Thursday, August 18, 2005

Six Performance Management Imperatives

Mark Smith of Ventana Research defines performance management as a methodology and process of managing performance of an organization and its business processes to achieve a commonly understood set of goals and objectives.
Furthermore he gives six Performance Management Imperatives:
  1. Compliance Management. Regulatory compliance brings new pressure to find better methods to assess policies and processes from finance to operations. Compliance assessment requires systems that automate the manual reviews and analysis and are proactive in monitoring business activities and processes to reduce audit costs. Efficient links between people and processes need to be adopted in the enterprise for compliance, new information technology and systems.
  2. Profitability Management. The push for managing costs and optimizing revenue streams is sharpening the focus on profitability across the enterprise. The influence of finance beyond the budgeting process is creating new rigor in different forms of profitability, including customers, products, operations and financials. Organizations need to build a BI foundation to support applications and systems for profitability management. Process Improvement. Despite the increased buzz around business process management, organizations need to focus on assessing and improving their existing operational processes before automating and controlling them with new ERP or CRM systems. Most organizations and IT suppliers have failed to take this easier path to process improvement. Measuring, monitoring and improving processes is not as easy as it seems, but it is essential for enabling performance management.
  3. Cost Management. Avoiding and reducing costs to meet the corporate and financial requirements of your organization should be part of your standard operational processes. Business must streamline operational processes for efficiency improvement and IT must continue portfolio and vendor consolidation to meet cost management objectives. Leveraging existing investments in CRM and ERP and accessing and integrating data assets into timely, relevant and contextual information is critical for enabling performance management.
  4. Performance Improvement. The underlying theme of performance management is improving business results, and, while it seems obvious, management has not adopted the performance management process as part of their daily operations. Assessing and refining processes to the next level of efficiency and effectiveness requires a much closer alignment of information and systems. Lack of support for linking strategy, planning, and execution in most organizations is still a major barrier to realizing optimal performance improvements.
  5. Business Innovation. Transforming or applying innovative processes and methods to gain a competitive advantage should be a top priority. Unfortunately, the assets and ideas in organizations aren't fully leveraged to improve the value of the organization. Organizing a process to take advantage of information technology and systems for business innovation should be part of every organization. One of the largest unrealized opportunities in organizations today is fully leveraging ideas and knowledge to transform business processes into continuing innovation.
  6. Assessment. Investing in BI is an important step toward improving information visibility and ultimately performance, but is only one piece of the larger performance management program that organizations need to undertake to achieve superior business results. The six business imperatives outlined here drive the need for rigorous performance management processes. How organizations apply performance management to their business will determine their competitive advantage. Ventana Research recommends that organizations that want to address these challenges leverage existing investments while examining new ones to bring innovation and performance improvement to the enterprise.


Anonymous Performance Management Kit said...

Great post. Also, employee acceptance management is critical to the success of a performance initiative. Employee Acceptance Management is the process of gaining employee buy-in by emphasizing performance expectations from the top level down. Employee Acceptance Management involves transforming employees into a high performance mindset, communicating employee expectations and enabling them to understand the impact that their specific role has on the success of the organization.

2:55 AM  

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