A Human-Centered Approach to Enterprise Performance Management
Performance Improvement Perspective
A rapidly growing social network with more than 150 million daily users, Snapchat has been credited with redefining how people share photos and videos. Founded in 2011 as an app for sending disappearing messages, it rebranded itself as Snap, Inc. in September 2016 and simplified its company mission statement to be “a camera company.”
It didn’t take long for Facebook to follow suit. Less than two months later, in its third-quarter 2016 earnings call, CEO Mark Zuckerberg explained that Facebook now sees the camera as the future of how people share. Although Snapchat was never named specifically on the call, it was a clear shot across the bow to the “camera company” and a verbalization of Facebook’s ongoing strategy to launch features that replicate Snapchat’s key technologies: Facebook began testing Snapchat-style camera special effects in October 2016 and its Instagram property recently unveiled Instagram Stories, which are very similar to Snapchat Stories.
This type of technological disruption is affecting far more than consumers’ photo-sharing habits. The landscape for business continues to evolve with innovation, data, technology, talent and global economics driving disruption across all organizations regardless of business sector, size or location. Today’s CEO need look no further than Netflix or Apple for textbook examples of companies that succeeded when the incumbent leader failed to adapt quickly enough.
Unlike evolving technology, global economics and other disruptive forces, operational excellence is something the CEO can control
The speed of change and disruption requires organizations to be more agile, strategic, responsive, nimble and data-driven than ever before. Today’s CEO is in hot pursuit of operational excellence – unlike evolving technology, global economics and other disruptive forces, operational excellence is something the CEO can control. Nevertheless, CEOs, presidents and chairmen across the world frequently cite operational excellence as one of their most critical challenges. In fact, they ranked it No. 4 on both the 2014 and 2015 Conference Board “Top Ten List of Global Challenges.”1
To be successful at operational excellence requires clear alignment between business strategy, performance objectives and organizational capabilities. To further aid this alignment is the enablement of a strong human capital base -- a base that is the foundation for effective leadership, a skilled workforce, highly engaged employees and a performance culture that is reinforced through accountability and measurement.
An increasing number of organizations are looking to achieve this alignment through Enterprise Performance Management (EPM), which allows them to adapt quickly to internal and external factors that are driving their performance.
EPM is a critical connector between strategic objectives and what should be measured in the organization. A formal, structured focus on Enterprise Performance Management allows organizations to connect people, process, data, technology and structure to enable strong performance, grow their top and bottom lines, and create in-year returns. Its focus on value as a key driver of performance, rather than just time or budget, can increase an organization’s capability to be more strategic and align operational processes and talent for successful execution.
It also gets results. According to a “Harvard Business Review” study, best-in-class companies with Enterprise Performance Management systems that linked strategy to outcomes achieved a 2.95 percent higher return on assets and 5.14 percent higher return on equity than companies without EPM.2
According to a “Harvard Business Review” study, best-in-class companies with Enterprise Performance Management systems that link strategy to outcomes achieve a 2.95% higher return on assets and 5.14% higher return on equity than companies without EPM.1
For all of the focus on data, technology, process and structure, make no mistake: Humans are at the center of the success of your organization’s performance. Human capital is the top concern for CEOs, and that concern is only increasing every year. Improving Enterprise Performance Management through a human-centered design allows organizations not only to align operational processes and talent, but also focus on how to increase employee engagement and experiences that will drive them to execute the organization’s strategy. In addition, employees can be more nimble and adaptive as the business environment changes -- and it will change.
- Leadership’s ability to clearly articulate the organization’s vision, business goals and key indicators of success
- A strong culture of change, open communication and individual leadership development
- Strategic planning and alignment are executed as a process, not an event
- A compelling vision that often has a higher purpose
EPM is a process, a way of working, a culture. It requires accountability and transparency into what is being measured. Ultimately it should provide the user at any level of an organization with visibility into the performance of a department or division and the understanding of which key levers to push to affect that performance.
That’s where human-centered design intersects with the EPM equation. Data is designed visually to reveal the strengths, gaps and interdependencies across the organization that are driving performance – for better or worse. Rather than pages and stacks of data or large governance meetings, a human-centric Enterprise Performance Management view keeps the users front and center in order to enable them to respond to data more quickly. It helps build a performance culture through accountability and measurement, upskilling the workforce, and raising employee engagement.
To be successful, a holistic Enterprise Performance Management approach links the “who we are” to the “what do we need to achieve” for an organization. It requires that the organization consider performance through three key views: Strategy, Measurement and Process.
STRATEGY: LINKING VISION, MISSION AND VALUES
The strategic view is an ongoing process of articulating and aligning the organization to the strategy.
The articulation process takes a complex, potentially far-reaching strategy and puts it into the language of organizational-level objectives that critical contributors can understand and connect to. It often involves the development of a top-level strategy map that identifies the strategic objectives that drive execution – providing a one-page view into the linkages between an organization’s mission, vision and values.
The alignment process allows the strategy’s organization-level objectives to be cascaded into the objectives of the most critical resources and processes. To execute the strategy successfully, these objectives, processes and resources must be carefully guarded from “oversteering” reactions to daily crises.
The Human Side:
Having an organizational culture focused on enterprise performance means having a culture of accountability and transparency. It emphasizes the importance of each individual team member and translates strategy into operational terms employees can understand. Effective leadership allows the organization to drive accountability further and further down, empowering employees at every level to act upon the levers that will drive the organization’s strategic objectives. A workforce engaged in the day-to-day care and feeding of the organization will drive better performance and profitability.
MEASUREMENT: ASKING THE RIGHT QUESTIONS
What you measure determines the outcomes you realize. The measurement view is essentially the glue that connects strategic management to operational processes and resources. It provides cause-and-effect linkages and consists of two major components:
- Strategic measures, which “look up” at strategy and reflect the organization’s performance at meeting strategic objectives (such as share growth in new markets or sales from new products). This is often a combination of leading and lagging indicators that can be effectively managed through the use of a balanced scorecard in conjunction with a strategy map.
- Process measures, which “look in” to the organization and reflect the performance of processes that are essential to the tactical execution of strategy, such as new product sales leads or new market unit sales. Although these measures may be very tactical in nature, they are absolutely critical for strategy execution to take place. The ability to properly measure these processes is directly dependent upon the company’s ability to clearly manage them.
Typical measurement tools include balanced scorecards, standard and ad-hoc reporting, and cause-and-effect maps.
Of critical importance is identifying the Key Performance Indicators (KPIs) that are most relevant to your organization. With most KPIs defined by measures from more than one core process, cross-functional consensus is required to ensure that your KPIs are effective. Integrating these KPIs into your daily operations also requires that you take into account considerations related to change management. Today, 44 percent of executives say their metrics in place in their front, middle and back offices either don’t clearly align to the overarching business KPIs or don’t exist at all.1 With an effective EPM approach, the organization abandons the smorgasbord approach of tracking everything, instead focusing on the levers that drive performance.
Most likely, you will not have data for all of the measures that matter, though. Plan to launch with processes in place to manually collect data for key metrics.
The Human Side:
Building a performance culture through accountability and measurement requires ensuring that KPIs are accessible to and digestible by employees at every level of the organization. The human-centered approach ensures that people are able to measure and affect the behaviors that matter most.
PROCESS: TRANSFORMING TO A PROCESS-DRIVEN CULTURE
The process view is truly where the rubber meets the road. If the organization cannot effectively focus and manage those processes that most directly influence the strategy, all the effort in the world will not produce the desired strategic or tactical results. This is the target at which all process management and improvement disciplines must be aimed. There are two primary components:
- Process improvement is the discipline by which a company improves the performance of its strategic processes. Process improvement tools such as Six Sigma or Lean can be applied, and while many of these tools are highly effective for sustaining ongoing improvement in process performance, they cannot be the strategic focus. They are merely tools to support the sustained strategic effort.
- Process management is how a company chooses to manage, measure and develop all strategic processes critical to its execution. Process management is focused, structured, disciplined and constantly under the lens of the management team.
The Human Side:
A human-centered approach creates a flexible process for implementing strategy. Create milestones at which team members look at measurements to guide -- and refine -- the process. Iterative processes involving humans use hard data to drive those iterations.
THE RESULT? STRATEGY AND OPERATIONS IN PERFECT ALIGNMENT
Going by gut feeling is no longer an option in today’s business climate. Organizations that have a transparent Enterprise Performance Management approach clearly linked to company strategy will lead the pack in meeting or exceeding their business goals. Executed effectively in a manner that integrates strategy, measurement and process, EPM can help your organization foster consensus among the executive team and accelerate behavioral and cultural change from top to bottom. By aligning strategic programs with investments and daily operations, it can help distribute ownership and accountability throughout the organization and manage the trade-off between innovation and sustained execution.
For more information, please contact:
Global Organizational Excellence Lead
 “The Conference Board CEO Challenge 2015.” https://www.conference-board.org/ceo-challenge2015/