Driving Business Performance

What should be on your dashboard?

If driving best business performance is your objective, Key Performance Indicators (KPIs) are a very useful way to focus attention on what really matters.

Your IT can help you in three ways:

1. Efficiently collect information required to calculate the KPI
2. Report the KPI, plus drill-down to further analysis, explanation and exceptions
3. Deliver these reports on a timely basis to people who need it, be it on a desktop, laptop or mobile device. Dashboards are a popular method.

But the IT is only a tool. It’s what you do with it that counts. And in this case, what are the right KPIs for your business?

In financial reporting, the term KPI tends to be used for key results such as revenue and profit. But the origin of the term is quite different. The idea is that KPIs are just that – key indicators of performance. Not just what has been achieved financially, but what's driving that achievement.

Firstly what drives business success? These are the business’s “Critical Success Factors”. Secondly how can the CFSs  be sensibly measured? These indicators can be both financial and non-financial, and can be termed Key Performance Drivers (KPDs).

Let’s take the example of an airline. If planes leave on time, then:

• Customers will be pleased, will want to use that airline again out of preference, and will recommend it to others
• Staff rostering, cleaning, catering and other aspects of the business can run efficiently, at minimum cost.

So a Critical Success Factor for an airline is that planes should leave on time. How that is measured is the KPD. Perhaps the percentage of planes leaving on time, say within 15 minutes late. Plus explanations for any leaving more than that time limit. By reporting daily, and perhaps more frequently, action can then be taken by management on a timely basis.

It’s therefore useful to think of KPIs in two main groups:

1. KPIs such as revenue and profit, which are the results reported on a periodic basis such as weekly or monthly
2. “Key Performance Drivers” (KPDs), often non-financial, which reflect what is happening in the business on a much more frequent basis. Management can then take timely action

By focusing on a restricted number of KPDs, which reflect the Critical Success Factors, management attention can be focused on what really matters. The IT tools can then make data collection and KPD reporting both practical and valuable.

In many businesses, a common complaint from management is that they get too much information. KPIs and KPDs provide the focus to allow reporting packs to be trimmed right down.

If you are not getting the right level of management information you need, when and how you want it, isn't it time this was reviewed?

A fresh and independent pair of eyes can make all the difference. Do call Chris Challis on 01628 632914 to discuss.

Management Reporting - Improving Analysis

Garbage in, garbage out. Management reports are only as good as the quality of the underlying data, especially in terms of any analysis.

In this article I've written for the ICAEW IT Faculty, here are some tips to improve the quality of information entered.

Taking your Tablet for Dashboards

Dashboards have become an important way of providing information to senior and junior management. Properly constructed they can focus on what is key to each person to support timely decision-making, by including both results and drivers.

This article written for the IT Faculty of the ICAEW looks at the opportunities to provide dashboards on tablets such as the iPad. Would such an approach better serve your colleagues?

Forecasting and Performance Analysis - Alternative Systems

Forward planning and performance monitoring are both important management functions for any business or organisation.  This is true at any time, but especially when finance is being raised or banking facilities need to be monitored.

Budgeting and forecasting is a regular activity for most organisations, together with variance analysis against actuals.

But all too often these processes are using systems which are difficult to use and maintain. In many organisations they are the most ineffective practices in management. They take everyone too much time.

In this article I've written for the IT Faculty of the ICAEW, here are some tips for how alternative systems can help, and what to look out for.

Performance Management – Will Your Business Fly?

Business performance management usually refers to managing the performance of an existing business. But the first step with a new business is to assess whether it will fly!

Further down the track, market changes may mean performance has dropped and action needs to be taken. How should it continue? Or there’s the opportunity to start a new business. Again will it fly?

Many new businesses quickly come to grief, or fall well short of expectations. Usually this is because [...read more...]

What's Driving Revenue, Costs and Cash Flow?

At the end of each period, you look at your business results and hopefully admire the revenue, the margin and the net profit. You may even look at the balance sheet, especially if your bankers are interested in key ratios.

But maybe there's a problem with a result, and you need to fix it. What’s driving these figures? [...read more...]

Garbage In, Garbage Out

Management information needs to be timely, relevant, clear and reliable.

Relevant and clear comes from the design of what information is presented in what way. Timely comes from ensuring that the information process is efficient and cost-effective.

But none of this is worth anything unless the information is reliable. [...read more...]

Designing Business Metrics

When designing the metrics which you will use to monitor and control your business, it’s important to ensure they drive appropriate behaviour.

This is especially important with any metric with one figure being divided by another.

For example it is important [...read more...]

Multi-Dimensional Forecasting and Reporting

You sell 60 products across 25 countries. In one country you have 5 salespeople. Fairly modest numbers – there could be thousands of products and many more salespeople.

Now you want to forecast sales, cost of sales and gross profit by month. [...read more...]

Cost, Revenue and Cash Flow Drivers

Many moons ago I was Head of Finance at Celltech, the biotechnology company. Some R&D costs were project or department-specific, but others were allocated by the number of people in each section.

Then the first manufacturing process started. Initially the same cost basis was used, but this began to produce bizarre decisions, such as [...read more...]

Performance Management - Mind The Gap!

In the last few days it would be understandable to ask the question “How much do Irish customers owe us?”. Back comes the answer £10 million.

Then someone does an analysis by country and discovers that there is £10m for “Ireland” but another £5m for “Eire”. It turns out the validation has been changed, and new customers are now Eire, old customers are still Ireland.

Or perhaps the field isn’t validated, and there’s another £2m for variations like [... read more...]

Using Multi-Dimensional Software Tools

Over the last few weeks we’ve looked at various aspects of multi-dimensional software tools, often referred to as Business Intelligence (BI):

[... read more...]

Strategic Business Planning - Turning Ideas into Reality

So you’ve come up with an idea for a business, within a corporate or independently. This may be into an established market, you may be planning to be disruptive by doing things differently in some way, or you want to market some new technology into a totally new market.

Commercialising technology is always interesting, whether it is what you are selling or what you are using to approach a market differently.

You’ve researched [...read more...]

What Makes a Business Dashboard Good or Bad?

42 is the ultimate answer to the ultimate question, according to Douglas Adams in “The Hitchhiker’s Guide to the Galaxy”. But what is the ultimate question?

Good management reporting provides reliable information on a timely basis, relevant to support management decisions. Getting the right information at the right frequency is key.

Dashboards, at the pinnacle of the reporting pyramid, are no exception: [...read more...]

KPIs – What’s Driving Your Business?

Sit down for your weekly business review and there is likely to be a page or screen full of numbers like revenue, order book and profit.

These are measures of results. But are you measuring what is driving your business? These are the true Key Performance Indicators (KPIs), or better called Key Performance Drivers (KPDs).

Depending on your business, these might be [...read more...]

Business Performance Management - Commentary in less than 140 Characters?

Management reporting can be figures, graphics and gauges. But to bring these figures into perspective, commentary helps. Why? Where? How? to go with the When? and What? of the figures.

It helps to keep the commentary short and succinct for busy readers. One great technique is [...read more...]

Choice in Multi-Dimensional Planning and Reporting

There are a great number of multi-dimensional OLAP (OnLine Analytical Programming) software  tools. These are changing all the time. At Softworld on Tuesday I was talking to various vendors to keep up to date with the leaders.[...read more...]

Forecasting and Reporting with SaaS

Recently I attended a seminar about a cloud SaaS-based planning, budgeting and forecasting system.This has been built by people from a background with leading systems such as Hyperion and Cognos Planning.

Potentially very valuable, for businesses that either can't afford such tools, or want something more flexible.[...read more...]

KPIs – Why? What? Who? When? Where?

Key Performance Indicators (KPIs) is a term that means different things to different people. Here’s a quick roundup:

Why?

When properly used, KPIs can dramatically improve business performance. [...read more...]

Do also see the series of articles on KPIs written last year.

Business Performance Management - Dashboards - Good, Bad or Excel?

The idea of management dashboards, taking the automobile concept into performance management, has been around since the 1970s. Best practice has advanced considerably, not least as technology has provided ever more powerful and cheaper solutions.

But as with anything powerful, the opportunity to do more harm than good is ever present. Cheap tools make it tempting to do a DIY job. That could prove very expensive. [...read more...]

Business Performance Management - How Important Are Multiple Dimensions?

A few years ago a young AIM-listed client asked whether we could build a cash flow forecast model for their business. Their business plan had been to take two years to develop a major product, and in the meantime use two interim products to provide initial cashflow. These products hadn’t sold as well as expected, and further funding was needed.

The audit was imminent, and there needed to be a clear 12 month forecast to allow the auditors to provide a clean audit report. A major issue that was focusing my client directors’ minds somewhat!

We did indeed build a forecasting model. But in the absence of an affordable multi-user system, it was built in Excel. All sorts of issues, but the one to highlight here is trying to cope with multiple dimensions. [...read more...]

Business Performance Management - Forecasting and Reporting

To manage overall business performance you need to establish the metrics that are key to the business, plan them, and then monitor progress of them.

So the value of quotes raised may be critical. Or the activity on your website. Or whatever else is key to your business.

By setting targets, plans can be out in place for the resources and organisation to achieve them. Monitoring performance against targets is a key step towards control. [...read more...]

Performance Management - How Can You Gain From KPIs?

You're in business to make money. You need to make profits. You also need to generate cash. No doubt you monitor and report upon some key results - revenue, gross margin %, bank balance - that sort of thing. You probably call them KPIs (Key Performance Indicators)

But can you control these numbers? Well yes indirectly. But not directly. What you can control directly are [...read more...]

Performance Management - Gauges in Excel Dashboards

Just a reminder that if you've been hunting for gauges to add to your Excel dashboard, then here they are!

There are a wide set of different styles configurable, one of which is as in the diagram.

We've arranged a free trial if you'd like to try the gauges out

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Performance Management – Multi-dimensional BI tools

For those of you familiar with “cubes”, the idea of being able to report on data in any combination of a multitude of dimensions (time, geography, team, etc) is very familiar.

Such analysis is usually carried out by some form of multi-dimensional business intelligence (BI) software tool, usually termed OLAP (OnLine Analytical Processing). [...read more...]

Performance Management - Avoiding Project Failures

Who at a senior level in business doesn't know of an IT project that has failed to provide anticipated benefits, or indeed failed completely? Whether it is a large ERP, a mid-sized CRM or a small accounting system, IT projects have a habit of going wrong.

In the worst cases, the company can go bust (as happened with a botched SAP implementation I know about). In others it's money down the drain, and opportunities lost. But when IT projects go well, the benefits can be enormous.

The line between success and failure is no more [...read more...]

Performance Management – A Cautionary Tale

What’s the point of performance management, if a business is neglecting risk management?

It’s interesting to see news that BP’s Tony Hayward has stepped down as Chief Executive, effective 1 October. This is not just for failing to adequately handle the PR aspects of the spillage in the Gulf of Mexico. But as is becoming increasingly clear, the disaster looks like it was a result of cutting costs to the point of taking unacceptable risks, and management ignoring warnings from staff.[...read more...]

Performance Management - Types of KPIs

Talking to businesses of all sizes, the term “KPIs” means different things to different people.

Yes the letters stand for “Key Performance Indicators”.

But some people just think of them as revenue, profit and other measures of performance. Is that all?

The real power comes when you consider what factors drive business performance, and how [...read more...]

Performance Management - Just fight crime, Theresa May tells police

With huge pressure expected on police budgets, Theresa May the Home Secretary has announced that the last of the previous targets will be dropped to let the police get on with the job.

That’s great, but how can this be reconciled with “If you don’t measure it you can’t manage it”? That’s an important question. Should every business and organization in the land follow suit and drop their KPIs (Key Performance Indicators)? [...read more...]

Performance Management - KPIs and the Brewery Analogy

Yes, that got your attention! But why the association between KPIs and breweries?

KPIs are of two types:

(1) KPDs – Key Performance Drivers
(2) KRMs – Key Results Metrics.

It’s the KPDs that are the real Key Performance “Indicators”, providing information about how well the underlying business processes are running.

Let’s think for the moment of a business as a money-making machine. There are typically a number of [...read more...]