Overcoming the challenges of business performance management

The complexity of modern business structures is challenging companies that want to establish broad-based performance measurement systems. Annette Hieber, sales and marketing director at Altron Group subsidiary, Bytes Business Solutions, looks at how companies can use human resource systems and system integration methods to help them overcome this hurdle.

In many instances, the complexities of modern business structures, often characterised by hierarchical management and departmental formations, are blamed for the failure of companies` efforts to realise returns on their business strategies.

These failures are increasingly centred on the inability of companies to adopt a "balanced scorecard" approach to defining goals and measuring the internal processes central to performance management.

The balanced scorecard model offers a way for companies to gain a wider perspective on their strategic decisions by considering their impact on staff, as well as departmental, divisional and corporate performance.

A balanced scorecard model can help keep e-commerce, supply chain management and other business-focused projects on track.

Central to applying a balanced scorecard model is the need to establish performance benchmarks - the checks and balances that are necessary to measure and quantify success.

These key performance indicators - or KPIs - are necessary to uncover the root needs of the organisation and match them with operational realities.

These needs could include, for example, a minimising of the production/sales cycle time, or reducing the overall cost of processes, or the need to place more emphasis on employee empowerment, mentorship and growth.

From the customer-facing side of the business, there is always a need to increase satisfaction levels and gain more data for use in marketing campaigns.

One of the problems with setting company goals in terms of the balanced scorecard approach is that the KPIs set for company, division or department are seldom in line with the KPIs set for individual staff members.

This might not be true initially - and it is certainly not intentional - but over time the widening gulf between individual and company results in personal KPIs becoming out of sync with the corporate goals.

This has a direct and potentially detrimental impact on company-wide strategies designed to achieve growth and success.

One of the best starting points for redressing this situation is in the human resources (HR) department.

Because the HR department is seen as autonomous within many organisations, there is little or no communication between it and other departments - at least not on issues relating to balanced scorecard implementations.

Dialogue needs to be initiated and encouraged at various levels throughout the organisation.

The key to achieving this is the integration of the disparate software systems within the organisation to bring HR into the mainstream of data flow.

Understanding the unique structures of an organisation is the first step towards setting the performance benchmarks for the individuals, operational cells and the corporate teams with which they are associated.

This understanding is also crucial to the gathering of data necessary for the formulation of business plans and the establishment of business goals.

Significantly, it is also central to the measurement of the progress of individuals and groups towards set objectives - both short and long term. Understanding business needs and then responding to them with positive solutions that integrate all aspects of the organisation in a cost-effective way is the challenge that decision-makers face today.

If this level of integration can be achieved, the setting of company goals will move from being a "top down" only activity orchestrated by the executives to include a "bottom up" approach in which individual staff members have strategic input.

In this way corporate KPIs will, in effect, fuel perpetual systems built into the information infrastructure of the company and they will be able to be monitored continuously.

Top management often fails to turn strategies into action. This is a result of what I call the "ice palace syndrome". Strategies are poorly communicated and the individual`s role in achieving the strategic goals is unclear.

This is when corporate administrative and executive structures become detached from the operational activities of the organisation.

Corporate hierarchies become isolated and operate remotely from the individual and - increasingly - the gulf widens between the company`s goals and the individual`s goals.

There is no doubt that a multiplicity of KPIs - most likely with a significant number of different matrices - are required within an organisation in order to measure its successes (or failures) on a day-by-day basis.

This is crucial if a road map is to be established that points the way forward. However, it is up to the decision-makers to establish the levels to which they will monitor and measure.

Plunge to depths within any department or division and the complexity will rise exponentially.

On the other hand, skim to shallowly over the surface and not enough data will be gathered, rendering the process academic.

The most important aspect of a KPI strategy is the need for solutions that are creative, integrated and practical.

Importantly, a clear understanding of the concept of the balanced scorecard approach to the setting of KPIs upfront will aid in the roll-out of HR applications later.

For example, rolling out an enterprise-wide HR programme should be supported by a complementary balanced scorecard and KPI system.

By integrating the two, the organisation is better able to align its strategic activities to the strategic plan. It permits real deployment and implementation of the strategy on a continuous basis.

Significantly, corporate decision-makers will have a better understanding of the individual`s contribution to overall business success and will be able to obtain the feedback needed to guide its planning efforts in the future.

Although the balanced scorecard can form the foundation for strategic planning, it is not sufficient in isolation. There must be other initiatives, such as business process improvement efforts, to steer the organisation in the right direction and improve efficiencies.

But, as always, it is the level of integration expertise that is brought to bear that will ultimately determine a project`s success or failure.

Pitfalls to be aware of are over-complexity and confusion which will result in any KPI initiative simply "fizzling out". Be weary of a reliance on manual systems - spreadsheet managed balanced scorecard systems are popular hazards - which will not provide the rich data source so necessary for success.