One of the frustrations I experience is when managers or analysts share with me that their organizations tried to implement progressive management methods, and they either failed or abandoned them. A prominent example is an unsuccessful attempt to implement activity-based costing to measure and manage costs and profit levels of products, services, channels and customers. Other examples include risk management, customer analytics, enterprise resource planning (ERP) systems, and the balanced scorecard.
Read moreDo you Really Need to Embrace Analytics?
If you have not witnessed the deluge of big data and business analytics media coverage to date, then welcome back from the coma you were apparently in for the last couple of years. For the rest of you, perhaps you have the same nagging question that I have: Are big data and business analytics such a big deal that if our organization is late to the party in deploying them, we will never catch up to our competitors?
I go back and forth on wondering if applying analytics now is an urgent imperative for an organization to survive or if it is a “nice to have” relative to more critical “must have” capabilities that an organization should ideally possess.
The US Government’s Sequester – Anything versus Everything
I tend to be an apolitical person. I try to be internally apolitical within organizations I am employed by as well as related to government politics.
But now I have a dilemma. It is not with an employer. At the age of 64 I recently “semi-retired” from my employer, a large business intelligence software vendor, after being 16 fun years there. I now have time to write more and present seminars, talks, and webcasts. My dilemma is that I have been invited to present a keynote talk in Washington DC on March 28 to US Federal government civilian and military executives. What should I say to them?
Read moreMeasuring and Managing Patient Profitability
“The greatest wealth is health” (Virgil, Ancient Roman poet). There is nothing more important than taking care of ourselves and each other. However, focusing a health system on the appropriate goals in a complex political and social environment requires investment in the right combination of time, money, intellect, and creativity.
Government agencies are bringing pressure on healthcare providers, vendors, and insurance companies. For decades, our health system has been revenue driven, often with somewhat irrational pricing. Healthcare leaders must now pay closer attention to the middle line – costs – not just the top line (revenues) when working to improve the bottom line (profits).
The only financial value a healthcare facility will ever create for its stakeholders is the value it derives from its patients — its current patients and new ones to be served in the future. Healthcare organizations should view patients similarly to how commercial companies view existing and prospective customers. To remain competitive, healthcare facilities must determine how to keep patients and their families coming back to satisfy medical needs throughout their lifespan and to serve them more efficiently. To do this, they must maintain a high level of quality and patient satisfaction, while growing revenue and controlling costs.
Read moreHow to Embrace and Understand Enterprise Performance Management
DocuStar is honored to welcome Gary Cokins to our Marketing Organizational Leadership series. Gary is the founder of Analytics-Based Performance Management LLC, an advisory firm located in Cary, North Carolina.
Gary is an internationally recognized expert, speaker and author in advanced cost management and enterprise performance and risk management systems. He began his career in industry with a Fortune 100 company in CFO and operations roles and then worked for 15 years in consulting with Deloitte, KPMG and EDS. From 1997 until recently, Gary was a principal consultant with SAS, a leading provider of enterprise performance management and business analytics and intelligence software. His two most recent books are Performance Management: Finding the Missing Pieces to Close the Intelligence Gap and Performance Management: Integrating Strategy Execution, Methodologies, Risk, and Analytics. His most recent book is Predictive Business Analytics.
In the first discussion of a three-part series, Gary takes a look at Enterprise Performance Management, what it actually means and why businesses should be adopting its various methodologies.
Read moreA Kite with a Broken String – The Balanced Scorecard
How do executives expect to realize their strategic objectives if all they look at is financial results like product profit margins, return on equity, earnings and interest before interest, taxes, depreciation, and amortization (EBITDA), cash flow, and other financial results? These are really not goals – they are results. They are consequences. Measurements are not about just monitoring the summary dials of a balanced scorecard. They are about moving the dials of the dashboard that actually move the scorecard dials.
Worse yet, when measures are displayed in isolation of each other rather than with a chain of cause-and-effect linkages, then one cannot analyze how much influencing measures affect influenced measures. This is more than just leading indicators and lagging indicators. Those are timing relationships. A balanced scorecard reports the causal linkages, and its key performance indicators (KPIs) should be derived from a strategy map. Any strategic measurement system that fails to start with a strategy map and/or reports measures in isolation is like a kite without a string. There is no steering or controlling.
Read moreEnterprise and Corporate Performance Management (EPM/CPM) – Making It Work
Many organizations are far from where they want and need to be with improving performance, and they apply intuition, rather than fact-based data, when making decisions. Enterprise and corporate performance management (EPM/CPM) is now viewed as the seamless integration of managerial methods such as strategy execution with a strategy map and its companion balanced scorecard (with key performance indicators, KPIs); enterprise risk management (ERM); capacity-sensitive driver-based budgets and rolling financial forecasts; product, service-line, channel, and customer profitability analysis (using activity-based costing [ABC] principles); customer lifetime value (CLV); lean and Six Sigma quality management for operational improvement; and resource capacity planning.
Each method should be embedded with business analytics of all flavors, such as correlation, segmentation, regression and clustering analysis, and especially predictive analytics as a bridge to prescriptive analytics to yield the best (ideally optimal) decisions.
What is the answer for executives who need to expand their focus beyond cost control and toward sustained economic value creation for shareholders and other more long-term strategic directives? EPM/CPM provides managers and employee teams at all
Why Is Solitude the Secret to Enterprise Performance Management (EPM)?
Enterprise and corporate performance management (EPM/CPM) methods embedded with business analytics are a hot topic. Will they stay hot? Or are they a business improvement fad, like the quality control circles in the 1980s? My bet is these methods are keepers. Why? It is for many reasons. A major one is the EPM/CPM methods are so fundamental to an organization’s health.
Read moreBeethoven and Analytics – Based Enterprise Performance Management
I was educated as an industrial engineer, but I sometimes masquerade as an accountant. Engineers are not perceived as very worldly or sophisticated. They are often pictured with a shirt-pocket protector stuffed with pens. But some engineers, like me, do have appreciation for the performing arts. For example, I appreciate classical music. In particular, I admire and am in awe of the great classical music composers. How did Tchaikovsky and Mendelssohn transcribe such beautiful music as notes from their brain to a page of musical score for so many instruments? (Hint: I don’t think they had a smartphone or email to distract them.)
I believe that in the next few years the adoption rate for enterprise performance management (EPM) methods imbedded with business analytics will accelerate. Core EPM methods include strategy management (strategy maps, balanced scorecard, dashboards); profitability analysis (by products, channels, and customers); driver-based budgets and rolling financial forecasts), enterprise risk management (ERM); and continuous improvement (lean and six sigma quality management). They should ideally be seamlessly integrated.
Read moreImagine Data and FP&A Analysts with Superpowers
Imagine that you are a data analyst or perform financial planning and analysis (FP&A) who works for an organization with executives, managers and colleagues who do not appreciate the power of data analytics or management accounting to improve an organization’s performance. If you could have one superpower, what types of powers might capture the attention of your co-workers?
The ability to fly – An analyst who can soar to great heights and get a holistic view with perspective can better see what is really happening. How are customer demand patterns changing? How are supply chains being obstructed? With unstructured text analytics and sentiment analysis, what is being said in social media about your organization or your competitors?
Time travel – An analyst who can travel back and forth through time could perform experiments by changing variables and seeing the effects. They could continue to repeat their experiments for sensitivity analysis to understand how independent input variables impact dependent variables. How much is the impact? Project driver-based rolling financial forecasts? What actions might work best?
Read moreAnalytical Geeks are Chic
A managerial movement is now in motion and picking up steam. It is the application of business analytics for organizations to gain insights to determine good decisions and the best actions to take. This topic was once the domain of “quants” and statistical geeks developing models in their cubicles. Today applying analytical methods is on the verge of becoming mainstream.
One way to draw my conclusion about this emerging movement is that there is much chatter and debate about the topic. Articles in Accounting, Finance, and IT magazines and websites about analytics of all flavors, such as correlation and segmentation analysis, are increasingly prominent. Debate is always healthy. Some view applying analytics as a fad or fashion or way overvalued. Others claim that an organization’s achievement of competencies with analytics will provide a competitive edge.
Predictive analytics is one type of analytical method that is getting much attention. This is because senior executives appear to be shifting away from a command-and-control style of management – reacting after the fact to results – to a much more anticipatory style of managing. With predictive analytics executives, managers and employee teams can see the future coming at them, such as the volume and mix of demands to be placed on them. As a result, they can adjust their resource capacity levels and types,
Read moreWho Are the Animals of FP&A?
Ever notice how the personalities and dispositions of animals often resemble humans’? An organisation’s pursuit of adopting FP&A involves personalities of all types. How are they like the creatures that populate our planet? Here is a zoology of analogous types of employees that you might recognise.
Lions
These are the managers whom co-workers respect. They are bold and lead their pride. With FP&A, their boldness enables them to have the will to try emerging managerial concepts. These include strategy maps and their companion, the balanced scorecard; activity-based costing to measure product and customer profitability; and driver-based budgeting with rolling financial forecast updates.
Read moreThe Many FP&A Rooms of the Organization Mansion
The organization mansion has many rooms.
Business schools tend to divide their curriculum between hard quantitative-oriented courses, such as operations management and finance; and soft behavioral courses, such as change management, ethics and leadership. The former relies on a run-by-the-numbers MBA-like management approach. The latter recognizes that people and human behavior matter most. This separation of the curriculum is like chambers in a mansion.
In one set of chambers are managers who apply the quantitative approach of Newtonian mechanical thinking. They see the world and everything in it as a big machine. This approach speaks in terms of production, power, efficiency and control, where employees are hired to be used and periodically replaced, somewhat as if they were disposable robots. Some “data scientists” work in these rooms.
Read moreExceptional EPM/CPM Systems are an Exception
Quite naturally, many organizations over-rate the quality of their enterprise and corporate performance management (EPM/CPM) practices and systems. In reality, they lack in being comprehensive and how integrated they are. For example, when you ask executives how well they measure and report either costs or non-financial performance measures, most proudly boast that they are very good. Again, this is inconsistent and conflicts with surveys where anonymous replies from mid-level managers candidly score them as “needs much improvement.”
Every organization cannot be above average!
Read moreWhich Do You Choose - Wisdom or Answers?
If you had to pick, which would you choose - wisdom or answers? Let’s start with some initial observations and consider some differences between the two.
By understanding the answers to these questions today, and how they change over time, you will gain valuable wisdom about your company and their practices. This wisdom will enable you to design and redesign strategies to move forward profitably.
Read moreElf Performance Management: EPM for Santa Claus Inc.
It is my hope that the team at Santa Clause Inc. (SCI) read this article, takes note, and works to achieve their Key Performance Indicators (KPIs)! It is also my hope that other business leaders can learn how enterprise and corporate performance management (EPM/CPM) methods can substantially improve an organization’s performance.
No organization can escape the global pressures to better execute their executive team’s strategy and improve productivity. Not even SCI. Sadly, just like the typical resistance to change with most organizations there are reports that Santa is dealing with the “We don’t do that here” rebellious behavior from his workforce. To avoid widespread disappointment on December 25th SCI will have to improve its performance.
Read moreSix Key Components of Analytics-Based Performance Management
As companies face a thinning margin for decision error, the ability to use business analytics effectively – everything from correlation, segmentation, clustering, regression analysis, as well as forecasting and predicting outcomes – is becoming mission-critical.
Read moreWhat Is Performance Management?
Establishing a strong performance management plan takes a lot of effort. Thinking about your company’s needs and ensuring that your managers and other employees understand those goals through consistent communication is a lot to start with, but it can really be a boon to overall productivity and enthusiasm.
To kickstart the process, here are a few ways you can make sure you and your employees get the most out of performance management efforts.
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