Business Performance Management

DHIREN CHATLANI & JIMMY NGUYEN

Agenda

 Business Performance Management (BPM)  Strategize  Plan  Monitor & Analyze  Act & Adjust

Business Performance Management

“A real-time system that alert managers to potential opportunities, impending problems, and threats, and then empowers them to react through models and collaboration”  Outgrowth of Business Intelligence

BPM Cycle

Strategize

• Perform a current situational analysis o Internal analysis • Determine the planning horizon o Time period (1-5)

Porter’s Five Forces

Critical Success Factors (CSF)

• Critical Success Factors (CSF) • Key Performance Indicators (KPI)

Gap Analysis

“identify and prioritize the internal strengths and weaknesses…”  Vision – effective communications  People – incentives should be provided  Management – continuous monitoring  Resources – requires sufficient resources

Strategic Vision & Goals

 Strategic vision – image of what the organization should look like in the future  Strategic objective – describes the general course of action for a firm to follow  Strategic goal – a quantified objective that is time sensitive

Plan Operational Plan “When operational managers know and understand the what, they will be able to come up with the how.”  Operational Planning Tactics & Initiatives  Financial Planning & Budgeting Financial Results

OPERATIONAL PLANNING

 Translate Strategic Objectives & Goals TACTICS RESOURCE REQUIREMENTS EXPECTED RESULTS FOR FUTURE(1YEAR) *KEY Factor: Integration Tactics & Initiatives need to relate to key objectives of strategic plan.

OPERATIONAL PLANNING

 Tactic-Centric:  Used by best practice organizations.

 Defining alternative tactics that are used to reach a target.

 E.g. Ryanair  Budget-Centric:  Financial plan that sums the targeted financial values.

 E.g. Resource requirements, financial viability..

Financial Planning & Budgeting

 Allocation should be based on strategic objectives and key metrics  Resource allocation should align with those goals and objectives for success.

Monitor How Are We Doing?

  What to monitor Diagnostic Control System   Has inputs a process and outputs A standard to compare the outputs to  F ee dback channel: Receive information on variance between standard ie. Profit margin, turnaround time, location in Ryanair.  How to monitor  Balance scorecards, dashboards, reporting systems (pg 111)

Monitor How Are We Doing?

    1. Set a goal 2. Measure Outputs 3. Calculate performance variances 4. Use variance information to change input and process.

DISCOVERY DRIVEN PLANNING: Way to find problematic assumptions that are usualy not noticed. As plans evolve, new data is “uncovered” and new opportunities are found.

Dashboard

Pitfalls of Variance Analysis

 Negative Variances  Majority of analysis focus in these, and when functional groups don’t meet their target.

 Positive Variances   Rare May be a sign of opportunity.

Act & Adjust

“It is critical for a company to continually monitor, its results, analyze what has happened, determine why it has happened, and adjust its actions accordingly”  70% of IT projects fail  Critical for long term success

Harrah’s Closed-Loop Marketing Model

Paucity of Analysis

“The overall impact of the planning and reporting practices of the average company is that management has little time to review results from a strategic perspective, decide what should be done differently, and act on the revised plans”

Conclusion

“Best practice organizations do not necessarily develop better predictions or plans; however, they are better equipped to quickly identify changes or problems, diagnose the root causes, and take corrective action”

 http://www.youtube.com/watch?v=zpmqUnoK-jY