ehat to loo! /or in a "ashboar"

7 +nable "rill4"own or "rill4through toun"erlying "ata soures or reports

7 #resent a "ynami, real4worl" iew with

timely "ata up"ates7 $e&uire little, i/ any, ustomi=e" o"ing to

implement, "eploy, an" maintain

#,

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