Elf 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.

Below are some suggestions for Santa and his team to move the organization into the 21st century. A warning: although I believe I am warm-hearted, my university degree was in industrial engineering (imagine an ingot of cold, hardened steel).

• Santa Claus – Before the world became more complex and volatile, Santa’s organization knew what work to do and how to do it. That is no longer the situation. The first action Santa needs to take is construct a strategy map from which to derive its companion balanced scorecard. It has been demonstrated that a key reason for poor execution of an organization’s formulated strategy is the C-suite has not effectively communicated it to its workforce. A strategy map accomplishes this. The identification of key performance indicators (KPIs) comes as a later step.

• Mrs. Claus –Mrs. Claus, your role, let’s call it the Chief Operations Officer (COO), is critical. Santa’s time for managing the operations is not available during December when he has children sitting on his lap. Getting organized for the big night – December 24th is a key COO responsibility. Do not make the usual mistake of selecting KPIs with targets to monitor the workforce’s performance. Elicit from SCI’s various departments what projects, initiatives and core processes are needed to improve each of the causally linked strategic objectives in Santa’s strategy map. Once the strategic objectives are identified in the strategy map, each department should determine their KPIs and monitor how well they are doing. This will create the buy-in necessary for the team to hold themselves accountable for their objectives and KPIs.

• The Elves – These toymakers are critical to a successful mission. Last year’s late deliveries cannot be blamed on inclement weather, which was much better than average. The problem was two-fold. The toy production system was clumsy. And the Elves were not working effectively. Just in time (JIT) and lean management consultants have re-arranged the production lines. Six Sigma quality teams have removed waste. What is left to do for improved productivity is to establish the KPI run rates and output measures. This is a standard practice in industry. It is now time for this practice to be implemented in the North Pole. I suggest Mrs. Claus start with moderate stretch targets for the KPIs. Get the Elves accustomed to being measured and show them how the achievement of their individual KPIs builds toward the achievement of the organization’s strategic goals. Mrs. Claus can crank up the targets next year for more output with the same capacity resources.

• The Reindeer – This part of the workforce is a bit more challenging to secure performance improvement from. Logistics tend to have moving parts that can behave like wild animals. But Santa is in the sleigh’s driver seat. He can demonstrate to the reindeer what effective leadership does – provide vision and inspiration. Who is better than Santa to guide them? Rudolph, who was not one of the original eight reindeer, is critical. There is much evidence that role model behavior of a lead worker, for example, a manager in a fast-food restaurant who does it all, will be matched by the workers. Rudolph must set the pace.

Information technologies with advanced analytics are also important to improving performance at SCI. Santa and Ms. Clause, here are some suggestions.

The North Pole workshop – As mentioned, consultants have streamlined the processes, but production measurements are essential. They are needed to manage the material flows to have the right parts in the right place at the right time. Think enterprise resource planning (ERP) and supply chain management systems.

Christmas list order management – The goal is to accommodate every child’s Christmas gift wish list, but it is a “wish list” where there are limits to what a child should expect to receive. Improving customer service levels will also be an objective. Big Data is involved. There are billions of children who must be uniquely served. After the children’s orders are processed, software should be deployed to optimally stage the toys in a sequence for efficient dispatching at each delivery location. Eventually children satisfaction surveys should be administered, but I suggest we wait a few years when a sufficient number of children will have mobile tablets to reply to the survey.

Forecasting Analytics – Marketers in companies use predictive modeling to anticipate the preference and subsequent demand volume of its customers. Santa Claus Inc. should too. The data is available as well as advanced analytics (e.g., regression, correlation) to forecast demand. The demographics exist for where all the children on the planet are.

Route optimization – The best plans are typically impacted by unanticipated factors. What is needed is real-time information including weather conditions and feedback of last-minute naughty children where their “order” needs to be modified by cutting back on delivering some requested toys. Children know they need to be good in order receive presents – and Santa can assist parents in their efforts to develop children into great adults.

Management accounting – I have saved the most important technology for last. Santa may have enough money to pay his elves to do anything – but not everything! There are capacity limits. Making some toys obviously costs more than others. A good product costing system, ideally with activity-based costing (ABC) principles, is needed to rationalize the optimal mix of products to make. Since the best supply made will not match the children’s Christmas list of requested toys, demand-shaping will be required. This can be accomplished through Twitter and Facebook by influencing media (and directly to tech savvy kids) to promote the selected product mix manufactured by the elves.

Some will say that what Santa Claus Inc. does is not a business. I disagree but will grant Santa two things: (1) He cannot choose his customers (i.e., the children), and (2) his goal is not to make a profit.

However, the business similarities far outweigh the differences. For example, Santa must deploy his limited but magical resources to meet acceptable service levels to children. By embracing the information technology-enabled enterprise and corporate performance management (EPM/CPM) methods suggest above, SCI can improve children satisfaction levels with higher efficiency and productivity.

There are lessons here for any organization, including yours.