Nearly every CFO I’ve spoken with lately acknowledges taking a very different posture with respect to spending and investing. Most have radically slashed O&M budgets and have cut deeply into their CapEx plans to accommodate today’s anemic growth levels. All companies, however, would admit to taking a more conservative posture with respect to any spending that looks even the least bit discretionary.

So where does (or should) EPM investment fall in this mix? Does it belong in the same category as infrastructure investments that are of obvious high benefit but long term in nature? Should it be viewed as

“nice to have”, to be done in periods of excess profits and reinvestment? Or is it something more critical to the companies ability to generate value, or more importantly, manage risk in the environment we find ourselves sitting in

For those pondering the same questions, here are a few of my perspectives on why EPM should not only stay on the priority list, but perhaps rise to the very top in terms of executive time and mindspace.

1. Value Realization from EXISTING projects-
For years, all of our companies have had improvement initiative after improvement initiative, program after program, project after project. We’ve all seen the value cases, and we’ve all become used to seeing many of these projects receive accolades for being completed on time and under budget, only to generate a fraction of the promised value/ savings promised. Putting the right EPM process in place will immediately force project sponsors to tie improvement initiatives to clear impacts on your KPI’s. Once that is done, and you can see the landscape of what is really generating value, you are now in a position to defer (or kill) projects that are not accretive to immediate returns, and start “ringing the cash register” on the the ones that do. Sure, this will have generate long and sustained impact on the culture and a new way of thinking across the enterprise. But it is something that is not too difficult to do with the right process and tools, and something that can and will have immediate and significant impact.

2. Compliance with today’s risk/ performance controls-
Starting with SOxley and today’s new transparency mandates, and looking forward at IFRS requirements, CFO’s and other Company Officers will be on the proverbial “hot seat” for the forseeable future. Unfortunately, the seat only gets “hotter” with further declines and more market uncertainty, just at a time when the cost of adding new controls becomes unbearable. Finding new and less costly ways to achieve compliance is paramount in resolving this inherent conflict.

3. Lowering Administrative Costs-
The cost of management and budget reporting is increasing at a record pace, which is believed by many to be unsustainable. Furthermore, the manual manner through which much of this is coordinated, has decreased the reliability of the information produced. While “cloud” computing has a sexy new connotation today, most CFO’sand CIO’s would agree that without a clear architecture, the current web of worksheets, source systems and partial BI layers is unsustainable. EPM focus will begin to clear up this picture by quickly establishing the right architecture (and foundation) on which this will ultimately sit.

Those are three of potentially many arguements for moving faster and moving NOW on EPM as a strategic thrust of the business in 2009. But even more compelling reinforcement for this assertion comes from some recently published benchmarks. According to a recent study on the value of performance management, world class EPM companies are consistently generating 2.4 times the equity returns of peer companies, a potential lifeboat for a company facing tougher and tougher economic times. These same companies have 20-30 less volitility in profits, and more significant operating returns overall.

But here’s the kicker for why you want to do this now rather than later. The very same companies that are achieving the above gains, are also  doing so at roughly 1/2 the cost for performance reporting and performance management business functions. And they are radically reducing budget complexity and improving information access to end users rather than traditional reporting middle-men. And another nice benefit- a 40% higher reliability in forcasting. Best of all is that when this is in place, the company becomes better able to model and forecast more dynamically, a practice where speed and flexibility are life saving in down/ unpredictible markets.

EPM investments are sometimes significant depending on the end state you want to achieve and your relative starting point. And while the EPM journey of best practice companies can take between 4 and 7 years to achieve full scale competence, results can begin materializing in months. In fact, many would say the first 6-12 months are most vital in creating awareness and a catalyst for real cultural change, with sizable gains occuring all along the way.

Bottom line: EPM can and will add immediate value, mitigate current risks, and save on adminiatrative and budgeting cost in coming years. Starting the EPM journey during a dark time like this may not be the most intuitive answer you want to hear. But starting a journey at night is sometimes the best answer.

Lately, it seems that Enterprise Performance Management (EPM as it is now referred) is getting a lot of press in the global network of business professionals and is quickly becoming a heavily used “buzz phrase” in IT and Operating circles. But let’s face it – neither Performance Management nor its new sexier relative EPM, really represents anything fundamentally new or earth shattering. Or does it?

For starters, let’s acknowledge that in any management discipline, the number of “official definitions” often exceeds the number of practitioners that dominate the implementation space for the associated services. One might conclude that I am merely a lone voice among many with some strong views on what EPM really means. But those of you who know me, know that won’t stop me from wading in with my not-so-humble view of the world…certainly not in a discipline where I’ve spent the better part of 20 years.

With that caveat in mind, let me say that what EPM means to the discipline of Performance Measurement is similar in magnitude to what Information Technology meant to the evolution of Data Processing, and what Enterprise Risk Management meant to the age old function of corporate “insurance buying.” However, it is likely that at the outset of each of these journeys, the practitioners thought that the distinction was much more subtle than it ended up being. In fact, in both of these areas, the end state has evolved well past what anyone would have envisioned only a few years ago.

With that as a backdrop, let’s do a little bit of retrospection and “crystal balling” on the evolution of EPM, from its origins in performance measurement, to the pervasive impact that it can have on business results. For many of us, the Performance Management journey began with some basic steps to raise awareness of what was important to measure, and took strides to measure it. Some still struggle with these very basics. Others have taken this to a broader level of transparency and accountability, integrating these values into all company processes. Others have pushed the envelope and taken EPM to what we call a “pervasive” level in the business, characterized by a universal cultural receptivity to the values of accountability, transparency and “line of sight” integration with day to day business processes.

In the end though, there are three fundamental factors that influence a company’s ability to move along this continuum, and it is these factors that should dominate the agendas of companies desiring EPM excellence:

1. Uniformity and Consistency of Approach
The problem at most companies is NOT the lack of KPI’s, or the failure to provide reports, or the lack of a balanced scorecard or even a corporate dashboard. I have yet to work for a client that didn’t have each of these core attributes in place at some level of the business. The problem is that these pieces of the puzzle remain scattered across various levels and layers of the business. With the exception of a corporate dashboard or balanced scorecard which likely exists at the Enterprise level (at least covering the top output measures), the application of the process is often heavily inconsistent between business units, and especially at lower levels of the business where the results of measurement are much more actionable. The good news here is that most of the important “parts” of the process already exist. But without the integration of the components into a cohesive architecture, you are unlikely to get any of the possible enterprise synergies demonstrated by more advanced EPM companies. EXPECT TO SPEND 15-20% OF YOUR EFFORT HERE!

2. Cultural Competence
For many, the words “culture” and “competence” in the same breath show up like “oil and water.” But it is important to highlight the need for both. Clearly, leaders in EPM space have a “data driven” culture – a fact-based process for measuring, validating, analyzing, improving and controlling key parts of business. But having a process is one thing, and being able to execute is another. I like to say that leaders go through a process of development for any major new skill or behavior – starting with awareness, and progressing through openness, acceptance, competence, and mastery. Any organization right of Stage 3 EPM will point to its Leadership as their reason for success. And it’s not just what they say and what they declare, but often the ability of leadership (which often extends 2-3 layers down to the top 100-300 managers) to demonstrate the behaviors required of a performance driven operating model. EXPECT TO SPEND THE VAST MAJORITY OF YOUR EFFORT HERE – 50-60%.

3. Emphasize the CAPTURE of Value
Ok – before you say it or think it, I acknowledge this sounds pretty basic. Who DOESN’T do this – right? Well before you go too far down that path, how often does your organization ask its project managers and sponsors to account for the VALUE produced by their investments? I’m not talking about if the project was done on time or on budget, but rather if the investment produced the outcome that was projected during its cost/benefit analysis and justification stage. Surprisingly, less than 10% of our clients do this to the level of their own satisfaction. This is by far the greatest value of an EPM process and should be the #1 measure of your future EPM success as a company. In my eyes, it is what distinguishes EPM from our traditional roots of performance measurement and tracking. Linking measures to what we do on a day to day basis, and then retrospectively assessing our day actions against those measures is the essence of the “closed loop” EPM process that we espouse so often. EXPECT TO SPEND 30-40% OF YOUR EFFORT HERE.

Maybe these factors seem simple or trite on the surface. Or maybe they represent challenges that have been elusive in the past. But no matter how elusive, trite or otherwise mundane they appear to be, they represent the biggest roadblocks in the type of EPM journey I laid out at the outset of this post.

You may also find it odd that nowhere on the above list appears the words technology, and conventional terms like dashboard and scorecard only appear in passing. In a way, that should amplify the point (particularly to those in the IT client and vendor community) that EPM is NOT about the technology, much like Risk Management is not about buying insurance and IT is no longer about just Data Processing. EPM has become a central part of MANAGING STRATEGY inside of a closed-loop framework of objectives, measures, investments and implementation.

By: Bob Champagne,
VP- Performance Optimization Solutions at UMS Group

As we wind down the final days of 2008, I thought I’d take the opportunity to summarize some of my observations from what I believe to be one of the most pivotal years in the evolution of Performance Management as a discipline.

Despite all of the macro-economic turmoil (volatility of commodity costs, loss of customer growth, credit market collapses, loss of equity values, et al), there were in fact some bright spots in how we “manage” our companies, and our ability to drive gains in efficiency, effectiveness, and overall value delivered to customers. While this may not be of much short term consolation to those in the C-Suite who have had to watch profits and shareholder value diminish because of largely non forecasted and uncontrollable market forces, there will soon be a time where the value of “performance” related gains become more noticeable and significant.
History has shown that while all companies experience pain during heavy market corrections, those who survive are often those who are able to “weather the storm”. They are most often those who have found a way to expand and contract their business “on a dime”, who know what efficiency buttons they can push and which ones they can’t, and who can manage the margin effectively between business survival and business failure.

More importantly, these are not lessons we learn in a time of crisis, but rather the result of embedded processes, skills, and culture that have been established over time. That is why I believe that the improvements we have made in our performance management processes are so significant. Many of these gains may not even show up on our 2008 and 2009 P&L’s due to the overwhelming impact of other uncontrollable forces on today’s business results. But rest assured, that when the dust does settle, it will be these very processes, skills, and competencies that will have allowed those that have survived to do so unscathed.

So, with that as my humble (and somewhat depressing) attempt at a “backdrop”, here’s my take on where these gains in Performance Management were most notable, and why I believe this year was so pivotal for the discipline:

1. Increased Visibility/ Accountability for Enterprise Performance- Just a few short years ago, it was hard to find someone in the organization with true responsibility and accountability for driving “Enterprise Performance”. Of course, all of our companies have had budget analysts, financial planners, business intelligence managers, etc. with responsibility for providing management reports and information. And most of us have also had HR, OD, and Change Management functions with responsibility for facilitating changes in business process or culture. But few of our companies have had executive level accountability for driving PM processes, skills and culture throughout the enterprise. This changed significantly in 2008.

While still mostly in the minority, we are now seeing senior management (often Officer level individuals) with responsibility for driving Enterprise Performance, much like we saw emerge over the years with IT, Internal Auditing, Safety, Asset Management, and most recently Enterprise Risk. Don’t get me wrong- I am not for proliferation and expansion of our management layers, but something very real does happen when executive level leadership and visibility is brought to bear on a key business priority.

Of those I consider to be true “best practice” organizations in the discipline of Enterprise Performance Management (EPM), 100% claim executive sponsorship, leadership and demonstrated commitment in the C-Suite as the most significant factor in their success. The fact that we are now seeing this level of visibility emerge in the industry, not only as a role, but as part of senior management/ executive career paths, is one of the most notable changes we’ve seen in 2008.

2. EPM as an Integrated Business Process- Even with the right leadership visibility, EPM can still hit major roadblocks if the focus strays from being a core business process, to being a single function or task in the chain. Until recently, anything resembling a Performance Management department at our companies usually had accountability for a single activity like producing monthly management reports or implementing components of a business intelligence solution. Even today, I could point you to companies where, despite the elaborate title of “Enterprise Performance Management”, and the token executive or senior manager who runs it, it remains nothing more than a glorified benchmarking or industrial tourism function.

But this is changing for the better. We are now seeing companies who see EPM as not one business function, but rather a set of functions that together make up an integrated process. I won’t go into detail here on each component (will save for future posts), but suffice it to say that there are four critical components to the process- Indication, Analysis, Insight, Action (what we’ve termed (IA^2). Things like reporting, benchmarking, data gathering, best practices research each make up a critical part of the process, but by themselves generate little value.

The fact that we are now seeing companies (albeit, again, the minority) take accountability for more broadly defining this process is encouraging. Again I point back to functions like Risk Management (that used to connote the activity of insurance buying”) that today is responsible for managing a full suite of risks, many of which were unknown to the business only a few years ago. Process versus activity/ business function: a simple, yet big distinction that is starting to differentiate winners in EPM space.

3. Technology as an Enabler- A Novel Concept?
Certainly a novel concept, but one that few actually embrace. I must admit that watching the consolidation occur between the SAP’s, Oracle’s, and IBM’s of the world, and their recently acquired business intelligence and reporting/ performance management products/companies (the Hyperion’s, Cognos’, Business Objects’, Pilot Software, and the like) was nothing short of painful to witness over the course of the year. At the beginning of 2008, I had the unfortunate opportunity during a software selection process for a client, to witness a presentation by one of the IT monoliths (who will remain nameless to protect the innocent) in which they were asked to demonstrate their Performance Management application. Not only was the integration between the various products unclear, but it was actually hard for the vendor to discern which of its products actually served the EPM application needs. It was the epitome of integrating their company “on the fly”, with a result that left all of our collective “heads spinning” (and the emperor (vendor) with no clothes (almost literally)!).

Well, all joking aside, the year unfolded quite differently than most of us expected. I am not sure whether it was the IT shops getting their integration act together, clients better articulating what they needed (and more importantly what the didn’t need), companies becoming more operationally versus IT centric, or a combination of all three. But we are definitely leaving 2008 with a lot more clarity than when we entered it.

We entered 2008 with over 20 EPM applications, and each of the large IT shops with at least one of these applications that they were (unsuccessfully) struggling to integrate into their suite, for the main purpose of growing their footprint within their key client organizations. We are leaving 2008 with 2-3 clear frontrunners, and the major IT vendors much more willing to fill the niche client need and less focused on owning the “whole enchilada”- a major step forward in a relatively short amount of time.

4. Forward versus Backward Looking:
What’s more important- leading or lagging indicators? This question has probably caused more debate than any other question among key EPM stakeholders and executives in 2008. And although it is an interesting question, the answer of which may appear to be somewhat “Holy Grail-ish” to the EPM managers out there, much of the debate was pretty wasteful and unnecessary.
Well, of course BOTH are necessary, we all say. The world is not black or whit.- We all know that, right?. Yet the conversations seemed to want to sway all the way to “why do we care about what’s happened in the past?” end of the spectrum. Amazing how our tendency is to abandon the old, and adopt the new, without asking the obvious questions. What is the right balance between leading or lagging? When should I use each? Is there a difference in what information each of those types of indicators provide? 2008 began to reveal some insight into this, largely because of the coincidence of the market uncertainty that was dropped on all of our laps.

Clearly, we cannot abandon the lagging indicators. They are necessary for gauging what worked and what didn’t within each of our strategies. They tell us (albeit retrospectively) when we veer off course. And lagging indicators often help us learn about what caused these deviations. But even those indicators that may appear to the naked eye to be “leading” (ergo, the alarm in an airplane cockpit) ,are really only the manifestation of some lagging event. So for starters, I think we can all rest easy that lagging indicators and report cards, while they may not pass the “new new thing” test, certainly will remain the core of our management reporting and scorecards.

But 2008 also told us that leading indicators were both necessary and vital. And more importantly, 2008 told us WHY that was. The role of leading indicators is to help us predict things that we have some ability to control or better react to. For example, a decline in number of building permits may indicate a future drop off in electricity demand long before it is visible in consumption results. These indicators can help us make changes more quickly, and often more deliberately, than we would otherwise be able to, be those staffing changes, modifications to production planning, changes in commodity contract strategy, etc.

In short, lagging indicators help us monitor our progress, gauge our success, and provide cues into necessary course corrections. Leading indicators, on the other hand, are warning signs- over the horizon indicators if you will, that help you see what isn’t immediately apparent on the surface. 2 different measures, 2 different purposes, and often best to keep them separated in 2 conversations.

All of those distinctions notwithstanding, 2008 has shown us a sharp increase in companies that are focused on adding leading indicators into their mix of performance measures, and yielded some good ideas as to what some of them might look like.

5. Changes in how we communicate:
The final observation I have about 2008 as it relates to performance management, is how we communicate ABOUT performance. OK, this may seem a bit trite, as almost every management book I know talks about the importance of communication in managing the business. What they don’t talk about is what TYPE of communication we are talking about.

Over the years, all of have experienced what I will term wasteful and often unnecessary communication with our colleagues, employees, and upper management. So much so that some of us remember the “standing” meetings where the entire meeting was conducted standing up so as to encourage brevity.

2008 revealed a number of success stories where companies were able to use performance data and analysis to “cut through the noise”, as one of my clients put it. “When conversations are oriented around performance data, they tend to be less wasteful, to the point, and more actionable”.

In fact, the words “Performance Management” in some communities relates to the “performance appraisal” process specifically, and is considered an HR process, revolving around how those conversations are conducted, managed, documented, etc. So it is only fitting that the more holistic process of EPM reinforces that by bringing data, analysis and expanded insights to the table to make those conversations more productive and less wasteful.

But 2008 also showed us companies that have successfully expanded performance conversations to exist in cross functional settings. For example, using performance data to spark debate and dialog BETWEEN groups of stakeholders, where each one drives a major part of a business outcome. While sometimes more difficult to manage and facilitate, the dynamic generated by these forums is proving to be quite healthy.

We are also seeing companies become more successful in how they broadcast performance results. And NO, this does not mean more technology. Not that technology is bad, but it does sometimes slow down the speed with which more creative and higher impact solutions can be generated. More of my clients are displaying their top KPI results on simple posters around their lobbies, hallways, and workspaces- displaying a unified set of performance results that have replaced the unwieldy display of excel charts and data dumps that previously laced the corridors. Some have gotten real creative, going for the high traffic areas- kitchens, water coolers, and my favorite, commode-ications (the process of hanging performance results on the backs of bathroom stalls- a guaranteed read!).

Others have brought their operational results to the inside covers of their annual reports, complementing their financial ratios with evidence of their successes, failures, and objectives for the coming year- information the shareholders are starting to find more valuable as financial information becomes more and more routine and sometimes non differentiable to the eyes of an average shareholder.

So once again, as Performance Managers, we leave the year better than we found it, perhaps more so in 2008 than in previous years. And that is a testament to our hard work and commitment to keeping the discipline moving forward in a high value adding manner.

Still, we have challenges in 2009. Some of them will be larger than our challenges to date, if for no other reason than the traps that many of them will lead us toward. So where should our focus be in the year ahead?

– We must automate our data streams and simplify the data gathering processes without becoming slaves to the availability of technology and speed (or lack thereof) with which it can be implemented.

– We must push our managers and employees to get more aggressive with their target setting without losing the gains we have made in management buy in and commitment.

– We must proactively address gaps in our business culture and create an environment of individual accountability without losing the collaboration we gained through our stronger communication and cross functional teaming

– We must continue to focus our measurement on the indicators that matter, without losing the comprehensiveness and completeness of our measurement framework

– We must continue to deliver real value to the business in our roles as Performance Managers and Executives, while avoiding the temptation to increase EPM costs and infrastructure beyond its capacity to sustainably deliver strong ROI

With that, we draw an official end to 2008. I wish each of you all the best as you pursue your 2009 objectives, and address many of the above business challenges. And I look forward helping you meet these challenges though sharing the experiences and best practices that we continue to amass through our work in EPM around the globe.

As always you can find our most up to date thinking on our website (http://www.umsgroup.com/enterpriseperformancemanagement/ ) and on my personal blog at http://pmdaily.blogspot.com , or contact me directly at 973-335-3555 or through the LinkedIn Network at http://www.linkedin.com/in/bobchampagne

Happy Holidays!

As is typical in any installation of an enterprise- wide Performance Management framework, managers and employees often balk at the volume of measures and data that represented by the selected KPI’s for the business.

Such was the case for me in a recent project that spanned 6 major business areas, from Energy Supply to Delivery, and also included all of the company’s administrative, customer, and infrastructure support areas. In total, the number of KPI’s selected were just over 100 and represented both “level 1” indicators (business unit goals and top level result areas) and “level2” indicators representing a suite of KPI’s that reflected the individual performance of each area (roughly 4-6 each). For the client, that appeared to be an overly heavy dose of data and information to absorb.

In part, the client is right, this is a lot of information, being that each metric will require numerous data elements to assemble, and further complicated by how many different ways the client will want to view the data (by business unit, component, region, etc.). So yes, this is a lot of data. But is it too much?

As with most questions like this, there are a few dimensions to the answer.

1. First is the question of sheer volume. As a matter of comparison, there are clients of mine that started with a single business unit that had over 1400 KPI’s, and others that started with only 5-10 at the entire company level. Yes, 1400 is too many (and to call them KEY Performance Indicators is clearly a stretch). And yes, 10 for the entire enterprise is too few. But by sheer numbers, 100 would fall on the lower end of the spectrum, yet broad enough to be representative of the business in general.
2. Second, is the architectural aspect of the measurement framework. We are not talking 100 metrics to be consumed in “one sitting”, but something designed to be managed by a collection of individual managers- in this case between 30 and 50 managers depending on the level of management. Any good balanced scorecard will have a “line of sight” or pyramid aspect to the architecture, typically flowing from the mission to the key result areas, to the supporting objectives, and finally to KPI’s and metrics. So the question of “too many” or “too few” really depends on what level we are talking about. At the key outcome level, 100 would be ridiculously high, and at the KPI level it would be just as ridiculously low.
3. Third is what I will call the soundness or “sniff test” element- the question of whether there is unnecessary duplicity, redundancy or inconsistency in the universe of measures selected. The test I apply here is what I call “complete and discrete”. For each area being measured, does the set of KPI’s adequately measure (80% or more) of what the function or process is there to produce? and are each of the measures somewhat mutually exclusive (i.e. not redundant)?
4. Finally, the test of relevancy does have to come into play. This one is tricky because you need to strike a balance between being relevant to everyone and relevant to a particular process owner. Often, you may elect to include a few measures that are in the proverbial “grey area” so as to not disenfranchise a key business unit leader or process manager. Sometimes, a judgment call

Using these three tests, we would normally conclude that the 100 measures selected would be reasonably appropriate given the size of the enterprise and breadth of business units at play.

Here’s an analogy to consider. Think about a football coach who meets with the team at halftime of the big game. The most significant outcome is whether they are winning or losing. On the surface that is what really counts. Keeping it simple, one might also be able to add in some evaluation of offence, defense and special team’s performance. 4 measures that in total pretty much tell the story. Simple enough right?

But is this enough to drive a real understanding of what is really going on in the game? Not really. As the team breaks out into their individual units, simply telling them that they had 150 yards of total offence reveals little if anything in terms of what needs to change. With just that information, the conversations would be very short and somewhat pointless in terms of managing performance.

That is why offense, for example is often broken down into metrics like number of first downs, time of possession, yards per carry, number of “touches” per key player, etc…So extrapolating out, there may be 2-3 dozen measures for an 11 man football team required to effectively manage a 60 minute contest.

My point to you is this: It’s ok to aspire to simplicity. We all want to keep the message simple and not confuse the troops. But let’s also remember that we are managing a business that does have some complexity to it. We are often talking several thousand employees and a business strategy that transcends many years. While 100 metrics may sound daunting to a company at first, it is really just scratching the surface in terms of the volume of drivers and levers at play in a comprehensive EPM framework.

The true test of whether the volume of measures is right is how it stacks up against the tests outlined above, and how well your overall framework holds together.

That notwithstanding, some good rules of thumb to follow for an enterprise with multiple business units:

– 2 to 3 broad business goals (usually things like revenue, growth, profit, etc.),

– 5 to 6 outcome areas (perspectives that need to be managed, like Financial, Customer, Operations, etc…)

– 2to 3 objectives within each outcome area (e.g. Customer satisfaction, Customer retention, etc.),

– and a collection (usually more than 1 and less than 5) measures (whatever is necessary) to adequately reflect performance of each objective in a meaningful way.

This is certainly not a hard and fast rule, but should give you some parameters to go by.

I’ll admit up front that the title of this post may be a bit misleading. But it does point to an age old problem in implementing a Balanced Scorecard…specifically, how companies respond to a critical choice point encountered in designing the scorecard itself.

One of the most important choices companies encounter during the very early stages of scorecard design and architecture is the decision of whether or not to “cascade” KPI’s and to what level of detail.

The temptation of many is to cascade to the n’th degree, and build what I call the “never ending tree structure”…one that allows companies to keep breaking down measures and indicators until they can’t break them down any more. In fact, some software applications actually encourage this process by building this “tree structure” orientation into the administrative interface itself.

In a weird sort of way, this is a self perpetuating prophesy. Software designers and some users are by their very nature analytic thinkers. You know the type- the kind of people who over intellectualize every problem they encounter. The ones who prefer to model and analyze everything they encounter, right down to their spouses if they would let them. And believe it or not, society needs these people. CSI agents, NASA scientists, golf or baseball swing coaches- all of these are great career choices for the hyper analytic crowd. But if its great performance management and business excellence you crave- stand clear!

What you want is enough “breakdown” analysis to make your objectives relevant to the managers and employees that accountable for driving positive change, but little or no more than that. Usually that means 2-3 levels tops, with maybe a level or two of trending where necessary. But just because your system or IT solution will enable you to go down 10 levels ( “pointing and clicking” on every bar chart data element until the cows come home) doesn’t mean you should build that into your enterprise performance management solution. And just because you may need that level of detail for a custom report for one of your corporate CSI-type analysts to do his job, doesn’t mean it should be a central design principal in your performance management process and supporting application.

Here are a few tips when faced with the IT capability of “cascading to your hearts content”:

1. The level to which you drill down should be no more than 2-3 levels from your highest level business objective- any more will begin to lose that critical “line of sight” I’ve discussed in previous posts.
2. The lowest level KPI or business metric you select should be both measurable and MANAGEABLE- For example, you can drill all the way down to the tire or lug nut on the truck in your delivery fleet, but that level is rarely anyone’s key accountability and hence may not be as “manageable” as you may think. And if by chance it is, then make it part of another context, or another scorecard, related to that specific business function- not part of your enterprise scorecard.
3. Every KPI should be tied to one or more high impact initiatives designed to drive business improvement, with the total # of strategic initiatives across all KPI’s less than 20-30. Beyond that, the organization will begin to lose critical focus
4. Keep your scorecard layout simple and easy to understand, avoiding complicated multidimensional analytic graphics or causality relationships- leave these for the custom panels or your analytic core
5. Make EVERY view in your scorecard something that your CEO and Board COULD understand if they saw it. That’s not to say they would typically view those screens, but they should be able to make a mental connection to something they care about.

In short, don’t let your software capability drive your EPM process, but rather let your EPM process drive your software. After all, its called EPM for a reason. Said another way, if God had intended the ultimate in hyper analytic solutions for your EPM process, it would probably be called something like Micro Analytic Performance Management- maybe a cool solution for the BI crowd, but not something that should be top of mind for your management team.