Frank Buytendijk Blog

Did you ever wonder where the balanced scorecard came from? It was created as part of a set of workshops by Drs. Kaplan and Norton with a group of companies who were looking for a way to combine financial and non-financial management information. The idea that emerged and that was finetuned over time was to group and connect four areas of performance: financial, customer, process and growth/learning.

I wasn’t in the room during those workshops that led to defining the four perspectives, but I have a hypothesis how it could have happened. In figuring out which non-financial areas to pick, someone may have mentioned the three value disciplines from Treacy and Wiersema: operational excellence, product innovation and customer intimacy. Treacy and Wiersema state that organizations need to score sufficient in all these areas, and need to excel at one.

These three value disciplines map 3 of the balanced scorecard perspectives perfectly: process, growth/learning (innovation) and customer. The fourth perspective had to be the financial outcome of those perspectives.

If it didn’t happen this way, at least it shows the logic of the four perspectives, as they align with other established management theory.

PS. Please take the survey that is part of the research for my new book on www.frankbuytendijk.com.

In Western management, we are obsessed with analysis. KPIs are designed to analyze deviation from the plan, we create graphs to analyze trends, and drill-down in a tree of information to analyze the root-cause of certain unexpected results.

But what about the opposite of analysis, called synthesis? Where analysis helps with straightforward problems taking them apart until you understand all elements (per definition an in-the-box activity), synthesis helps connecting different elements and create something new (an out-of-the-box approach). This is particular helpful when the business problems we deal with are not that straightforward and clean anymore, like dilemmas often are.

Sure, we all find this important, but think this is "creative" and "unstructured". But the process of synthesis is equally structured, and there are techniques that help dealing with dilemmas.

This is the topic of my new book, that I am currently writing. Taking business intelligence into an entirely new direction. Please take the survey at www.frankbuytendijk.com, and share anonymously how you think your company is dealing with its strategic dilemmas. As a "thank you" you can download a paper that was recently accepted by the Academy of Management, and was also accepted by the Performance Management Association (PMA) earlier this year. And if you contact me directly, I'd be delighted to share with you the thinking that led to the survey. But I wouldn't want to bias you responses too soon.

So please take the survey first, at www.frankbuytendijk.com !

Best regards, frank

Google Knol (a “knol” is a unit of knowledge in Google’s terms) is a bit like Wikipedia. You can post articles, but the difference is it is clear who the author is. My colleague Mark Conway and I recently posted an article on the definition of EPM. You can check his article out here.

The article discusses the various definitions of EPM, what components an EPM system consists of, an overview of EPM methodologies, suggested reading, etc. Here’s a paragraph from the article, to give you an idea:

The term Performance Management is not very well defined. Different disciplines have a different understanding. For instance, in the field of HR it means managing employee performance 1 and in IT networks performance management means optimizing the performance of IT systems and networks2. When performance management refers to organizational development, many different terms are used, amongst which Corporate Performance Management 3, Business Performance Management, Strategic Performance Management4 or Integrated Performance Management 5. Performance management is closely connected to the term performance measurement. They are sometimes mistaken for each other. In careful usage, Performance Management is the larger domain and includes Performance Measurement. Here we use the term Enterprise Performance Management (EPM). Some try to define the differences between these terms. In an article in BPM Magazine (12/08), David Giannetto, the author of “The Performance Power Grid” and a professor at Rutgers University made the distinction: “BPM is usually considered to be an approach that solves operational problems through better information, whereas CPM is often used to refer to the solution of problems that revolve around financial information. Meanwhile, EPM tends to be seen as the unification of operational and financial information to solve problems with a holistic approach.”

frank

On the 24th and 25th of june, the UK Oracle User Group is organizing a conference on business intelligence and enterprise performance management. The agenda is driven by the users, and features some extremely interesting case studies, such as Newmont Mining (Strategic Finance and Planning), Old Mutual (Financial Consolidation), BUPA Care Homes (OLAP), and many more. Furthermore there will be Roadmap Sessions, and lots of technology sessions with tips and tricks.

This event is probably the most comprehensive conference for Oracle BI and EPM users in Europe, and it is being held at Twickenham Stadium in the UK. More information here.

We just published the fifth issue already of the Journal of Management Excellence, and you can download it here.

The theme is "creating value", like the theme of issue #4 as well. The topic has so many facets, it was impossible to deal with them all in a single issue. In fact, as creating value is the bottom line for Enterprise Performance Management, we could continue to fill the JME with the same theme for many issues to come.

The following numbers are important in reading JME#5: 2.4, 5.13 and 3.

2.4 is the number of times that world-class EPM companies outperform others in terms of equity market return. I wouldn't dare imply causality: if you adopt EPM, your return improves. However, the correlation is striking. There are many possible explanations. For example, EPM helps you take or maintain control and this improves return. Alternatively, a good return enables you to invest in EPM much more. The article from Tom Willman, from The Hackett Group, indicates that this explanation is less likely. A third explanation is simply having good management explains both the success with EPM as well as a higher return.

5.13 (on a scale of 1 to 10) is the score of Oracle's first EPM index. Steve Walker provides some commentary around the most important findings. Jim Franklin introduced the concept of uncertaintly management in JME#1, and now revisits the topic. Tony Politano describes how analysis chains can help create value. Ron Dimon of Business Foundation, has contributed a very detailed article on how to build the business case for creating value with EPM and Mark Conway provides an overview of industry insights, as he does in every issue.

What about the number 3, you ask? The number 3 is the number of articles that partners and industry experts contributed to this JME issue. Next to the outstanding contributions of The Hackett Group and Business Foundation, Wayne Eckerson, the director of research of TDWI, wrote a guest commentary on build versus buy, and how both can create value.

Cranfield University School of Management, Balanced Scorecard Collaborative, CapGemini, Deloitte, Decision Management Solutions, The Hackett Group, Business Foundation, TDWI.

This is an impressive list of contributors over the last five issues, and I'd like to see it grow even more. Interested in contributing? Let me know.

frank

A few weeks ago, I traveled with my family to Germany. We decided to fly. Due to the status I have on one of the airlines, I am allowed to make use of the business class line at security, also when flying economy. Although no one else was in line, the guy checking my ticket sent me back to the long line for economy class. My wife and children did not have that status. This while 4 security people, let me repeat this: four people, in the business class security people were just standing there, doing nothing, watching the overly crowded economy line. "the rules, sir". The rules, where would we be without the rules.

It reminded me about what I heard about Southwest Airlines. One of the most important performance indicators is "turnaround time", who fast planes can leave again after landing. Southwest realizes this and put NO strict rules and processes in place for the ground staff in place, other than the guidance how important it is. The company lets the ground staff deal with the situation at hand, as the staff sees fit. You can guess the result: excellent turnaround times at the gate.

Back to the airport where I was at. What would be the result if the security people would open up the business class line if there is availability:
- less queues, higher flow, higher customer satisfaction
- lower cost of security, because of better resource load balancing at the line
- more time for shopping at the airport, improving sales and profitability
- no negative impact on security, the procedure stays the same
- better job satisfaction for security people, because they are empowered to make a difference.

Where would we all be without these senseless rule? In a better place. Less rules, more performance. Performance is about people making the right decisions.

frank

While I am writing this, I am flying back from visiting Oracle Open World in Japan. I have spoken with many customers, and it strikes me that many of them have the same question. How have other Global organizations implemented BI and Performance Management? How have they overcome a certain problem? How can we close the gap that we have?

First of all, this assumes that there is a gap. Although there is certainly room for improvement - there always is - I didn't think the companies I was speaking with were doing a bad job at all. Not better or worse than elsewhere in the world at least. The recent EPM Index study we recently did in NA and EMEA showed a score of 5.13 out of 10. And if I could take a stab at the level of maturity in Japan, I would rate that in the same category. 5 means lots of opportunity to work on, but also half-way there already.

Second of all, and more serious, the line of reasoning assumes that best practices in the West can be copied in the East. I doubt that. Michael Porter repeatedly said that in his eyes most Japanese companies do not have a strategy. That is quite a statement. Maybe what he meant to say was that most Japanese companies do not fit in his framework? A good theory is characterized by the clarity of its boundaries. Perhaps strategy theory is not universal? What a surprise.

I think in adopting BI and performance management there are three things to consider: management style, implementation practices and software.

The dominant style in Japan is very different than in other areas around the globe. Decision-making processes are much more bottom-up, a.k.a emergent strategies. The role of top-management is to provide council and to guide the process. Compare this to the West, where strategy formulation is seen as the responsibility of top management and then rolled out to the rest of the organization. In the West, strategy is seen as the big picture. In the East, strategy is a process of continuous improvement. OF COURSE the Western style of performance management isn't adopted in Japan,

Honestly, I don't think software is the issue. It can be used in many different ways. I think the real issue is that the implementation best practices do not take different cultures and styles into account. What is needed is a way of describing different styles and culture, and then derive an implementation style from that. I have done some preliminary work in this space as part of my book "Performance Leadership", but by far not enough.

Do you have experience in this field or do you have any suggestions? Let me know.

Recently I attended my first live Rugby Union match, visiting my colleague and rugby fanatic Nigel Youell in the UK. I have to fully define the game as Rugby Union as I have learnt there is also Rugby League and there is considerable rivalry between the two. So, armed with the knowledge that the ball is usually kicked forward but can only be thrown backwards I travelled to the beautiful UK city of Bath. We were to watch Bath Rugby play London Wasps in the Guinness Premiership!

As the game progressed and I realised that it would take me many hours of watching to fully understand the rules but one aspect of the game stood out and made me think about how performance management is played out in many businesses. I was struck by the fact that while each player has a specific position and role in the team they all adopted the multiple positions and roles as required of them by the flow of the game. They can be anywhere on the pitch and can be defending or attacking and, can even adopt a very specific role usually undertaken by another player because that player was not in the position to execute his role.

How different performance management is structured, where people are supposed to have a single role and related set of responsibilities. What if you are in the position to make a difference, but it’s not entirely your role? Say ‘oops’, step back and let the ball go? But what more can we do in a traditional environment? We don’t have the information to act in the right way.

Performance Management should not be seen as a hierarchic exercise where information is spread on a ‘need to know’ basis. Let me withdraw that statement. In fact, let’s redefine ‘need to know’. Managers and professionals need not only to know what their contribution and role is, they need to know what the role of others is as well, so they can actively contribute.

I think it is important to separate person and role. People can assume multiple roles. In reality most people do. When visiting a party and discussion the company you work for, you assume a marketing role. When approving expenses, you assume a financial role. When hiring a person, you assume an HR role. Whenever you visit a customer, you assume the general role of representing your company. Am I suggesting everyone should have all information? I am not. We can’t be experts in everything. I am suggesting though that if you act in a certain capacity, you should have the right information available. You can group information around roles, but you shouldn’t group information around people. In database terms: role and people have a many-to-many relationship, not a one-to-many relationship.

As with business there are winners and losers and Nigel wanted me to make it clear that in this match his team, Bath Rugby, were the winners with the final score of 22-14!

When working with customers, the workshops about BI, data warehousing or EPM are increasingly about “maturity”. There are more customers who are beyond the phase of “business case”, or “where to start”, or “how to…”. The key question is “what’s next”.

I looked into a number of maturity models out there, and some of them are better than others. I particularly like the maturity model of TDWI (The Data Warehousing Institute). Detailed, well thought through.

The point that I want to make is that most of the models assume the last phase is called ‘mature’ (maybe that is why they are called maturity models). But let’s compare this to real life. After maturity comes aging, and in the end we die. So where are the stages “… becomes old, stale and goes away”, or “… merges with XYZ”?

I don’t think business performance, or maturity models are linear of nature. That at one moment you reach the top, and then you stay there. “Ta ta! You’re in the High Performance Stage now”. Progress comes with ebbs and floods. At most moments in time, your BI will be in some kind of equilibrium, it supports what it needs to support. And all the time, there are various influences. Technology moves on, users progress and ask for more (or less), the organization changes, new best practices emerge, etc. This disrups the current balance, and then you try to create a new equilibrium. Sometimes this is an improvement, and sometimes it is a step back. Like with many things in life.

The best example I can give is how the key issue in BI was presented to me twenty years ago: “Users are spending too much time collecting the data, and not enough time analyzing it”. Today, this is still the case. Has there been no progress? I think there has been HUGE progress, and with the increased business complexity, data volumes, multiple types of users ad styles of delivery, it is fantastic that BI has been able to at least keep up.

Everything you don’t put energy in, decays. Buildings, living creatures, friendships, everything. Full stop. BI is not different. There is improvement along the way, but you’re never done.

Ramiro Kollmannsperger reacts:

In the last paragraph you compare the EPM Index Results from Respondents who give different Feedback on the importance and use of BI. I was just wondering how significant these found values really are, considering first: that the result of the ones who appreciate the value of BI is not so significantly higher than the result of the ones who don't believe in it, and second: considering that the ones scoring higher only said that BI is "important" or a "major tool". So they like BI, great! But can we be sure that their better outcome is really due to the importance they assign to their BI Tools? Next thing that bothers me a little bit is that those who appreciated the importance of BI are not sooo much better off than those who didn't. So what can we (BI professionals) do, to improve their Management Performance (naturally, i would aim to do it in ways that reflect visibly in the EPM-Index score, otherwise sceptics could claim there's no ROI)?

I don't think it is possible to claim causality, indeed. You can't say that if you find BI important, they have better results. You could say that if you find BI important, you find EPM more important. Somewhat tautological of nature, though. What is clear is that there is a correlation between the two. BI impacts the EPM index. The outcomes of the index influences the importance of BI, and there -- I am sure -- is a third controlling variable called "good management" ;-).

Regarding the significance of the differences, this needs some more explanation. There are multiple research designs possible. We chose to ask for people's perception and self-assessment, as it is perception that drives awareness and change.

The side-effect is that this flattens the scores a little. People are less likely to score themselves below let's say 5, and less likely to score themselves above for instance 8. However, in combination with a sample size of 800, and some statistical validation, the differences are still significant.

Thank you for asking!

frank