Choices are not the same as options. Choices, or alternatives, represent all possibilities. We use the term options in the sense of financial options, acquired with the express purpose of being exercised at will. Creating options means taking matters into your own hands. In a skillful hand, a portfolio of options helps decide what initiatives to expand, which ones to delay, where to change direction, and what to expedite. If you have specific options - as opposed to unlimited choices - you are better prepared for change.

Read more here.

Key findings from interviews with 800 organisations in Europe and North America show that the recession may have actually had a positive effect on firms - forcing them to integrate and improve management performance processes and recognise the benefits of treating key management performance processes as a whole, not as disparate parts.

Calculated on a scale of 0 to 10, the overall Index for all of the surveyed countries has leapt by 38% from 5.13 in the first report to 7.04 in Oracle EPM Index II. The increase reflects an improvement in performance management confidence across all geographies, sizes of organisations and all verticals.

As with the first report, analyst group Quocirca asked business decision makers to rank their organisations on the quality of their processes and accuracy of information governing the six inter-dependent areas of EPM: the stakeholder environment, market model, business model, business plan, business operations and business results.

Along with increased confidence about progress towards Management Excellence, results from the six key areas assessed in EPM Index II reveal that businesses:

* Increasingly accept the need to adhere to the principles of enterprise performance management.
* Perceive significant improvements in their strategic planning and reporting processes.
* Are still too internally focused, at the expense of wide-ranging stakeholder expectations, and have comparatively weak levels of integration between the operational areas.
* Have an increased focus on customer loyalty to drive growth as opposed to new products, services or geographies.
* Now generally acknowledge the importance of Business Intelligence as a key reporting tool.

According to Frank Buytendijk, vice president and fellow of Enterprise Performance Management, the findings show that businesses are now a lot more confident that they can handle "the new reality of today's economy".

"The improved Index doesn't as much signal any material advances, but this rediscovered confidence creates the preconditions for real improvement to take place," he added.

"Comparing it to a rise in consumer confidence preceding a spending increase, this increase in performance confidence will precede new projects and improved ways of working."

Buytendijk said that finance departments spent 2009 fixing broken processes and information flows and - based on the findings of Oracle EPM Index II - "businesses now understand better that key management performance processes need to be integrated."

View the YouTube video of Frank Buytendijk's analysis.

Read his post here.

frank

Non-financial external reporting is often still based on Excel spreadsheets, or a simple Access database that is hacked together. The data may look nice in a dashboard or official report, but may be directly keyed in by the person responsible for the report. No auditability, no reliability, no repeatability.

One of the things that you could do is demand that all external reporting goes through the financial consolidation system. It has all the controls that are needed for a reliable reporting process. This is increasingly the case for sustainability reporting, including CO2, health and safety and other performance indicators from e.g. the GRI framework. Even if there is no legal obligation for these reports to be auditable, it still makes sense, as critical stakeholders pay a lot of attention to them. But how does the data get into these reports? For financial data this is taken care of very well, the general ledger is also a highly controlled environment.

Is a data warehouse enough of a governance framework to ensure the data quality for externally reported performance indicators? The numbers can still be typed in, and uploaded from a simple spreadsheet.

The key difference between financial and non-financial information is the wide variety of data sources of the non-financial information, and recording that data is not always a very well-defined process.

Maybe this is the core of the matter. Data is still insufficiently seen as an asset. Any employee that handles money or materials in the same way data is usually handled, would probably get fired immediately. The best definition of BI that I ever heard was "BI is using information as a factor of production" (like labor, capital, materials and facilities). From a governance point of view, organizations therefore do not have a lot of true BI.

I recently attended a conference where a county in of the United States presented their results. One of the performance indicators was about the punctuality of public transportation. This used to be measued by sending out surveys to team leaders. Team leaders are not very motivated to fill in surveys like that accurately, and particularly not if the results are let's say not optimal. At one moment, all the buses were equipped with GPS chips, and this was also the opportunity to improve the measurement process. The data could simply be extracted from a system.

Measurement processes need to be as invisible as possible, and not hold up operational processes. I expect a lot of sensor technology that will become pervasive over the coming years. It allows us to create elegant solutions for measuring a wide range of results in operational processes.

But what to do in the meantime? A solution that have used in the past is to apply data quality color coding to numbers, or define a performance indicator that specifically measures data quality (a quality indicator). The indicator is set to "high" if the data comes from a well governed source system, set on "low" when it originates from a spreadsheet and perhaps two or three qualifications in between. It doesn't solve the problem, but it creates a feedback loop that shows how the data must be interpreted. Then through a process of prioritization improvement activities can be put in motion. (it is important that these quality indicators appear in the same report as the performance indicator, and not in a separate report. A separate report will not have the impact, it will be seen as "technical").

I am not aware of any formal data governance framework that can be used. You?

frank

Freddy Holwerda comments that I didn't address the full question. He writes:

In the readers reaction, the real problem seems to be the understanding of the reader that: 'Same information at the same time" sounds as bad architectural practice'. You don't seem to address that (mis) understanding in your post. From my point of few, this is not a bad architectural practice at all, as long as the interfaces between systems are well-defined, and ideally in a service-oriented way.

With Freddy, I agree there doesn't have to be an architectural issue. At first sight indeed it doesn't look nice to have the same data in both the DW and the Financial Consolidation tool. However, you should see them as different versions.

You could load GL data directly into the DW, and that would be a preliminary load. Then it goes to the Financial Consolidation system to be enriched, closed, reported etc. Then the final results are loaded into the DW too. So, it wouldn't be the same data, and wouldn't be at the same time.

Does that make sense?

frank

A reader reacted:

What are pros and cons of sending both financial and non-financial information from the operational systems to the data warehouse and from there feed the general ledger? The alternative now is feeding the general ledger directly from the operational systems, and feeding the warehouse with the same information but in more detail at the same time. "Same information at the same time" sounds as bad architectural practice. What is your opinion?

I don't think there is an architectural issue. In fact, in many respects financial consolidation is a transactional process, and not a management process. In many respects, financial consolidation is not about management information, but about transactional information. A financial consolidation process could/should be managed as unattended and automatic as possible. If you look at it from this point of view, there is no architectural issue. Transactional systems feed each other all the time. The financial consolidation system feeds the data warehouse with consolidated data, and then it becomes management information.

In many cases, things are a bit more complicated. Financial consolidation systems increasingly process non-financial information as well. Sometimes for financial purposes (like some operational/financial performance indicators), sometimes for non-financial purposes (such as other types of external reporting such as sustainability reporting. In those cases the financial consolidation system needs to be fed by the data warehouse.

Also here there are no architectural concerns. It is pretty normal for data warehouse architectures to be closed loop, where the DW feeds the operational systems with integrated information.

Makes sense?

frank

I checked, the email wasn't from 1983, but seriously from 2009. How can we still have that discussion? Has nothing improved in the last 20 years? And moreover, how can business/IT alignment be so misconceived?

First of all, let's define alignment, this is usually skipped already. From a social-psychological, a person is aligned when the self, self-perception and external perception closely match. The self-perception is how you look at yourself, and the self is who you really are. If there is a mismatch you could become delusional, frustrated, and generally uncontrolled. You don't understand yourself. If there is a big gap between the self and self-perception, and the external perception, people expect you to be someone that you are really not. This leads to role distance, and unauthentic behavior too. The same can be said of organizations. If there is a big gap between true organizational behavior and who we think we are, we are kidding ourselves. Did you check out your mission statement and values lately? And if there is a big gap between external perception and the organization's true motives, you spend more time figuring out how to spin your strategy externally than actually executing on it. Quite dysfunctional.

Same with business/IT alignment. Like any relationship, it needs to come from both sides. Business perception about value needs to match the IT perspective. But... functional relationships should be based on equality. If both parties agree that IT should follow the business, you're in a dependent, submissive relationship. Not mature.

Business needs to align to IT, as much as IT needs to align with the business. It's a two way street. The nature of technology dictates so, for starters. If you are a carpenter, and you buy one of those circular saw tables (new technology), you'd better organize your process and work around that table, instead of lifting the table to go to the wood. If IT were to follow the business, deleting text on a screen would have to be done with Tipp-ex. The whole point of technology is to not align with the business, but to bring innovation. New, different, better ways of working. If anything, business should align to technology in order to be more successful. In fact, secretly we do so already. It has become a best practice to adapt the business to the processes built into the ERP system and CRM application, and rightly so.

Then, let's discuss Business/Business alignment. How many times is IT struggling with suboptimal business cases, based on budget held by the business, by having to put in a departmental solutions, because each department is "unique"? IT is often found to be "nerdy" and having "no sense of urgency" for talking about architecture and infrastructure. True, IT driven projects are usually not very successful (the business will see to that), but the only thing worse is a business driven project. Short-term successful, but ill-architected, nothing repeatable, and lots of them combined form one big negative ROI in two years down the road. It is the role of IT to see commonality between functional requirements, and take an integrated approach. It would be a lot easier if the business departments would align with, well, the other business departments, instead of IT having that struggle all the time themselves.

And, while I am on the subject, it's a pity if organizations are still discussing business/IT alignment. The real battlefront has moved on already. The name of the game is value chain integration. Aligning all stakeholders around a successful and sustainable business model. Making sure partners, suppliers and channels all benefit from integrated logistical and administrative flows, while taking into account the requirements of investors, regulators, and society at large. This is how alignment contributes to the business strategy.

But perhaps we should start with something else. Remember the definition of alignment. The self, self-perception and external perception need to closely match. Perhaps the real problem is the gap between self and self-perception. IT people sometimes think too little of themselves, and desperately want to be seen as a 'business partner' and considered of strategic importance. Don't worry. You are. Because of the nature of technology. And IT people sometimes think too much of themselves, claiming they understand the business better than the marketing, operations or sales executives. Don't kid yourself. When was the last time you talked to a customer, and constructed a multi-year deal? Think of yourself as who you really are: at the core of business innovation, while at the same time making sure the business runs smoothly.

Thanks for listening. Rant over.

frank

PS. More on www.oracle.com/thoughtleadership

The solution itself could be seen as a straightforward business intelligence application, containing data connectors, a data model, and standard reports and dashboards. What is special is how the system is implemented.

It starts with a large display in the lobby, that shows the performance indicators in a graphical format. Based on the weather, and historical analysis of energy use, the system generates a daily optimal forecast, and alerts are sent to the building manager is the actual data on air quality, use of energy etc is deviating from the optimal pattern. For the owner, real-time reporting is available based on all properties under management, creating a consolidated view.

Furthermore, the systems produces rankings, for instance for each appartment, each floor or each tennant, and these can be used to organize competitions.

However, what I like best as a "user interface" is that EMMA sends data to wireless "eggs" that are strategically placed on each floor, for instance at the reception desk or in the hallway. The egg changes color real-time from green to red, based on the actual performance against its benchmark.

It may sound like a niche application, but consider the following. Buildings account for 40% of global carbon emissions (mostly due to electricity consumption). A building has no 'life' without the people - that occupy or use the space. Lessons learned in the office may lead to behavioral change elsewhere, such as at home. Furthermore, countries are starting to introduce mandatory disclosure on energy and water performance of large commercial buildings.

Innovation in action. Thank you, Ross, for sharing this information.

Honestly, I don't like spreadsheets, and I don't feel like writing macro's. So, I decided to use what is now known as Oracle OLAP Option. My first job was at IRI Software, that got acquired by Oracle in 1995 (and I left the company a year before that). I haven't worked with the technology since then, 15 years ago.

But if I close my eyes, I can still remember how it used to work. The version I am using is over 10 years old, and it has progressed immensely in the meantime. So I set out yesterday evening, loaded all the data into a data model, and am ready to start analyzing.

If you still know how to operate a tool, after 15 years, it says something about the power of its logic.

Ohhhh... am I having fun. Just like old days.

frank

In this issue we discuss 'business transformation'. Business transformation has many different facets, and we discuss a number of them. Thomas Oestreich looks at the perspective of the CIO, and how IT needs to grow from a supporting function in the value chain, to a force that drives innovation at the core of the business. Kevin Narain, managing partner at European consulting firm INEUM discusses finance transformation, in an excellent article called "Learning the Ropes". If there is one thing we (should have) learned from the economic situation, is that risk and performance management should be transformed to be more integrated, and Brian Gregory describes how to do that. Kathy Horton describes cultural transformation, using two case studies. Dr. Bill Stratton of Dixie State University of Utah takes a wider approach, and expands the idea of business transformation to the complete value chain. Jim Gurowka of the Institute of Management Accountants introduces the idea of a Performance Architecture. Sandeep Banerjie describes the relationship between eliminating IT complexity and business transformation. And as always, Mark Conway provides some interesting pointers for further reading.

It seems to me, looking at all the articles, that business transformation itself has transformed over the years. Gone are the days of reengineering the complete business in a big bang project style. Business transformation today is a series of smaller steps, gradually and in a controlled way leading to a new desired state. Most transformation is driven by the external world, by political, economical, social, technological, environmental and legal change. These external forces change, and it is not always possible to drive them yourself. Agility is the key to successful business transformation. The goal may be clear, the grand vision may still stand, but the way is continuously reevaluated.

Lastly, I'd like to introduce you to my colleague Toby Hatch, who will drive the next phase in the maturity of the Journal of Management Excellence, as the next editor of the Journal. The theme for the next issue will be "creating options". Send your contribution to toby.hatch@oracle.com.

frank

PS. All issues of the Journal can be downloaded here.

It's that time of the year again. Running season. Every year I write in my blog on my jogging efforts. Yesterday I ran the "Singel loop" in the City of Utrecht ("Singel loop" does not translate as "single loop"! Loop = Run, Singel = a canal surrounding a city), a 10km run.

Last year in my blog I used this run as an example of how measurement can tell you anything you want. Last year:
• I improved my personal record for the 10K (great!)
• ... as no. 570 I came in last anyway (hmmm... not so great)
• ... but the system didn't register the people who gave up and never finished (at least I did!)
• I started front row, and came in last, so I must have seen every single runner (social indicator?)

While running yesterday, I found some other examples in running that help understand the subjectiveness of measurement. (Yes, measurement is far from objective!)

Everything is relative
KPIs are used to express one measure of success against a certain base, like revenue per employee. A great way to fluff up your performance. In my case, if I correct my time of 1 hour 16 minutes (1:16) with my overweight, it compares to running 10k in about 1 hour, which is really not bad! Also, it was hot. Does that count for something, comparing performance to other occassions in better circumstances?

Measurement system
I use the Nike+ system that counts every step and sends the data to my iPod. Distance, speed, etc. is based on the average step-size. I reckon the system has about a 7.5% margin of error. So when my measurement system said I did run 10km, I still had 750 meters to go. According my definition of 10 kilometer, I did that in about 1:11, which is nicely on target of what I usually run. And as long as that is the only system of measurement, it is fine as long as the margin of error is consistent. One measures improvement (or not), even if the basis is wrong. So in a sense I did make my target of 1:11, as it was based on a different system of measurement.

Measurement tells you about the person measuring
Measuring a subject itself already causes a change in behavior of the subject. Also, any measurement system shows the hand of the person measuring. Choice of metrics (objectives), or relative position (from where was something measured). For instance, I measured that in the beginning of the run I was mostly overtaken by men. Later on, I measured I was mostly overtaken by women. What does that tell? That on average men run faster than women. But it also tells you something about me. I don't run terribly fast (in fact, I was amongst the last to finish).

Rhythm helps driving performance
I have been writing many times about how quarterly closings are a completely artificial event, that should not impact discounts, etc. The shoemaker charges the same price for fixing your shoes, whether it is March 31st, or April 1st. However, I have noticed there is something to be said for a periodic pace of business. A rhythm helps. I noticed that one song particularly (Eminem - Lose Yourself) kept me going. The rhythm was perfect, it gave me energy and the beat really drove me forward.

Synergy
My time this year was worse than last year, when I ran the race in 1:14. Then again, I didn't train that much, as I have spent most evening and weekend hours on writing on my new book. Ironically enough, the book is on dilemmas. So is this a dilemma? Spending time on writing versus time on training? The book actually argues it is important to find the and/and situation. How can you do both at the same time? Being so energized working on the book that I automatically run more as well? Alas, practice turned out to be different. Time truly has proven to be a constraint. Then again, synergy was achieved, I did come up with the content for this blog while running...

Lastly, measurement is about learning, closing the loop. That means this blog is about learning how to learn, which in terms of Argyris and Schoen is called 'double loop' learning. Another reason why "singelloop" doesn't translate as "single loop"...

frank

The start of the conference couldn't have been better. I check into the hotel, get into the elevator and am standing next to... Henry Mintzberg. He is one of my heroes, his work "Strategy Safari" was one of the best strategy books I've ever read. I was so perplexed I didn't say "hi" or anything. Then again, can the gentleman please have 30 seconds of peace and quiet in the elevator, people are bothering him all the time.

The number of presentations was overwhelming, covering every conceivable management topic. I was happy to see that the conference guide has contact details of all presenters, so we can ask for their papers.

So Pietro, Toby and I showed our work on scenario-based strategy maps in a bit of a different style. Not a formal presentation, but almost a market. We had an 8"-4" board where we attached a number of slides to, and people were wondering around, stopping at stands they thought were interesting. We got good traction, have been busy all the time.

The bookstore was unbelievably big, with a full range of books from most large publishers. Shopped till I dropped!

Oh, and lastly, Henry Mintzberg did a book signing, so I got my autographed copy of his latest book and was even able to give him a signed copy of my book. Silly, but I had to...

frank