1 1 BPM Business Performance Management encompasses a core set of processes including ISDS 2001 STUDY GUIDE for Final Exam Objectives After completing Chapter 3 you should know financial and operational planning consolidation and reporting modeling analysis monitoring of KPIs linked to organizational strategy BPM helps organizations translate a unified set of objectives into plans monitor Execution and deliver critical insight to improve financial and operational performance BPM refers to the business processes methodologies metrics and technologies used By enterprises to measure monitor and manage business performance BPM is an enterprise wide strategy that seeks to prevent organizations from Optimizing local business at the expense of overall corporate performance concentrates On enterprise wide view BPM BI Business Intelligence Planning 2 3 4 5 6 7 Closed loop process the BPM cycle links strategy to execution in order to optimize business performance Four steps of the closed looped process are BPM Cycle 1 Strategize Where do we want to go Goals objectives mission values goals objectives incentives and strategy maps 1 Conduct a current situation analysis Reviews the company s current situation and establishes a baseline as well as key trends for financial performance and operational performance 2 Determine the planning horizon The time horizon is determined by the volatility and predictability of the market product life cycles the size of the organization the rate of technological innovation and the capital intensity of the industry The shorter the life cycles the smaller the organization The faster the rate of innovation less capital intensity the shorter the planning horizon 3 Conduct an environmental scan Strengths weaknesses opportunities and threat assessment of the company Identifies and prioritizes key customer market competitor government demographic stakeholder and industry factors that potentially affect the corp 4 Identify critical success factors CSF Delineate those things that an organization must excel at to be successful in its market space product focused company product quality innovation 5 Complete a gap analysis Identify and prioritize the internal strength and weaknesses in an organization s processes structures and technology and applications What the strategy requires and what the organization actually provides 6 Create a strategic vision 7 Develop a business strategy Picture or mental image of what an organization should look like in the future the shift in products and markets Identifies the as is state and the desired state Strategy that is based on the previous steps but is consistent with strategic vision Exploit the strengths take advantage of opportunities address weaknesses and respond to threats Needs to be internally consistent the culture is aligned with the strategy and that resources and capital are available to implement the strategy 8 Identify strategic objectives and goals A strategic objective is a broad statement or general course of action that prescribes targeted directions for an organization Needs to be converted into a well defined goal A strategic goal is a quantification of an objective for a designated period of time Guide operational execution and allow progress to be tracked against overall objectives 2 2 Plan How do we get there Plans to achieve goals budgets plans forecasts models initiatives and targets requires operational and financial planning and budgeting operational planning 1 2 like a project plan that is designed to ensure that an organization s strategy is realized translates an organization s strategic objectives and goals into a set of well defined tactics action steps to bring about expected results for some future time period 3 Can be Tactic centric Budget centric Best practice organization use tactic centric operational planning 3 Monitor How are we doing Monitors actual performance performance dashboards reports analytical tools 1 framework for monitoring performance should address What to monitor How to monitor 4 Act and Adjust What do we need to do differently Corrective action interpretations collaboration assessment decisions acting and adjusting tracking Strategy gap the difference between the current performance of an Organization and the desired performance as described in the mission statements objectives and goals An organization s strategic objectives and key metrics should serve as top down drivers management driven Cybernetic system has 1 Inputs 2 A process for transforming inputs into outputs 3 A standard or benchmark for comparing to the outputs 4 A feedback channel to allow information on variances between the outputs and the standard to be communicated and acted upon The pitfalls of variance analysis positive variances are rarely reviewed for potential opportunities the analysis rarely focuses on assumption underlying the variance patterns bases on many assumptions with no adjustments to the assumptions need to monitor more than actual versus targeted performance The guiding principle of a best practice BPM program is first to eliminate unnecessary work and to focus on objectives Discovery driven planning offers a systematic way to uncover problematic assumptions that otherwise remain unnoticed and unchallenged Remember we discussed in class the case study Discovery Driven Planning The Coffee Wars Three steps 1 Reverse financials financial docs to model how various assumptions in a plan affect one another Determine whether the plan is gaining traction or is at risk 2 Deliverables specification lay out all the costs to deliver a product to a customer represent the allowable cost 3 Assumption checklist a written checklist of each assumption associated with the project deliverables laid out in step 2 is created 15 20 22 23 24 25 26 Results of Hackett s benchmarking indicate that world class companies closely align strategic and tactical plans enabling functional areas to contribute more effectively to overall business goals 27 Performance measurement system is a system that assists managers in tracking the implementations of business strategy by comparing actual results against strategic goals 3 28 29 30 32 33 34 35 36 37 38 39 and objectives performance measurement system can be used as a diagnostic control system An effective performance measurement system should 1 Align top level strategic objectives and bottom level initiatives 2 Identify opportunities in a timely fashion 3 Determine