Enterprise performance management (EPM) can provide leadership with a more complete toolkit to view, analyze, and improve their organizations. Here, enterprise means the total organization?all of its departments or functions and how they interact.
There are many variations to an enterprise approach to performance management. This approach has two key elements that differentiate it from the crowd. First, it can be easily understood. Simplicity is critical if the entire organization is going to not only be involved but involved effectively. Second, it is outcome-based. It focuses on the end results, the bottom line. It is not directed at implementing tools, enablers, technology, or processes, although it involves all of them.
SIX STEPS TO SUCCESS
The six steps involved in implementing effective and efficient EPM are discussed.
1. Develop an Enterprise Strategy : Most mature organizations have a strategic plan. You need to know if the leadership knows the contents of the plan and if it is used to guide the organization. EPM builds on the framework of a good strategic plan, taking the elements of the strategic plan and deploying the plan throughout the organization. Strategic planning starts with determining who is going to participate, where they are going to meet, and what the outcomes should be. Next comes the initial strategic planning workshop, typically held over several days and involving the senior leadership team, selected organizational representatives, and a facilitation team. Outcomes of the initial sessions include:
- The organization?s vision and future
- Guiding principles and behavior
- A mission statement that transitions vision to goals
- Strategic goals and a method that cascades their implementation throughout the organization
- Team roles and responsibilities including buy-in
- Plan deployment, publicity, and exposure to the organization
2. Objectively Map the Organization: This step requires creating or revising the blueprint of how work is accomplished within the organization (process flow), identifying resources required to accomplish the work resulting outputs. Consistent with EPM?s outcome-based methodology, it is essential to know objective answers to these elements for fact-based change decision to occur.
Enablers such as Activity-based costing (ABC) provide an efficient and effective means to map the organization. ABC and its implementation?activity-based management (ABM)?can help uncover many improvement opportunities.
Equipped with its process and cost blueprint, the organization can proceed to the next step of seeking improvement opportunities and establishing KPIs.
3. Identify Improvement Opportunities and KPIs: Mapping the organization from a process flow and cost perspective accelerates the identification of opportunities for improvement. These opportunities exist throughout every organization but are frequently not targeted because long-standing processes, resources, or outcomes are thought to be unchangeable. At this stage, you can profit by challenging everything. There is no need to break successful and profitable business lines, but you can often refine them.
KPIs describe critical organization metrics. When well conceived, they are causal and linked to outputs and process health.
4. Develop an Objective and Relevant Scorecard : Managers typically do not have time to routinely review detailed elements of their entire organizations. Yet they need to know the health of major processes, outputs, resource consumption, revenue and cost streams, profitability, and other business-related information.
Well-designed and relevant business scorecards can provide decision makers with timely, critical information. For this process to work, three things must happen. First, your meters must be relevant?or have a causal linkage?to something important that occurs within your organization. Second, the data that feeds the meters must be objective, easy to accumulate, accurate and current. And third, scorecards must be trusted and used. Scorecard information must not be gamed or manipulated to fit a desired outcome.
5. Implement Outcome-Based Change Management: The fifth step is where most EPM failures occur. The downside of implementing outcome-based change management is the failure to do something with actionable information. There are many reasons for failure to act: poor leadership, fear of change, and mistrust of information. The most common reason for unsuccessful change management is lack of a well-conceived and communicated change management plan.
6. Measure the Results and Continue to Refine: This is the final step in what should be a continuous process. The effects of change need to be objectively measured and then evaluated. The previous steps, when followed correctly, will lend their outputs to the change management measurement process. The organization?s scorecard is an excellent starting place and mechanism for this purpose because of its linkages to KPIs.
The value of implementing EPM is an example of the sum of the parts exceeding the value of the whole. Understanding the makeup and roles of each component within an organization, especially component interdependencies and linkages, provides insight into how best to organize and operate the enterprise for maximum outcome. This guide provides a framework to begin the journey.