Companies are increasingly facing up to the challenge of how to make performance management a success within their organisation.
Effective Business Performance Management(BPM) is central to the success of all organisations. In general Business performance management is a form of business intelligence used to monitor and manage a company’s performance.
The purpose of BPM is to enable an organisation to deliver its goals as effectively as possible. This is achieved by employing the available resources, including its people, to develop and implement a strategy that will be delivered through its structure.
- Why measure business performance?
- Effective Business Performance.
- Types of Performance Management.
- The considerations of successful business performance management implementation
- Tools that help in business performance management
- The Balanced Score Card
- Business Performance Management Tool
Why measure Business performance?
Measuring business performance helps to improve organization performance in meaningful ways.
Without measurement, we don’t know if there is improvement; we don’t know what is meaningful.
Business performance may be measured in many dimensions and it is generally how the business delivers value to its customers and other stakeholders that serve as predictors of future success.
Whether working at the individual process level or across an enterprise, too many Business Performance management measurement delivers many benefits:
- Enhanced alignment of operations with strategy
- Detection of performance trends
- Better understanding of the capability range of a process
- Uncovering actual and latent problems
- Changing behaviour based on factual feedback
- Improved control over the risks that really matter
1. Aligns strategic goals
A well-designed business performance management process helps your managers understand which areas contributes to the overall success of your company’s strategy and goals. This connection makes sure your managers know how the business is performing and what are the benchmarks is expected to keep them focused on the most impactful activities that provide real value to your business. Being able to track performance in different areas allow managers to have a better understanding of cross-functional performance and how each area affects the other from a value stream perspective.
2. Drives employee motivation
Business Performance management offers factual evidence of performance in predetermined areas like Cost of Goods management, customer-service levels, compliance and training efficiency. In areas where the business is not strong in, the team receive evidence-based determination of process improvement priorities and an avenue to track progress.
3. Encourages a loop of constant improvement
An effective business performance management process encourages the team to engage in a loop of continuous improvement (The Plan-Do-Study-Adjust Method).Business Excellence is a set of outstanding practices a company adopts in continuously managing the organisation and achieving results, based on a set of fundamental concepts or values. Business excellence today is about continuous improvement builds on the mindset and a culture of looking for opportunities to do the job better rather than a destination of perfection.
4. Improves your bottom line
When properly executed, business performance management helps you increase business productivity, reduce redundancy and human errors, allows the business owner to take pre-emptive action, which ultimately lowers your costs and improves your bottom line.
Effective Business Performance
Typically effective performance cascades from the organsiation’s
- Vision and mission
- Strategic approach
- Organisational structure; and
- Company culture.
Types of Performance Management
Performance management is managed on two main areas.
1. Business Performance Management
Business performance management is the act of setting corporate goals, monitoring the methods used to achieve those goals, and then creating ways for managers to more effectively achieve those goals. By collecting and analyzing data, a company can determine what effects managerial changes had on performance and then alter those changes to help create a more effective process. The idea of business performance management is a broad concept, but it is best used to analyze specific goals and help a company to save on operating costs, while generating more revenue at the same time. The important thing to remember about business performance management is that it is used to improve the performance of personnel and management. The use of metrics is just a means to an end, with that end being higher profitability.
A business management approach which looks at the business as a whole instead of on a division level. Business performance management entails reviewing the overall business performance and determining how the business can better reach its goals. … Also called corporate performance management
2. HR Performance Management
Human Resource Performance management is an ongoing process of communication between an employer/ supervisor and an employee, in support of accomplishing the strategic objectives of the organization. The communication process includes clarifying expectations, setting objectives, identifying goals, providing feedback, and reviewing results. This is a subset of the overall Business Performance management but for the most part, the over riding principles of Business performance management remain.
“Performance management is the continuous process of improving performance by setting of goals which are aligned to the strategic goals of the organisation, planning performance to achieve the goals, reviewing and assessing progress, developing the knowledge, skills and abilities of people.”
Regardless of whether the goal is to improve overall Business Performance Management or its subsets in Human Resource or Productivity Performance Management, a key point here is that it is a continuous process, not a once-a-year activity. Quality performance management should, therefore, bring together a number of different, integrated activities to form an ongo-ing ‘performance management cycle’.
In order to develop an integrated approach to Business Performance Management, companies need to start with the overall company strategy and goals. Once the Overall Company Strategy is developed, the key performance areas need to be identified and specific metrices to be measured need to be implemented. At this point, businesses need to identify what data need to be collected and what benchmarks and metrics are to be measured. Once the data is collected, the information should be presented on dashboards for easy analysis. With the analytics, business owners can now interpret the data so that actions can be recommended an acted upon.
On the whole, both levels of performance management follow the same framework of:
- Identify Key Performance areas and associated metrics
- Data Collection
- Recommendation and implementation
The Considerations of Successful Business Performance Management Implementation
A robust Business Performance Management System needs to be an extremely dynamic system where each activity and key performance area interacts with the others and they are all working together to help develop better business performance outcomes. In our experience with developing Key Performance systems for SMEs, One of the key areas businesses that most businesses should focus on is identifying the business’s value chain, value stream and from there recognise the true performance areas for the business. Surprisingly many business owners assume that the key performance areas are financial and do not invest much time on the other success areas that directly influence the business’s future performance.
1. Identification of Goals and Key performance areas
The best place to start with any business performance management system is to first identify the areas that make up the value chain in the business.
Once these areas are identified, it is important to set corporate goals and then determine the processes necessary to achieve those goals. At this stage, it is useful to establish a baseline and also set a desired benchmark for the business units or personnel to achieve. Thereafter, these goals should be documented and performance gathered and reported regularly.
2. Information Monitoring
The second step requires discipline and conscious implementation. Management support is necessary to ensure that performance management is a priority across the organisation. This step of data collection and consolidation in business performance management is critical. This is the part of the process where the data is gathered and the pertinent data is analyzed and used to develop a better way to do business. The list of metrics used to create the data varies by company and by project, but the data becomes a critical part of the performance management process. This is also the part where most companies stumble in the implementation of the performance management system due to the heavy reliance on human resource implementation. Tree AMS allows business owners to leveraging technology that help to implement, collate and present this information in real time. Automating the information and data collation process can greatly reduce manpower needed to execute the collation, the human errors factor involved and increase the chances of a successful business performance management system implementation.
3. Management Actions and Adjustments
Once the data has been collated and business performance reports presented, the management team can then make decisions based on the data presented and take necessary steps to increase efficiency and profitability. These actions involve both financial and non-financial goals. Decisions cannot be taken independently but rather with a holistic view. Once action is taken, the outcome should be continuously monitored and reported in the next business performance management cycle to observe the impact of the actions implemented. One Methodology business owners can use the Plan, Execute, Track, Evaluate, Improve (PETEI) Model to encourage continuous Progress.
Tools that help in Business performance management
All companies endeavour to manage their business well. Usually, if business owners know the elements needed to manage the business successfully, most will want to strive towards the ideal state. Knowing the elements of the performance management cycle is very important, but that will not necessarily be enough to lead to effective performance management as there are many other issues that can get in the way.
To increase the chances of implementing a successful Business Performance Management System, these are some elements we should consider:
- Ensure there is leadership support and buy-in.
- Ensure that the team understand the importance of the performance management system
- Implement a Business performance management system that simplifies the business management process rather than having to set up a separate team to enforce business performance management.
- Design reports that make it easy for business units and the team to understand the performance outcome and what steps need to be taken to improve performance.
Business Process Management Measurement Metrics encompasses three key components
- A set of integrated, closed-loop management and analytic processes, supported by technology
- Tools for businesses to define strategic goals and then measure/manage performance against them
- Methods and tools for monitoring key performance indicators (KPIs), linked to organizational strategy
Performance measurement system
This is a system that assists managers in tracking the implementations of business strategy by comparing actual results against strategic goals and objectives
Comprises systematic comparative methods that indicate progress (or lack thereof) against goals.
Key performance indicator (KPI)
A KPI represents a strategic objective and metric that measures performance against a goal.
A company can’t make adjustments to its strategies and procedures if the people in charge don’t know how business is trending. By tracking KPIs regularly, business owners can measure various factors affecting their growth and make course corrections as necessary. In the long run, doing this gives companies the best shot at succeeding.
Distinguishing features of KPIs that can be measured
- Time Frame
Tree AMS offers a configurable performance management dashboard to enable Business owners to have a quick overview of the performance in specific metrics in key drivers that matter most to the business. Although there are a few key areas that are common across all businesses, business owners place different priorities on the metrics that can be measured.
Some areas that can be measured and monitored:
- Customer performance
- Service performance
- Sales operations
- Cost of Goods
- Lead Generation
- Audit results
- Training Monitoring
- Compliance reports
The Balanced Scorecard:
Whilst there are many Performance Management Methodologies in existence, the Balanced Scorecard(BSC) is the most widely used
What is a Balanced Scorecard
The Balanced Scorecard is a set of performance targets that include both Financial and Operational measures. Financial measures report the results of actions already taken. Operational measures are drivers of the future financial performers. The three dimensions of Operational performers include the customer perspective, the internal process perspective, innovation & learning perspective. It recognises that organisations are responsible to different stakeholder groups, such as employees, suppliers, customers, community and shareholders
Managing a business is a complex task that involves many different parameters. Traditionally most companies measure their performance based on financial outcomes. Financial performance measures work retrospectively and are not effective measures for ongoing improvement. Today, most business owners recognise that traditional financial accounting measures like return-on-investment and earnings-per-share can give misleading signals for continuous improvement. Business owners should not have to choose between financial and operational measures but rather leverage tools to help them measure and manage both aspects so as to navigate their businesses towards growth more successfully.
In today’s competitive environment, competition has changed. Other non-financial performance measures like customer satisfaction, quality, cycle time, and employee motivation can be more effective measures of future performance.
Managing an organization effectively today requires that Business owners be able to have access to performance measures in various key performance areas. Often, it is the lack of information and clarity that leads them to lean more heavily in one direction than the other. They realize that no single measure can provide a clear predictor of performance. As such, having access to various information, both financial and operational measures in different key performance areas help business owners and senior executives analyse and make well founded decisions.
The Four perspectives of a balanced Scorecard includes:
1. The Customer Perspective:
Customers’ concerns tend to fall into four categories: time, quality, performance and service, and cost. Lead time measures the time required for the company to meet its customers’ needs. The combination of performance and service measures how the company’s products or services contribute to creating value for its customers.
To put the balanced scorecard to work, companies should articulate goals for time, quality, and performance and service and then translate these goals into specific measures.
Once these measures are in place, a series of questionnaires and audits can be designed and implemented using technology to simplify the implementation and allow the business owner and senior executives to quickly analyse the results.
2. Internal Business Perspective:
Excellent customer performance may be derived from processes, decisions, and actions occurring throughout an organization. Managers need to focus on those critical internal operations that enable them to satisfy customer needs.
Companies should also attempt to identify and measure their company’s core competencies, the critical technologies needed to ensure continued market leadership. Companies should decide what processes and competencies they must excel at and specify measures for each. Once these key performance areas are uncovered, it is important to understand what areas need to be measured, audited and evaluated to ascertain these areas are in line with the Company’s vision.
3. Innovation and Learning Perspective:
As global competition becomes more intense, companies need to continuously improve and innovate their existing products and processes and have the ability to introduce entirely new products with expanded capabilities.
A company’s ability to innovate, improve, and learn ties directly to the company’s value. That is, only through the ability to launch new products, create more value for customers, and improve operating efficiencies continually can a company penetrate new markets and increase revenues and margins. The ability to be ready to pivot is ever more pressing in today’s business environment.
4. Financial Perspective
Financial performance measures indicate whether the company’s strategy, implementation, and execution are contributing to bottom-line improvement. Typical financial goals have to do with profitability, growth, and shareholder value.
Some areas to consider in terms of setting Financial performance measures include:
- Sales & Revenue Tracking
- Earnings Before Interest, Tax, Depreciation and Amortization (EBITDA)
- Cash Flow Forecast
- Gross Profit Margin as a Percentage of Sales
- Revenue Growth Rate
Although there are many interesting Financial performance measures to track, It is important to note that strong financials do not always indicate strong underpinning performance and strong operations may not also translate directly nor immediately into Financial success.
Challenges faced when implementing a Performance scorecard approach in an organisation:
1. Poorly Defined Key performance areas and associated Metrics
Management need to clearly identify the company’s key performance areas and Metrics ot be measured need to be relevant and clear. They should be depicted with visual indicators that are easily understood. In addition, metrics need to be collected at the ideal frequency for making decisions, and defined in such a way that the measurement can be consistently applied across the company even if their targets of performance differ.
2. Lack of Efficient Data Collection and Reporting
A primary reason that companies overemphasize financial metrics at the expense of other important operating variables is the simple fact that systems already exist for collecting and reporting financial measures. Other Operational and non-financial often are not available on a system but rather require much human effort to implement, collate and analyse such data. Companies that deliberately plan to define the vital few metrics and commit the resources to automate data collection and subsequent reporting tend to achieve good results. Tree AMS is one such performance management tool that companies can leverage to help to manage their business’s performance.
3. Lack of a Formal Review Structure
Scorecards work best when they are reviewed frequently enough to make a difference. Metrics should be reviewed regularly and should be analysed across functions and key performance areas. Leveraging technology and automation to pull specific data and presenting them dynamically across functions, business units can provide insight that a 2 dimensional view does not. Having a formal review format and structure can systemise and encourage ownership within all stakeholders in the company. A successful implementation of the balanced scorecard within a company will keep the company looking—and moving—forward instead of backward.
Good performance measures should:
- Be focused on key factors.
- Be a mix of past, present, and future.
- Balance the needs of all stakeholders (shareholders, employees, partners, suppliers, etc.).
- Start at the top and trickle down to the bottom.
- Have targets that are based on research and reality rather than be arbitrary.
- An effective performance measurement system should help:
- Align top-level strategic objectives and bottom-level initiatives.
- Identify opportunities and problems in a timely fashion
- Determine priorities and allocate resources accordingly.
- Take action to improve processes and procedures when the data warrant it.
- Plan and forecast in a more reliable and timely fashion.
Dashboards versus scorecards
Ultimately, should business owners rely on Dashboards or scorecards?
Performance dashboard is a multilayered application built on a business intelligence and data integration infrastructure that enables organizations to measure, monitor, and manage business performance more effectively
Performance dashboards offer a Visual display to present operational performance (free form)
Performance scorecards offer a Visual display to chart progress against strategic and tactical goals and targets (predetermined measures)
Ultimately, with the availability of sophisticated technology, there is no need to choose between the Performance dashboard or Balanced Score card. With Tree AMS technology, The Performance Dashboard allows the business owner to not only track the performance of a business unit, it tracks the performance of all the business units and consolidates the data as an overall view according to the predetermined metrics to be measured. Depending on what the business needs to manage, the performance dash boards can be calibrated accordingly.
Three types of performance dashboards:
- Operational dashboards
- Tactical dashboards
- Strategic dashboards
When planning what should be presented on your dashboard, it is important to make sure you consider these items:
- The dashboard presented should have a logical flow and be easy to interpret
- Identify the top 5 critical areas to track and evaluate.
- To get a more complete view, combine data from a variety of systems into a single, summarized, unified view of the business.
- The information presented on the dashboard should not be static. It should enable you to drill-down or drill-through each key area to underlying data sources or reports
- The dashboard Presents a dynamic, real-world view with timely data updates
- Use of visual components (e.g., charts, performance bars, spark lines, gauges, meters, stoplights) to highlight, at a glance, the data and exceptions that require action
- What system you use, ensure that it requires minimal training and is easy to use. This reduces your reliance on a few trained individuals to allow the system to deliver information to you.
- The system you choose must require little, if any, customized coding to implement, deploy, and maintain.
Whether you are looking to enhance your company’s business performance management system or to simplify the performance management for your human resource department, consider leveraging the technology that is offered on https://www.treeams.com.
This is a tool that is designed for the easy onboarding of business units and its team to specifically help business owners and operations managers to easily build business performance benchmarks and improve the overall ease of business performance management. This software brings together several tools and functionalities that reduces the pain of seeking information on different platforms. Besides providing a smart dashboard, the Tree AMS Software also has Audit and Training tools, Sop Documentation systems, Network management and Financial models built into the system to help business owners manage their businesses more effectively.
The Business Performance Software that allows you to use Big Tools at very affordable SME Prices
Tree AMS was designed for the SMEs who need visibility on their business performance, in various Key performance areas presented one single dashboard instead of having to spend time manually and mentally collating the information for analysis. Tree AMS also offers Quality management technology including Audit Management to help with non-financial indicators, Quality management, and customer service management. Tree AMS also offers SOP Documentation and Training Evaluation technology to ensure the team is up to date with the processes and implementation of service standards. It allows management to schedule audits and training, conduct assessments, present reports and track progress. Another area that business spend a lot of time managing is the onboarding and implementation of repeated process. Tree AMS offers SMEs the ability to have their processes documented as checklists that become a workflow that culminate into an entire process. With this function, SOPs come alive.
Tree AMS offers our BIG Tools to every SME at small subscription prices. No longer do companies need to pay huge implementation prices and wait for months before being able to use the Business Performance Tool. With Tree AMS, Implementation capabilities are immediate. Online Guides and Offline training are conveniently available to help Business owners train their staff and get everyone up to speed. No longer do business owners need to depend on the few who know how to use the cumbersome legacy ERP systems. Tree AMS has been designed so that minimum Coding is required, but still allow for specific customizations and integrations.
If advise and further assistance is required, Tree AMS has local partnerships with business performance Management experts that can provide the expertise businesses may need to implement the system as an alternative to implementing the system themselves.
For more information on how Tree AMS can become a part of your business growth, contact a consultant at email@example.com to get the assistance you seek.