The Corporate Performance Management Practitioner

 Greetings.  I just got a email  newsletter from Bill Inmon at http://www.inmoncif.com.

 For those of you not familiar with Mr. Inmon, he is one of the the two gurus of Data Warehousing…Ralph Kimball is the other.

I found Bill’s short email on the history and current state of Data Warehousing as being quite interesting…Certainly, many data warehouses out there have not followed the either Inmon’s or Kimball’s approaches to data modelling, but this is to be expected. In a world of economic scarcity, pressure is put on all of us to deliver something that works…not something that follows textbook theory. That being said, Data warehousing projects are not delivering the value they should, so new approaches, such as DW 2.0 are needed.

The key issue however is not a technical one..it is a matter of changing how businesses use and collect information. The perfect technical platform in an organization that doesnt believe in making decisions based on information is worthless.

___________________________________ 

Dear DW 2.0 Reader

The School of Business (Center for Corporate Education) at Virginia Commonwealth University will host the Bill Inmon DW2.0 Certification Course, March 4 - 6, 2008

Join Bill Inmon at VCU’s Center for Corporate Education in Richmond, Virginia, for a three-day DW2.0 certification course. Become certified and have your name listed on Bill Inmon’s website.

You do not want to miss this class.

Comments from previous attendees:

“The world has needed a redefinition of data warehousing for a long time.”
“Definitely a great eye opener.”
“Some very interesting points were brought up that I hadn’t considered before.”

Click here for more information.

WHY DW2.0?
Data warehousing began in the mid 1980s. By 1990, the first book on data warehousing had been written and seminars were just beginning. Soon thereafter, data marts, operational data stores, descision support systems applications and a whole host of other extensions to the data warehouse began to appear.

At the same time, technology began to appear that made data warehousing commercially viable. There was the extension of DBMS to start to be able to handle very large volumes of data. There was a drop in disk storage prices. There was the advent of new forms of storage such as near line storage. There were the business intelligence vendors. In short, the world of data warehousing went from a theoretical possibility to a burgeoning reality in a few short years.

From a thought leadership perspective, something unusual began to happen. Consulting firms were building data warehouses that really weren’t data warehouses. Some vendors began to talk about real-time data warehouses and active data warehouses when no such thing existed as part of data warehousing. Some conferences that focused on data warehousing held many presentations on solutions that were not data warehousing. In those presentations, the concept of a data warehouse was changed from what a data warehouse really was to a form of data warehousing that was simply not valid. Yet, these non-data warehouse structures were called data warehouses. And, finally, even consultants issued reports that measured the size of data warehouses that included all sorts of databases that were not remotely data warehouses.

In a word, the thought leadership that once had been very clear surrounding data warehouses, turned very murky. People were using any old notion of data warehousing or something resembling data warehousing to sell their products and services - whether the notion was proper or not.

Into this sea of confusion comes DW2.0 - the architecture for the next generation of data warehousing.

Best Regards,

Bill Inmon

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In a great article from BPM Magazine, James Creelman points out that

“The point of any business performance management initiative is to improve decision-making companywide — and so, ultimately, to boost shareholder returns.”

Thank You, James!

CPM is about decision support. All to often, we lose track of that. We also have to realize that numbers and KPIs have their limits. Sometimes the best decisions are based purely on instinct. I am reading a biography of Walt Disney; he went ahead with Disneyland with complete disregard for financial projections. He just knew his Park would be a hit.

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• Each department makes its own plans and reports on its own activities.
• Vision statements become empty slogans on posters, coffee cups or mouse pads.
• Long-term strategic planning is not integrated with the annual budget.
• The preparation of next years budget starts earlier and earlier every year, and is obsolete almost immediately.
• The sales department does not consult with operations when it compiles revenue forecasts.
• Potential investors and the equity markets review financial statements based on Generally Accepted Accounting Procedures (GAAP).
• The operations staff uses reports from the ERP system and supplemental spreadsheets to allocate scarce resources on a �??squeaky wheel gets the grease�?� basis.
• A business analyst uses a Business Intelligence tool to analyze sales data extracted from the ERP system. The sales manager uses a separate spreadsheet to evaluate sales person performance.
• A data warehouse project started a few years ago produces sales reports by product. The reports do not include data from the sales forecasts prepared by the marketing department.
• Each cost center manager gets a monthly income statement. There is no formal process for reviewing these statements.
• The annual budget is prepared using spreadsheet templates sent out to managers by the finance staff. The process is so time consuming that the managers rarely get feedback on their submissions.
• The procurement staff has sent up a supplier certification scorecard, but the suppliers rarely get any feedback on their scores.
• Three of the top five customers have asked for reports tied to their past buying behavior. Each of them have different requirements and are unhappy with the accuracy and timeliness of the spreadsheets they are currently receiving.
• The Information Technology group has very few standard processes or tools to measure project status. Other departments have none.
• Executive Leadership use a “Executive Dashboard” report to track KPIs, but the report is hand assembled, unaudited, and does not tie out to previously published versions of the “Executive Dashboard” or other financial statements. The executive team spends a great deal of time discussing the credibility and value of the data on the report.

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Corporate Performance Management (also known as Business Performance Management, Enterprise Performance Management, or Organizational Performance Management) is the intersection of many different management processes that are not integrated in the vast majority of organizations. There are problems with most of these processes, and the lack of integration makes the problem worse.

 A partial List of Processes:

• Financial Consolidation and Reporting: Based on Generally Accepted Accounting Principles(GAAP) these processes support external decisionmakers, such as Governments and the Capital Markets. These processes must follow the rules set out by the Financial Accounting Standards Board (FASB), the Public Company Accounting Oversight Board (PCAOB), the Securities and Exchange Commission (SEC) and a whole host of other regulators. The purpose of GAAP is to force all reporting businesses to a common framework, based on the core prinicples of Conservatism, Relevance, and Reliablity. Unfortunately, these principles force the assumption that all businesses, or certainly all businesses within an industry, are essentially the same. This of course, is in direct contradiction with the idea that management matters. There is also a focus on tangible assets, such as inventory, machinery, and Land/Buildings. Intangible assets, which really form the key value of the information age company, are given short shrift. There is some key thinking on this in the first Balanced Scorecard book, as well as in academic discussions of the subject. Essentially, the idea here is that investors do not value corporations based on the net book value (Acquistion cost less Accumulated Depreciation) of their assets. They make investment decisions based on future earnings expectations, which are driven in great extent by concepts such as Brand, Intellectual Property, Marketing efforts, and so on. These concepts, by definition, cannot be valued by traditional GAAP.
• Corporate Budgeting and Business Planning: Lets face it. Corporations do a terrible job at making financial plans for the forseeable business future. This in not a new opinion:
• Jack Welch said “The budget is the Bane of Corporate America.”
• Bob Lutz (the current Chairman of General Motors North America, and overall Big 3 automotive executive) said that ”The budget is a tool of repression rather than innovation.”
• The Harvard Business Review says that “Corporate Budgeting Needs to be Fixed” and “Budgeting Kills Companies”.
• Managerial Accounting: Traditional Management Accounting (TMA-My abbreviation) focused on product costing, which was basically an input for Financial Reporting. Product Costs were also used to set pricing and measure effectiveness. Most thinking around traditional product costing was formed in the industrial age. Much of it is obsolete. Before Kaplan became “the founder of the Balanced Scorecard” his focus was on Activity Based Costing and other alternatives to TMA.
• Internal Financial Reporting: Usually an byproduct of external financial reporting, internal financial reporting is based on the General Ledger. The concept of the “cost center” or “responsiblity center” is used to measure performance for a subset of the organization. It is very difficult to get an accurate picture of the effectiveness of a particular manager’s effectiveness,  because by definition, a subset of the whole is dependent on all the other subsets around it.
• Operational Reporting: For the first time, we leave the processes centered in the finance department and move into the reports everyone looks at every day. This is the realm of the business intelligence questions:
• How Many Blue Widgets are in Inventory?
• How Many Blue Widgets have been sold in Kansas?
• How Many Blue Widgets were sold in the same order as Yellow Gadgets?
• What Customers have bought the most?
• Which region has sold the most?
• How are the Sales People Performing?
• Strategic Planning: Every organization devotes time to strategic planning, but who spends time actually executing it?
• Operational Planning: In a world of limited economic resources (scarcity) how do resources get allocated…today, tomorrow, or next week.

The key to CPM is to tie these disparate processes together.

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Here is a great resource on CPM..the personal website of Art Schneiderman. He has some great, very accessible content all over the site, but was particularly impressed by his archive of the earliest Balanced Scorecard initatives at Analog Devices. It is clear that this first BSC evolved from TQM initatives (there is that focus on business process again!). Remember that Kaplan and Norton did not originally focus on the execution of strategy…Kaplan was coming of a number of books and articles where he was questioning how traditional Management  Accounting was failing to meet the needs of Managers. His interests were in TQM, ABC, and so on.

 Make sure you review the Art of Process Management section. Great Articles.

Filed under: Uncategorized, CPM Process Improvement, CPM Theory
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The concept of the business process is well established. Most of us understand real performance management comes from how well processes function, with the only real measure of value coming from how well the customer’s needs are met. Businesses earn above Market Rate of Returns (what microeconomics calls “Economic Profits”) by beating the competition and building profitable relationships. You can argue about the social/economic impact Wal-Mart has on society, but there is no way to argue with their success at managing the processes that directly touch the customer. Amazon changed how we buy books. Toyota changed how cars are made. There are many others: Geico, Starbucks, Home Depot, Dell, Google, etc. All these firms focused on their customer facing processes, and then revolutionized their industries.

I don’t think the CPM world focuses enough on process measurement. Six Sigma, which focuses on how well the process (or project, or product, or initiative) meets the needs of the customer is the one main exception. Strategy Maps and Execution plans need to take into account how well processes are currently working, and the level of performance needed to achieve strategic goals.

Jerry Harbour wrote a great little book on process measurement. It is a must read for anyone interested in CPM. The book has a strong manufacturing focus, but the truths are global. He points out that are only a handful of ways to measure processes:

• Time (How Long Does the Process Take to Process 1 unit of Output?)
• Quality (How closely does the Output match Customer Expectations?)
• Cost (How Much Does 1 unit of Output Cost?)
• Throughput (How many units get processed in a given time measure?)
• Efficiency (How many Input units are used to Create 1 output unit?)

These measurement types form the basis of any kind of process measurement. They are core to Six Sigma, Business Processing Reengineering, Lean, TQM, and all kinds of other business improvement methodologies. They also should be key to any CPM efforts around scorecarding, metric development, and target setting. Do not measure a process with only 1 measure…use several to provide a balanced view of process performance.

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The IMA has put together a list of articles on Performance Management. I am a bit surprised that this great reference list is available to the general public.

Suggested Reading

Filed under: Uncategorized, CPM Process Improvement, CPM Theory
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Four Feckless, Counterproductive Business Approaches to IT

Read the article, and then come back and read my comments..

 I found this to be a very pragmatic discussion of the real world communication gaps between “the business” and “IT”. This article makes a whole lot of sense in light of general IT, but these 4 gaps really apply to CPM and BI. This makes perfect sense, because these areas require very tight alignment between IT and business.

Lets consider each of these common mistakes in context of Corporate Performance Management and Business Intelligence.

No Long Term Plan: Very few organizations have any kind of long term strategy for CPM and BI. The tools are seen as “report writers” and are applied at ad hoc basis to pain points. Have a problem getting information out of SAP? Throw Crystal at it. Have a problem with printing financial statements? Drop it out to a Spreadsheet (and violate every Sarbox rule at the same time). Use Cognos to analyze sales. 

This short term thinking just creates more information silos, not less. It costs more to support and makes life more difficult for everyone. It lowers information quality.

Forcing Projects along..everything is needed ASAP: This feels familiar to the CPM Practioner. I can’t even count the number of times I have seen a report or data mart built as a priority item…and when it is presented to the user a few days later, they forgot they requested it or found an existing report that met their needs.  On the other hand, I have seen IT respond ridiculously slow to even simple requests. Part of the problem is considering BI or CPM as a project, not a lifestyle. These systems are constantly changing, and any IT group supporting one needs to create mechanisms that allow them to respond to user needs quickly. A request for a new report or dashboard should be considered a frequent event…it should not be treated like a full fledged project.

Not knowing what they don’t know: In the article, the author points out that many business people believe they know more about IT then they actually do. I consider this to be a fair assessment, especially in smaller organizations. This can certainly apply to BI….how many end-users have written never ending queries by using point and click data modeling tools?  This can also apply to IT types of course. I have heard the same IT manager comment that he wants a BI tool to prevent certain types of joins…but he also wants the complete ability to type in his own freeform SQL. Doesn’t he realize that a BI tool just sends the query to the database?  Of course, there is some IT types feel a paternalistic need to “protect our users from themselves.” IT goes out of their way to limit what BI endusers can do. In the best case, this forces IT into a situation where they have to respond to the smallest user requests….in the worst case, it causes the business to ignore IT and go off on their own. I once was involved in a project in a large organization’s human resources department. I needed to get some data from Peoplesoft;  it seemed easy enough, since Crystal Reports was on everyones desktop…but the outsourced peoplesoft administration team refused to allow any users to access more than 1 table at a time. What did the users do? They all downloaded every peoplesoft table they needed to their desktop..and built joins within Microsoft Access. Every user had a unsecured, badly working peoplesoft data mart on their machines…complete with the most confidential employee information. Whenever I read about organization’s losing laptops with confidential employee or customer information, I think back to this particular project. There is no way that this stuff should be on a laptop unless this kind of thing is happening.

Blaming IT for project failures

IT takes a great deal of blame, both deserved and undeserved. IT departments probably don’t do a good enough job communicating their value to the rest of the organization; this is especially true of organizations that do not view IT as a strategic weapon. On the other hand, IT groups can be difficult to work with.  I see this particular “approach” as a symptom of other problems. If the first 3 issues are dealt with, than there should not be a need to allocate blame.

Filed under: Uncategorized, Enabling Technology, CPM Theory
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Top 10 Project Pitfalls You Can Avoid

Great Article from Baseline…how many of these issues affect CPM systems? How about all of them?

Filed under: Uncategorized, Enabling Technology, CPM Process Improvement, CPM Theory
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This website, which apparently was created as part of a better government program which is now obsolete, is a great resource. It cuts through CPM hype and delivers about the most realistic portrait what the benefits and obstacles of a working CPM system. Pay Special attention to the Addendums and links. Tons of good stuff.

City of GP - Performance Measurement In Government - City of Grande Prairie, Alberta, Canada, Official Government Web Site

Filed under: Uncategorized, CPM Process Improvement, CPM Theory, CPM Results
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