Trends

Performance Management
Responding quickly crucial in the economic crisis

A global study has revealed that interest in systematic Performance Management for all company processes has recently undergone explosive growth. Still, the effect of this depends considerably on a shared vision for business and IT.
TEXT: CLAUDIA FUNK

Every company has noticed the effects of the recession its inescapable. Nevertheless, gaining insight into internal and external developments and signs at an early stage can make all the difference during times like these. Organizations that continue to perform well are better prepared, and thus better able to adjust, than their competitors. Therefore, an important part of management is systematic Performance Management (PM); this is what often makes all the difference. An increasing number of organizations are discovering the benefits of PM. This process concerns the systematic measuring, operating and monitoring of various performance dimensions within an organization. The aim of PM is to acquire an accurate representation of current performances, based on detailed

information about internal company processes and external factors. Organizations can then use this knowledge to make better-informed decisions. But how can PM be applied in practice? And how exactly do companies use it? What kinds of challenges does it involve? And which benefits can be reaped? At the beginning of this year, researchers at the Business Application Research Center (BARC) in Germany posed exactly these questions to IT employees and managers across a range of sectors in 27 countries worldwide. Their research revealed that detailed information is in great demand. Managers are demanding more reports and indicators in order to reveal developments. Leo Kerklaan, Dutch management consultant and developer of the Organization cockpit concept,

explains that it is crucial that companies are quick and flexible to adjust to developments in the market. You used to develop a management plan that would last for three years; nowadays, you sometimes need to think up a new strategy every six months and implement it within a year. When considering the PM concept, it is important to understand that not only financial criteria need to be taken into account, as Prof. Andrea Schenker-Wicki, Chair of Performance Management and Director of the Executive MBA Program at the Institute for Strategy and Business Economics in Zurich explains. A holistic approach is needed. Financial indicators are simply not enough we cant measure everything in money. It is also important to consider data concerning clients, client satisfaction and information

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WE CANT MEASURE EVERYTHING IN MONEY

Professor Andrea SchenkerWicki

about the markets and their development. In particular you need to consider the supplier data for import countries and information on their business processes. All kinds of things enter into this for a good strategic tool. Collecting all the necessary information can be both tricky and demanding at times. Ninety-three percent of respondents indicated that the complexity of the tasks they

perform has risen, while, in the past three years, the number of employees that are involved with PM in order to reduce the workload in any one company has increased by 30 percent. The researchers predict the even stronger growth of these processes and with it, the number of people involved. Leo affirms the results of the research, also in the Netherlands. The results are certainly recognizable for the Dutch business world.

On the same page

More and more companies are making the decision to introduce PM. Nonetheless, when making the switch it is vital to look out for a number of factors to ensure that the set-up is as efficient as possible. In the first place, the extent to which a systematic PM system is effective depends on how the management and the IT

department regard it. The research shows that the risk that these two parties fail to understand each other is great. Given that, nowadays, virtually all business processes in a well-functioning IT department are dependent on one another, as Leo explains. IT within a company becomes a really large player. At a certain point in time, the IT department will make certain suggestions, in the same way a consultant would. Yet the question is then whether this is also good strategically. The management should still make this decision, even if IT is going to be playing a more active role in the business processes. Still, it remains indisputable: the cooperation between IT and Business is becoming more intensive and integrated. The finer points of PM strategies and their implementation need

Main drivers of current challenges

Economic turmoil / the financial crisis Competition Globalization Access to financial resources (credit etc.) New compliance demands Other 4.6 % 13.2 % 11.6 % 11.1 % 242 % 35.4 %

Source: BARC: Performance Management Current Challenges and Future Directions.

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to be discussed in detail and carried out in accordance with everyone involved. The technical questions on the use of the PM system are often what prove to be an obstacle, comments Andrea. The management doesnt give all that much consideration to the technical aspects, so the IT department has the impression that they dont actually know what they want. However, these things all need to be mapped out and decisions need to be made before action is taken; otherwise, youve implemented a costly system that doesnt deliver the information that you consider important. The size of an organization plays an important role in the systematic set-up of PM processes. Small employers know their customers and therefore conduct PM intuitively. And that doesnt have to be bad, claims Andrea.

COOPERATION BETWEEN IT AND BUSINESS IS BECOMING MORE INTENSIVE

Leo Kerklaan

However, if your company has reached a certain size, then it needs to become more systematic. The crisis has helped many managers to understand that they dont have much other choice. The use of PM is increasing dramatically, because every company wants to avoid bankruptcy. Leo observes that it doesnt only concern a technical aspect of these processes, it also involves an

important cultural aspect. In a culture where everything revolves around performance, organizations create a shared vision through delegation and participation in order to reach the set target. This means that, in response to the results, you have to be able to motivate people in the organization to take action and to respond to new developments. This is more effective in some organizations than others, and the commitment of the people in the organization is extremely important for the whole performance, explains Leo.

IT support of PM processes
It is not only important that the organization itself is dedicated, but a reliable PM system is also vital. An impressive 80 percent of respondents acknowledge that the processes surrounding PM need to be improved. The consequence of

Top 5 goals of improvement initiatives

Improve data quality Assist the CEO in implementing the corporate strategy Reduce the complexity of the process Standardize methodologies and/or processes 12.2 % Standardize tools or introduce new software 11.9 %
Source: BARC: Performance Management Current Challenges and Future Directions.

18.5 % 15.3 % 13.3 %

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the increasing complexity and the interest for PM is that standard table calculation programs, such as Excel, in many cases no longer satisfy the requirements of the information in demand. According to the research, specialized software will increasingly replace Excel. In many companies, a number of programs already exist to map the performance of various business processes. More than half the respondents claim to use one to three programs; however, nearly one third use up to six different applications. The responses reveal that the possibility of confusion grows dramatically as the number of tools used for PM increases.

20-100 tools 3% 10-15 tools 8% 7-9 tools 4% 0 tools 1%

4-6 tools 32%

1-3 tools 51%

How many different tools are used to handle performance management tasks?
Source: BARC: Performance Management Current Challenges and Future Directions.

A RELIABLE PERFORMANCE MANAGEMENT SYSTEM IS VITAL

lot of work and money, explains Leo. But an increasing number of organizations are sacrificing that for one version of the truth. Andrea argues in favour of restraint. The more you know the better. However, you dont always have to opt for an integrated solution, just so long as the programs you use are attuned to one another. The interface must be compatible; otherwise, it will go wrong. You really cant invest enough time in looking for the right program and investigating whether it meets your requirements. If that is not entirely the case, then its better to stay away from it. If it simply doesnt fit, then youre better off with an Excel sheet.

Whichever IT support system you end up deciding upon, you need to consider carefully how you set up the processes and what you do with the information. Nearly every department in large organizations works with PM, including HR, Marketing and Facilities. PM is an interdisciplinary field that can be implemented anywhere. Its important, however, to not only monitor quantitative but also qualitative aspects, because figures cant say everything. But Performance Management will make its way in the long-run; Im convinced of that concludes Andrea.

One possible solution is integrated software for the entire company. The implementation then needs to be well prepared, because replacing all existing information systems within one organization is a drastic operation. It costs a

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