Achieving Organisational Change from Measurement and Reporting

Paul Vella

17-Aug-2010

The most comprehensive Oracle applications & technology content under one roof

• Change

• Landscape

• Resistance

• Measurement

• Best Practice

• Use Measurement Strategically

• OBI Analytics KPI and Metrics

• 11g Scorecard Features

Introduction

Change Landscape

Technological

Change

Demographic

Change

Market

Change

Climate

Change

Financial

Change

Political

Change

Organisational

Change

“It is change, continuing change, inevitable change, that is the dominant factor in society today. No sensible decision can be made any longer without taking into account not only the world as it is, but the world as it will be ...” - Isaac Asimov

Change Landscape•Political Change

•Government Policy

•Taxation Policy

•Regulatory Framework

•Financial Change

•Recession

•GFC

•Interest Rates

•Inflation

•Climate Change

•Environment Change

•Catastrophic Events

•Market Change

•Competitive Framework

•Consumer Demand

•Developing Markets

•Organisation Change

•Merger

•Acquisition

•Succession

•Turnover

•De-Centralisation

•Shared Services

•Relocation

•Demographic Change

•Population Age

•Urbanisation

•De-Urbanisation

•Technological Change

•System Change

•User Interface Change

Change Process

Change

Plan

Baseline

Measure

Continuous

Improvement

• TQM• Baldridge• Six Sigma (define, measure,

analyze, improve, control)• Kaizen (standardise, measure,

gauge, innovate)• PDCA (plan, do, check, act)

Resistance to Change – Top 101. Risk of Change

2. Connection to “Old Way”

3. No Role Models for “New Way”

4. Fear about Competence to

Change

5. People are too busy to Change

6. Healthy Scepticism

7. Fear of a “Hidden Agenda”

8. Feeling Threatened / Loss of

Status

9. Past Failure to Change

10. Believe that change is a bad idea

• Resistance relates to people and

perception

• You can change technology and

systems, but unless it is accepted,

then there will be significant

resistance

• Can lead to expensive failures

Using Measurement Strategically

What are the

changes needed in

people, processes,

products/services,

and climate, in

order to drive the

required results.

Current State

End State

Baseline

Define

Targets

Determine

Measures

Measure

Assess

Take a Leap

Magic Happens

Measures should….

1. Ownership: Connect business results to people

2. Forward Looking: Involve a healthy mix of leading and lagging indicators

3. Current: Are kept alive in discussions-and not left sitting in a binder

somewhere

4. Realistic: Are given time to work

5. Challenging: Have teeth

6. Strategically Aligned: Support organisational goals over and above

functional/divisional goals

7. Consistent: Measure the right things

How Measurement Helps…1. Need for Change: Provide evidence that change is needed

2. Clarity: Clarify the purpose and direction of the change effort, by forcing

people to consider its specific impact in unambiguous terms

3. Communication: Measurement is a form of communication - it tells

people what you care about

4. Progress: Tracking the effectiveness of the change effort both tells people

that it is important and provides a way to judge how well it is being

implemented, or how well it was designed

5. Business Case: The results can be used as a justification for future

projects

6. Direction: The measurement effort can be set up as a framework for

expecting and anticipating change, making it seem more controllable and

less threatening

Approach to Measurement

1. Develop Strategy Map of

Organisation

2. Define Objectives under each

Strategy

3. Define KPIs under each Objective

4. Baseline Current State

5. Set and Agree Targets

6. Measure and Report on Indicators

7. Review Progress against Agreed

Targets

• KPIs are measures by which the

performances of organisations,

business units, and their divisions,

departments and employees are

periodically assessed.

• Balanced Scorecard Methodology is

used to review and track

performance of KPIs aligned to the

Objectives and Strategic Map of the

Organisation.

Defining KPIs1. Acceptable, understood, meaningful and

measurable.

2. Measured when systems and processes

to capture and measure are in place.

3. Meaningful by contributing to

organisational improvement.

4. Take into account seasonal, geographic,

demographic considerations

5. Lower level KPIs aligned to higher level

objectives

6. Numerical Targets should be set in terms

of a value, a lower limit, an upper limit,

range of values, percentage or scheduled

date.

• SMART Criteria (Specific,

Measurable, Achievable, Relevant,

and Time phased.

OBI Analytics

350 Fact

tables

550

Dimensions

2500

pre-built

metrics

2000+ derived

metrics

109

Dashboards

430

Dashboard

Pages

3250

Reports

OBI Analytics Measures

DPO

DSO

EBIT

AP Turnover

Inventory

Turns

AR Turnover

ROE

Current RatioCAPEX RatioQuick ratio

ROA

ROCE

Compa Ratio

Cash Cycle

Days Cash in

Hand

Purchasing

Misses

%Adhoc

Purchases

OBI Analytics KPIs

This metric compute4s the Days Sales Outstanding- (AR Balance / Average Daily Posted Revenue). Average Daily Posted Revenue is computed by Posted Revenue for the period / Number of days in the period.This metric determines the average number of days in accounts receivable to measure the effectiveness of the firm’s credit policies and indicate the level of investment in receivables needed to maintain the firm’s sales level.

AR Days Sales Outstanding (DSO)

AR

This metric shows Days Payable Outstanding (DPO). It shows the average length of the time the trade payables are outstanding before they are paid.This metric determines the average number of days in accounts payable to measure the effectiveness of the firm’s credit policies and indicate the level of investment in payables needed to maintain the firm’s expenditure level.

AP Days Payables Outstanding (DPO)

AP

Common KPIs - 2

This metric calculates Purchases / Accounts Payables; where Purchases = total purchases from various suppliers.

AP TurnoverAP

Accounts receivable Turnover measures the number of times the trade receivables turnover annually. The higher the AR Turnover, the lower the working capital needs of the company.

AR TurnoverAR

Common KPIs - 3

This metric determines the ratio of revenue to Working Capital where working capital = current assets less current liabilities

Working Capital Turnover

GL

This metric calculates an organisations cash cycle by subtracting the Operating Cycle in days from the Average Payables in days

Cash CycleGL

This metric determines the ratio of inventory to COGS to measure the efficiency of the firm’s inventory management (number of days of inventory held). A higher ratio or days indicates that inventory does not remain in the warehouses or on the shelves but rather turns over rapidly form the time of acquisition to sale.

Avg Inventory DaysInventory

Common KPIs - 4

This metric calculates (Cash + AR) / Minimum Operating Expenses ; where Minimum Operating Expenses = (Total Operating Expenses + Interest Expenses – Depreciation)

Days Cash In HandGL

This metric calculates the current assets to current liabilities ratio. Sometimes called the liquidity ratio. Provides an indication of financial risk.

Current ratioGL

This metric is the ratio of operating cash flow to capital expenditure for the period.

CAPEX ratioGL

Common KPIs - 5

This metric subtracts current assets from current liabilities, then divides the results into total assets to determine the ration of net working capital to total assets.

Net Working Capital (NWC) to Assets

GL

This metric calculate profitability by calculating Revenue – COGS – Selling and Marketing Costs –Other Operating Expenses – R&D Expenditure + Other Income

EBITGL

This metric calculates the long-term debt to total equity ratio.

Debt to EquityGL

Common KPIs - 6

EBIT / Total Assets * 100Return on Assets (ROA)

GL

This metric calculates (Earnings before interest and taxes) / Interest expense where EBIT = revenue – COGS –Selling and Marketing Costs – Other Operating Expenses – R&D Expenditure + Other Income

Times Interest Earned

GL

This metric perovides liquidity information by calculating (Current Assets – Inventories) / Current Liabilities.

Quick RatioGL

Common KPIs - 7

•Absence Days (Notified / Not Notified)•Annual Leave Balance•Long Service Leave Balance•Headcount•Diversity Ratios (M/F), (P/T)•Compa Ratio (Emp salary / Avg salary)•Termination ratios•Average Length of Service•Training Days pa•Supervisor / Employee ratios

LeaveRatios

HR

Net Income / Total Shareholders Funds * 100Return on EquityGL

Pre-Tax Income / Total Capital Employed *100; Capital Employed = (Total Shareholders Funds + Long Term Debt)

Return on Capital Expenditure (ROCE)

GL

OBI 11g Scorecarding and Metrics• OBIEE 11gR1 includes a new

product called Oracle Scorecard

and Strategy Management.

•KPIs are defined within the web

catalog and are defined by taking

a measure, a target measure and

a set of thresholds, which can

then be used either directly in

dashboards (by use of another

new feature called KPI

Watchlists) or within one of the

new scorecards.

OBI 11g Scorecarding and Metrics•Build KPIs and KPI Watch Lists

•You can either display the results of

the KPI in a simple table, or you can

add them to a KPI Watchlist.

•These can be added like any other

object to a user’s dashboard.

•This KPI Watchlist can then be sliced

and diced, using dimension controls

at the top of the watchlist, to allow

the user to drill into whatever level of

data they are authorized to view.

OBI 11g Scorecarding and Metrics

The Scorecard part of OBIEE

11g builds on the foundation

of KPIs to allow you to define

complex, multi-part

strategies using the metrics

in your semantic layer.

OBI 11g Scorecarding and Metrics•These objectives are

organized into a hierarchy.

•Create a strategy tree

diagram that shows how

each objective feeds up into

the overall strategy.

•The objective of improving

store performance is made

up of financial, and non-

financial objectives, each

with their own set of KPIs.

• Change

• Change Landscape

• Resistance to Change

• Measurement

• Best Practices

• Using Measurement Strategically

• OBI Analytics KPI and Metrics

• 11g Scorecard Features

Summary

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