Setting Strategic Objectives

Even to the uninitiated, one of the easiest analogies to give for Business Performance Management is in the field of sports. If one were to plan on training for a sporting event, say, the Olympics, the ease with which the intent can be stated in a conference room is quite insightful. "We will be a medalist in the 3000m event by 2012". The three components of a well defined strategy is present (a) the domain is qualified - "the 3000m event" (b) the target is quantified - "medalist", meaning one of the top three qualifiers, and (c) the timeframe is defined - in 4 years from today (2012).
Once the strategic intent is crystallized, it is for the strategic planning team to communicate that to the core business functions - sales & marketing, operations and finance. Each of these functions then needs to translate the objectives into what it means for them and communicate that down the chain to the last individual. It is never a one way process. Feedback from various levels goes towards refining and aligning the functional objectives and for setting key performance metrics.
Coming back to our analogy, the intention translates to building the competencies required to deliver the level of performance within a targeted timeframe. This involves physical and psychological dimensions laid out in a well defined training program. But train for what? Is training for the 3000m event any different from training for any other track and field event? An analysis quickly highlights the difference. A participant in the 100m sprint event would train very differently from one in the 3000m event. The 100m event is characterized by an explosive burst of muscular effort that rockets you off the blocks, legs, arms and breathing quickly synchronize into perfection as you power your way down the track in a straight line until the finish. The 3000m event starts without blocks with the runners loosely spread along an arc. The initial pace is hard, but not the same as for the 100m event. What matters here, more than super human strength is stamina and endurance. You have to have a game plan to start with and that needs to be continuously evaluated and altered based on the relative strengths of your co-competitors. The training regime, diet, the cardio-vascular performance, attitude and emotions are designed for optimizing speed and endurance. It is a fine balance between speed and endurance. The current world record for the 3000m event is 7:30:51. Thats just a tad over 2 minutes for each 800m lap. While a 100m sprinter goes about 10 meters per second, a 3000m runner would go at a slower, but still a blistering average of 6.67m a second just to stay in the reckoning. To be able to attain that level of performance requires a careful selection of athletes, a body condition analysis that quantifies the necessary parameters for setting training targets and a regimented and sustained training program. It requires discipline, committment and staying power to remain on the program, and even among the selected few, there will be dropouts. What you acheive at the end of it is a capability tuned for peak performance for a specific event.
Even for those with no sports background, the sequence and buildup is easy to visualize. However, when translated to the domain of business, things begin to fall apart unless there are specialized disciplinces that help with the initial assessment, selection and the subsequent execution. Without such expertise, managers tend to slide into preset indivdualized behaviour patterns and optimize within a narrow functional scope that is generally retrogade and becomes an impediment to acheiving organizational objectives. BPM champions have to be carefully selected before planning for a BPM initiative can commence.

Sensitization

I had been following the developments with regard to the oil price hike starting with the meeting of the political affairs committee, the briefing by the finance ministry followed by the press conference by the minister for Petroleum, the reaction of the industry and stock markets and finally, the almost apologetic address to the nation by the Prime Minister justifying the hike. While one can question the need for a government to meddle in the price of a commodity, it will remain a reality in India for the forseeable future. Though inflationary, the price hike and the related reduction in customs and excise duties was unavoidable given India's dependence on imports. These are challenging times for the governments economic advisors.

For some industries, the alarm bells had already started ringing since the weekend with the 10% hike in the price of aviation fuel. This following a 14% hike in ATF in Apr has made the airlines scramble for cost cutting measures and creation of secondary revenue streams like the proposed charge for check-in baggage.

The precipitous rise in commodity prices during the past few months have already sent many other industries into a tizzy in an attempt to balance competitive pressures and high input costs. The bottomline is that the world as we knew it is changing dramatically. The foundations of tried and tested business models that have withstood the boom and bust cycles of the industrial era and even adapted to the changes of the information age are again being challenged in unprecedented ways. One of the toughest transitions that most managements have to make is the one from calendar based planning to event based planning, requiring higher and higher levels of flexibility in processes and systems. The task appears daunting and only about 20% of companies worldwide are even aware of the enormity of the challenges ahead.

So what should companies do to sensitize and adapt the organization for the changes ahead?

For starters, strategy needs to move down from the boardrooms and executive councils to the frontlines of the organizations. Increasing the level of strategic awareness across the board and then aligning individual, team, departmental and business unit goals to the strategic objectives are the first steps that would prepare the organization for change. A typical BPM initiative would start with a strategy audit that drives the first stake in the ground from which all progress would be measured. This sensitization or creating awareness and aligning the organization is a critical aspect of change management, and more important than the subsequent activities of selection and implementing a BPM system to support performance management.

Introduction

The acronym BPM is often mistaken, especially by those in the IT industry, to mean Business Process Management. So it is often more prudent to use the alternatives such as CPM (Corporate Performance Management) or EPM (Enterprise Performance Management) to distinguish it. However, the two are often used interchangeably by a majority of business managers due to its association with metrics.

Consider the definition: Business Performance Management (BPM) is a management culture that aids enterprises in optimising business performance through the analysis of business processes and the provision of forecasting tools and performance analysis. This appears to imply that business performance management software would provide a suite of tools necessary to collect and analyse data generated by the organizations business processes. Is that right?

Here is another from Wikipedia: Business Performance Management (BPM) is a set of processes that help organizations optimize their business performance. It goes on to say that it is a framework for organizing, automating and analyzing business methodologies, metrics, processes and systems that drive business performance.

So is it a management culture, a set of processes or a framework?

BPM forum puts it in a clearer perspective by stating that advancing performance accountability across the organization is one of the most pressing strategic imperatives and topics of concern in executive office suites, boardrooms, regulatory groups and financial institutions.

So Business Performance Management is the practice of enabling organizations to translate strategies into plans, monitor execution and provide insight into improving financial and operational performance. Given the emerging spotlight on environmental practices and corporate social responsibility (CSR), the scope of Business Performance Management enlarges to accountability for financial performance, environmental practices and CSR - now commonly referred to as the "triple bottom line".