corporate performance management-1_2003
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CORPORATEPERFORMANCEMANAGEMENT
An Overview
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An OverviewCorporate Performance Management:Corporate Performance Management encompasses:
strategic planning, budgeting,
forecasting,
workflow,
reporting,
modeling,
scenario planning,
profitability analysis,
KPI monitoring, and
consolidation.
CPM addresses both operational and financial
performance to include the process of collecting thedata and performing analysis and reporting in acollaborative fashion for executives, managers, andstaff through all levels of an organization.
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An OverviewCorporate Performance Managementhas three main activities:
selection of goals,
consolidation of measurement information
relevant to an organizations progressagainst these goals, and
interventions made by managers in light ofthis information with a view to improving
future performance against these goals.
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An OverviewCorporate Performance Management
Corporate performance management consists of: a set of management and analytic processes,
supported by technology,
that enable businesses to define strategic goals.
measure and manage performance against those goals.
Core business performance management processesinclude financial planning, operational planning,consolidation and reporting, business modeling, analysis,and monitoring of key performance indicators linked tostrategy.
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An OverviewCorporate Performance
Management
Strategy
FinancialPlanni
ng
Operational
Planning
Consolidation &
Reporting
Business
Modeling
Analysis
Monitoringof key
PerformanceIndicators
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An OverviewCorporate Performance Management
Alignment Management :A performance management system that tiesevery aspect of the organization from the boardroom to the factory floor to the strategy is
known as alignment management.Alignment management can help achieve thatbalance using three distinct levels ofperformance measures that are:
Organization level
Process level
Jon level
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An Overview
Levels of Performance Management:Level
Outcomes Objectives Design
Measurement
Perspective
Organization
The overarchingstrategy
The value
migration Organizationalignment
The business plan
Strategy drivenfunctions
EVA or CVA value of
function Permeability ofboundaries
ABC/ABM driven
Financialperspective
Customer
perspectiveOrganizationperspective
Growth &Innovation
Process Conformance tocustomer standards
Process owner Inputs Outputs Service levelagreements
Boundary crossing
Cost Cycle time Quantity Quality Conformance tostandards
Job Report cards Easy access Process maps Function charts Activities Outcomes
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An OverviewCorporate Performance ManagementVarious methodologies for implementing corporate
performance management exist. The discipline givescompanies a top-down framework by which to alignplanning and execution, strategy and tactics, and business-unit and enterprise objectives. Reactions may include theSix Sigma strategy, balanced scorecard, activity-basedcosting (ABC), Total Quality Management, economic value-
add, integrated strategic measurement and Theory ofConstraints.
The balanced scorecard is the most widely adoptedperformance management methodology.
Methodologies on their own cannot deliver a full solution toan enterprise's CPM needs. Many pure-methodologyimplementations fail to deliver the anticipated benefits dueto lack of integration with fundamental CPM processes
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An Overview
The need for a different framework forperformance management
Characteristics of an ideal framework
Balanced Scorecard framework Corporate Performance Management
framework
Core components of a performance
management system
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The Need for a DifferentThe Need for a Different
Framework for PerformanceFramework for PerformanceManagementManagement
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Performance management is the practiceof actively using performance data toimprove desired outcomes.
Performance ManagementDefined
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The Need for a Different FrameworkThe Need for a Different Framework
The common measures focus on bottomline results, not the drivers
The need for timely results
There is a need for measures that align withthe mission and strategy (i.e., a focus on
program business operations and outputs)
Common Measures and PerformanceCommon Measures and Performance
Management are not the SameManagement are not the Same
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The Need for a Different FrameworkThe Need for a Different Framework
Participant impact measures provide alimited picture of organizational health
Participant impact measures alone areinsufficient to assess continuousimprovement
Common Measures and PerformanceCommon Measures and Performance
Management are not the SameManagement are not the Same (Continued)(Continued)
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Deploys the agencys strategic plan
Focuses and aligns agency activities andefforts
Tests cause-and-effect relationships amongthe programs activities
Family of measurement types reduces riskof not meeting bottom line measures
Links performance measures to decisionmaking
Characteristics of an Ideal FrameworkCharacteristics of an Ideal Framework
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Balanced ScorecardBalanced Scorecard
FrameworkFramework
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Balanced Scorecard Framework
The Balanced ScorecardBalanced Scorecardis a performance
management approach that focuses on variousoverall key performance indicators, includingcustomer perspective, internal - businessprocesses, learning and growth and financials,
to monitor progress toward organization'sstrategic goals.
Each major unit throughout the organizationoften establishes its own scorecard which, in
turn, is integrated with the scorecards of otherunits to achieve the scorecard of the overallorganization.
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MISSIONMISSION
CUSTOMERCUSTOMERPERSPECTIVEPERSPECTIVE
To achieve ourTo achieve our
mission, how must wemission, how must wesatisfy our customers?satisfy our customers?
FINANCIALFINANCIALPERSPECTIVEPERSPECTIVE
If we succeed, how willIf we succeed, how will
we look to Congresswe look to Congressand the public?and the public?
INTERNAL PROCESSESINTERNAL PROCESSESPERSPECTIVEPERSPECTIVE
To satisfy our customers, Congress,To satisfy our customers, Congress,
the public, and mission, whatthe public, and mission, whatbusinesses processes must we excelbusinesses processes must we excelat?at?LEARNING AND GROWTHLEARNING AND GROWTH
To achieve our mission, how must ourTo achieve our mission, how must ourpeople learn, communicate, and workpeople learn, communicate, and worktogether?together?
Value
,
Value
,
Benefit
Benef
it
V
alue,
V
alue,
B
enefit
B
enef
it
Balanced Scorecard FrameworkBalanced Scorecard Framework
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Perspectives are key organizational strategies
Aid to system and operations management
Help in diagnosing and troubleshooting Prioritizing
An aid to planning
Understand improvement Tracking performance
External accountability
To be successful, theTo be successful, thedrivers of performancedrivers of performance
must be identifiedmust be identified
PerspectivesPerspectives ObjectivesObjectives MeasuresMeasures
Why Use Different Perspectives?Why Use Different Perspectives?
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Identify strategic themes and group them underthe appropriate perspective
Create a strategy map to visualize the interaction
of individual activities in the larger system For each identified strategic theme, identify what
you are trying to achieve and the obstacles youface
Develop measurable objectives that specifynumeric target levels, where appropriate
Limit objectives to major program elements
PerspectivesPerspectives ObjectivesObjectives MeasuresMeasures
Use a Strategy Map to Develop ObjectivesUse a Strategy Map to Develop Objectives
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How well did we succeed at providingcustomer value?
How well do we do the things whichsupport creating customer value?
Each measure should answer one of the followingquestions:
PerspectivesPerspectives ObjectivesObjectives MeasurMeasur
eses
Develop Measures for the ObjectivesDevelop Measures for the Objectives
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Compare
Learn
Motivate
Reward and celebrate
Promote and explain
PerspectivesPerspectives ObjectivesObjectives MeasurMeasur
eses
Uses of Performance MeasuresUses of Performance Measures
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PerspectivesPerspectives
AgencyAgency
DepartmentDepartment
Team/IndividualTeam/Individual
MeasuresMeasuresObjectivesObjectives
Strategies Should be Aligned atStrategies Should be Aligned atDifferent Organizational LevelsDifferent Organizational Levels
The Importance ofAlignment
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Wherever the product of a public organization hasWherever the product of a public organization has
not been monitored in a way that ties performancenot been monitored in a way that ties performance
to reward, the introduction of an effectiveto reward, the introduction of an effective
monitoring system will yield amonitoring system will yield a fifty percentfifty percent
improvement in the product in the short run.improvement in the product in the short run.
In other wordsIn other words
What gets measured gets doneWhat gets measured gets done
Chases Law on MeasurementChases Law on Measurement
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Customer Perspective ExampleCustomer Perspective Example
Initiative:Initiative: Implement an expanded supportive servicesImplement an expanded supportive servicesstrategy to increase the percent of program completersstrategy to increase the percent of program completersfrom the current rate of 83%from the current rate of 83%
Rationale:Rationale: Successful completions highly correlated withSuccessful completions highly correlated with
increased employment and earningsincreased employment and earnings
Linking Strategy to MeasurementLinking Strategy to Measurement
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Illustration Using the BSCIllustration Using the BSC
ApproachApproach
Increasing the Efficiency and ProfitabilityIncreasing the Efficiency and Profitability
of a Commercial Airlineof a Commercial Airline
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Corporate PerformanceCorporate Performance
ManagementManagementAn Extension of the BSC ApproachAn Extension of the BSC Approach
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Corporate Performance ManagementCorporate Performance Management isisdefined as the processes, methodologies, metricsdefined as the processes, methodologies, metricsand systems needed to measure and manageand systems needed to measure and managebusiness performance. In the five years since CPMbusiness performance. In the five years since CPMwas introduced, this approach to management haswas introduced, this approach to management hasbeen credited with many success stories andbeen credited with many success stories andturnarounds. CPM builds on the core features of theturnarounds. CPM builds on the core features of theBSC.BSC.
CPM Framework
CPMCPM
MissionMission
RefineRefine
Review/Review/
AnalyzeAnalyze
Measure/Measure/
MonitorMonitor
Align/Align/
ExecuteExecute
Define/Define/
PlanPlan
CPM includesCPM includes
the whole setthe whole set
of managementof management
processes thatprocesses thatstarts with thestarts with the
mission of themission of the
organization.organization.
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Elements of CPM
MissionMission
Define/PlanDefine/Plan
Align/ExecuteAlign/Execute
Measure/MonitorMeasure/Monitor
Review/AnalyzeReview/Analyze
RefineRefine
Organizations purposeOrganizations purpose
VisionVision
Value driversValue drivers
Used to align all activitiesUsed to align all activities
in an organizationin an organization
l f
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Elements of CPM
MissionMission
Define/PlanDefine/Plan
Align/ExecuteAlign/Execute
Measure/MonitorMeasure/Monitor
Review/AnalyzeReview/Analyze
RefineRefine
Feedback fromFeedback from
implementation of currentimplementation of currentstrategystrategy
Refine organizationsRefine organizationscorporate strategy modelcorporate strategy model
Strategic objectivesStrategic objectives
Key performance measuresKey performance measures
TargetsTargets
Strategic initiativesStrategic initiatives
Communicate strategy toCommunicate strategy toall organizational levelsall organizational levels
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El f CPM
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Elements of CPM
MissionMission
Define/PlanDefine/Plan
Align/ExecuteAlign/Execute
Measure/MonitorMeasure/Monitor
Review/AnalyzeReview/Analyze
RefineRefine
Continuous monitoringContinuous monitoring
Track progress on keyTrack progress on keyperformance measuresperformance measures
Requires the collectionRequires the collectionand reporting of timely,and reporting of timely,accurate, and accessibleaccurate, and accessibledatadata
Create and useCreate and use
performance scorecard toperformance scorecard tosee the entire organizationsee the entire organization
El f CPM
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Elements of CPM
MissionMission
Define/PlanDefine/Plan
Align/ExecuteAlign/Execute
Measure/MonitorMeasure/Monitor
Review/AnalyzeReview/Analyze
RefineRefine
Analyze performanceAnalyze performance
gaps on key performancegaps on key performancemeasuresmeasures
Use performance dataUse performance dataand create a learningand create a learning
feedback loop to educatefeedback loop to educateall levelsall levels
Business insights onBusiness insights onperformanceperformance
Use these insights toUse these insights tounderstandunderstand
El t f CPM
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Elements of CPM
MissionMission
Define/PlanDefine/Plan
Align/ExecuteAlign/Execute
Measure/MonitorMeasure/Monitor
Review/AnalyzeReview/Analyze
RefineRefine
Decision makersDecision makers
collaborate, sharingcollaborate, sharingdifferent viewpoints anddifferent viewpoints andideasideas
Generate integratedGenerate integrated
insights frominsights fromReview/Analyze stepReview/Analyze step
Refine corporate strategyRefine corporate strategyand execution planand execution plan
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Key Features of CPM Comprehensive and structuredComprehensive and structured
planningplanning Disciplined execution andDisciplined execution and
reviewreview
Information-based decision makingInformation-based decision making
Integrated management processesIntegrated management processes
Agile management structureAgile management structure
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Core Components of aCore Components of a
Performance ManagementPerformance ManagementSystemSystem
Performance Management System
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Performance Management SystemDefined
AA PerformancePerformance
ManagementManagement
SystemSystem is theis the
continuous use ofcontinuous use of
four practices (four practices (seesee
diagram)diagram) that are fullythat are fully
integrated into anintegrated into an
organizations coreorganizations core
businessbusiness
Source: Turning Point,Source: Turning Point, From Silos to Systems: Using PerformanceFrom Silos to Systems: Using Performance
Management to Improve the Publics HealthManagement to Improve the Publics Health, 2003, 2003
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Important ConceptsPerformance StandardsPerformance Standardsare objectiveare objective
standards or guidelines that are used tostandards or guidelines that are used to
assess an organizations performance (e.g.,assess an organizations performance (e.g.,
80 percent entered employment rate).80 percent entered employment rate).Standards may be set based on national,Standards may be set based on national,
state, or scientific guidelines; by bench-state, or scientific guidelines; by bench-
marking against similar organizations; based on themarking against similar organizations; based on thepublics or leaders expectations; or other methods.publics or leaders expectations; or other methods.Source: Turning Point,Source: Turning Point, From Silos to Systems: Using PerformanceFrom Silos to Systems: Using PerformanceManagement to Improve the Publics HealthManagement to Improve the Publics Health, 2003, 2003
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Important Concepts
Source: Turning Point,Source: Turning Point, From Silos to Systems: Using PerformanceFrom Silos to Systems: Using Performance
Management to Improve the Publics HealthManagement to Improve the Publics Health, 2003, 2003
Performance IndicatorsPerformance Indicatorssummarize the focus (e.g.,summarize the focus (e.g.,
talent development, customer service) of performancetalent development, customer service) of performancegoals and measures, often used for communicationgoals and measures, often used for communicationpurposes and preceding the development of specificpurposes and preceding the development of specificmeasures.measures.
Performance MeasuresPerformance Measuresare quantitative measures ofare quantitative measures ofcapacities, processes, or outcomes relevant to thecapacities, processes, or outcomes relevant to theassessment of a performance indicator.assessment of a performance indicator.
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Important Concepts
Performance TargetsPerformance Targetsset specific and measurableset specific and measurable
goals related to agency or system performance.goals related to agency or system performance.Where a relevant performance standard is available,Where a relevant performance standard is available,the target may be the same as, exceed, or be anthe target may be the same as, exceed, or be anintermediate step toward that standard.intermediate step toward that standard.
R i f C iti l S F t
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Review of Critical Success Factors
BSC and CPM Emphasize theBSC and CPM Emphasize the
PerformancePerformanceManagement System ShouldManagement System Should
Align to the corporate mission and strategyAlign to the corporate mission and strategy
Develop meaningful key performanceDevelop meaningful key performancemeasuresmeasures
Increase data availabilityIncrease data availability
Maximize data qualityMaximize data quality
Enhance performance reportingEnhance performance reporting
Improve analysisImprove analysis
Achieve performance integrationAchieve performance integration
Drive decision makingDrive decision making
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Questions?