The economic downturn caught most companies off guard, leading many of them to re-examine their business strategies and take decisive action to protect their organisations by cutting and containing costs and driving greater efficiencies.
Signs indicate that the lean times are over, or nearly over, but the world has changed and business needs to change with it. In the aftermath of Enron, Parmalat and other financial scandals, shareholders and legislators are no longer willing to allow executives to pull the wool over their eyes.
Management no longer has the benefit of trust, high pay and bonuses without first delivering the value to warrant the rewards.
"Business performance today is under intense scrutiny from all sides, internally and externally," says David McWilliam, MD of Cognos SA.
"Corporate leaders must take new shareholder, regulatory and social pressures which demand unprecedented levels of transparency of performance into account in every decision."
Under this pressure, weaknesses in entrenched approaches to managing business performance are easy to spot: established processes are inflexible and disconnected; and the associated corporate strategy is not well understood throughout the organisation, with the result that execution suffers.
Worst of all, this non-performance is typically only noticed when the company delivers disappointing results or divisions implode due to Dilbert-style management incompetence - due not to hiring the wrong people, but providing them with inadequate information and instruction. Performance has therefore become the watchword of 21st century business.
McWilliam says the following six points represent the most common challenges business leaders need to overcome if they are to produce the dynamic businesses strategies required to succeed in a performance economy:
1. Predictability: being able to drive expected, sustainable performance outcomes consistently.
2. Visibility: having clear insight into what is affecting performance.
3. Accountability: equipping people with information that lets them effectively take charge of specific performance outcomes.
4. Agility: equipping and empowering them to respond to changing market opportunities.
5. Confidence: managing and making decisions from a common set of numbers and assumptions.
6. Alignment: ensuring that all parts of the business are on-strategy and pulling in the same direction.
"These steps to optimum performance can definitely not be met by a committee or the finance department," McWilliam continues. "They require a company-wide commitment to corporate performance management (CPM) supported by the right enabling technology."
Neither the IT manager nor the financial director will be able to achieve this level of commitment as the scope of CPM includes areas of the business outside both of their spheres of influence. The only way to guarantee success is for the CEO to take control of the process, bringing the whole company along for the ride.
If CPM is not driven from the top with accountability assigned and monitored by the CEO, it will not succeed and an organisation`s performance will remain in the realm of guesswork instead of being transparent and predictable. And it is the ability to effectively predict the outcome of strategic decisions that delivers the openness and accountability demanded in this performance economy.
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