What is business performance management really about? Ultimately it’s about business success, and providing the information to make the decisions that increase that success, now and into the future. Performance management is about three specific things. Firstly, it’s about monitoring your business’ actual progress toward the outcomes (and targets) implied by your business strategy. If one of those outcomes is to increase customer loyalty, then it’s about monitoring how much customer loyalty you have as time goes by (such as the average number of orders per customer per quarter), and comparing this actual level of customer loyalty with the targeted level (say 20 orders per customer per quarter).
Secondly, business performance management is about knowing which of your initiatives or projects are working and not working in making those outcomes happen. If you have an initiative around developing a customer relationship management system to improve customer loyalty, then you would expect to see that customer loyalty increases the more the customer relationship management system is implemented and used. If you don’t see a change in customer loyalty despite implementing customer relationship management, then how can you say the system was working? You can’t. Thirdly, business performance management is about knowing why those things are working or not working so you can choose better things to do, or fix the things you are doing. Perhaps the customer relationship management system isn’t impacting customer loyalty because customers are already happy with their relationships with you, but just feel your products or services aren’t as relevant as they expected.
This description of business performance management suggests several specific questions are important in managing a business so it’s success improves.
Have we achieved our target? We monitor business performance so we can know when we are actually performing at the level we need to, or want to, perform at. Targets are the description of the “need to” or “want to”.
Are we progressing toward our target? Rather than just waiting to the end of the year, or the date we wanted to achieve the target by, monitoring continuously throughout that timeframe gives us more power to influence the end result.
Are their any unintended consequences of our actions? Chaos theory, the butterfly effect, and system thinking all tell us that there will always be some kind of flow-on effect from our actions. These flow-on effects can be anywhere from small and insignificant, to shockingly dramatic.
Why are we getting the results we are getting? This is a question that is seeking information about reasons. Of all the possible reasons that you are getting a particular performance result, which reasons are the main ones, those that have most of the impact? If you are getting a good result, then knowing these reasons helps you confirm what to celebrate and keep doing more of. If you are getting a bad result, then knowing these reasons helps you modify your course of action to turn the result around.
What is likely to happen in the future? Predictive information is some of the most valuable information in business. While no information can really do the crystal ball thing, a really good understanding of drivers (or lead indicators) can certainly give some great clues about likely future results. Thus, you can prepare for the most likely outcomes, before they happen.