Enterprise Performance Management "Setting a Strategy" Introduction to EPM Enterprise Performance Management (EPM) can best be described as a methodology and discipline of planning, executing, monitoring, and analyzing an enterprise strategy to achieve confident decision-based value.  Historically, enterprise performance strategies utilized financial reports that were generated from various accounting systems. Today, companies are embracing other internal and external processes outside the accounting system to measure performance.  In 1992, Robert S. Kaplan and David P. Norton introduced a correlated set perspectives from a research project that was published in the Harvard Business Review called, "The Balanced Scorecard: Measures That Drive Performance." In 1996, they detail a Corporate Performance Management Framework in the book; "The Balanced Scorecard",which has been the cornerstone of most adopted Enterprise (Corporate) Performance Management philosophy and methodologies.   This article will provide an overview of important EPM topics, and successful adoption and deployment strategies based on the Balanced Scorecard (BSC), as well as my personal industry experience implementing other EPM methodologies for the Public and Private Sectors.  In essence, I have four basic phases in the EPM lifecycle that will assist in a successful EPM Solution. The four phases I believe to be critical in any EPM solution is the Planning and Execution of the strategy, and Monitoring and Analyzing the Performance of each strategy.  You will find some of the concepts to be redundant, but my spin on the EPM framework is to keep it strategy focused, grouping each phase dependent upon each strategy. The lifecycle of an EPM solution is depicted in the picture to the right.   Balance Scorecard Overview

Anyone interested in adopting an EPM solution must have an understanding of the basic foundation of the Balanced Scorecard by Robert S Kaplan and David P Norton.  Their research indicated that companies would not only value from financial performance indicators, but also by non-financial measurements. These indicators are categorized into four business perspectives with a cause-and-effect relationship. The four perspectives are Learning and Growth, Internal, Customer, and Financial.

Learning and Growth Perspective  The objective is to measure how employees learn and grow within the enterprise. In most cases, it measures the performance of employee training, education, satisfaction, or learning and adapting to new strategy-based decisions. Other performance indicators at this perspective may include employee motivation and overall perception and/or confidence in the overall strategy of the company. Internal Perspective -   The Internal objective concentrates on measuring performance in various internal business processes. Strategic Indicators in this perspective could be the average product delivery times to customers, number of product defects, or prep-time to make a particular dish in a restaurant. In the public sector, it could be the response times (in minutes) to an accident after a 911 call is made, or reducing the number of stray dogs in a particular city.  Customer Perspective - The objective is to measures the customers experience with your company’s products and/or services. Some basic measures would be customer satisfaction, customer retention, and number of new customers. In the government public sector, it could be the tax-payers satisfaction with restroom facilities at a certain park, or particular County or City Manager. Financial Perspective - Measures the overall financial health of the Enterprise. Basic performance measures in this perspective would be profitability (net income), and shareholder value.  The Cause-And-Effect Relationship - Each perspective has a cause-and-effect relationship, and should be looked at from the bottom-up, starting with the learning and growth perspective. For example, training an employee in Six Sigma (Learning and Growth) should decrease the number of product defects (Internal Perspective), which should correlate to an increased number of satisfied customers (Customer Perspective), which should have a direct impact on the financial bottom line (Financial Perspective).  In the public sector it could be increasing the number of training hours to firefighters (Learning and Growth), which would lead to a decrease in response times per day, or number of injuries a month (Internal Perspective), which directly correlates to satisfied tax-payers (Customer Perspective), which could lead to an approved increase in taxes (Financial Perspective).  The following picture articulates the Balanced Scorecard.

Establishing the Roadmap

Establishing an EPM methodology should be strategically planned, and should include assistance from an outside business consulting agency for expertise and facilitation. From my experiences and research, the main reason for failure of this methodology is due to the lack of commitment or involvement from the Executive Management team. As you will notice, the recommended approach involves many strategic sessions, from the CEO, to the individual contributor within the organization.  With that said, it is critical to get the CEO and everyone in the Executive Management team on-board with incorporating an EPM solution.  The CEO and EM team will be responsible for evangelizing the solution to each manager and employee, promote a positive message. Getting the employees involved and excited about a strategy-based system is vital to the overall success. A compensation package for everyone involved should be considered to show loyalty and commitment to the EPM solution, as well rewarding individuals for their involvement.

Direction comes from the top downward

Implementing a successful EPM solution involves everyone in the Enterprise, from the CEO to the line worker polishing the end product.  However, direction and evangelism for the EPM solution must come from the CEO.  His first steps will be to create a Problem, Mission, Vision, and Value Statement for the EPM Solution project.

 Project Problem Statement – The problem statement clearly identifies and articulates the problem that needs to be addressed.  An example would be, "We are unable to determine why we are unable to measure the performance of our decisions."

Project Mission Statement  This Mission statement explains the purpose of the project. An example could be To create a solution that improves the overall well-being of our Employees, Guests, and Environment.

Project Vision Statement  The Vision Statement tends to be a little more concise and provides direction for the project. An example would be to Have the ability to confidently make better decisions through a strategy-based solution, and will result in the increase of net income, reduce operational costs, increase guest satisfaction, and employee commitment

Value Statement  The Value statement is a positive description of how the EPM solution will provide value to each of the four perspectives. One example of a value statement in the Learning and Growth perspective may be To empower and compensate our employees to make strategic decisions that directly impact the overall health of the company.

After the CEO has written down his mission, vision, and value statements, he is ready to get his Executive Management (EM) team on-board.  Several training sessions with the EM team will most likely be needed until they become experts in the framework and methodology.  Now that the CEO and EM team is committed and passionate about the success of the EPM solution, we need to move forward with the planning of the activities. 

Planning Phase

Planning for an EPM solution depends on the size of the Enterprise, as well as the complexity of each strategic performance indicators.  For the sake of brevity, I will provide a high-level plan, with simplistic strategic indicators for a restaurant chain called Shellers. Shellers offer a variety of seafood dishes at an affordable price, with an average price of a dish at Fourteen Dollars.  They also have a spectacular bar that overlooks the bay with live entertainment.  Mike Smith, the CEO and Founder of Shellers, has noticed customer complaints were steadily increasing, specifically in the category of timely food service and delivery.

After attending a half-day seminar discussing the advantages of an Enterprise Performance Management Solution, Mike immediately knew this approach was ideal for his company, and became very passionate about the solution. He immediately approached his Executive Management team about attending the same EPM Seminar the following Month.  After the seminar, all were on-board with adopting an EPM solution and methodology that could help them with monitoring poor guest satisfaction scores in the service and delivery area.  They are ready to plan, and have asked the local EPM solution agency to assist in the facilitation and delivery.

Write the Problem Statement

Mike and his EM team have discussed the problem, and have articulated it by writing the following statement.  We have an increase in Very Dissatisfied guests over the past two months in the services and delivery category from our guest surveys, at all three of our locations.

Write the Goal Statement

The goal statement will be the desired outcome of the problem statement. In this case, the goal statement for SHELLERS is To decrease the number of complaints 70% by the end of the third quarter of the fiscal year or more in the service and delivery category from our guest satisfaction surveys, for all locations.

Schedule Strategy Sessions

Several strategy sessions will need to be held to discover which teams, organizations, and department will be affected in order to achieve the goal statement. Once the sessions have ended, it is time to write the impact statement.

Write the Impact Statement

The impact statement addresses the teams, groups, and departments in the organization that will be affected in achieving the goal statement.  A sample impact statement could be, In order to decrease the number of guest complaints 70% by the end of the third quarter in our service and delivery category from our guest surveys for all locations, Human Resources, Information Technology, Operations, Store Managers and staff will need to be impacted.

After the impact statement has been recorded, other strategy session need to be held with each team, departments, and organization individually (sometimes collectively) to address all the statements and strategize with the outside business consulting team on the best approach the problem, and move forward with achieving the goal.

After several strategy sessions, the outside business consulting company and Sheller’s Executive Management team believe looking at the average ticket times from when an order was placed, to when the food is served, must be investigated. Another outcome was to send out a survey to the cooks and service personnel asking various questions about the service and delivery, and how they would improve the performance. It is believed by empowering the employees to help uncover additional issues that the problem statement addresses, would contribute to the success of the goal statement. Several town-hall meeting were also held to get a bigger picture and address the problem statement in face-to-face intimate meetings at each location to address the problem statement.

Define more Problem Statements for Granularity

The outcome from the town-hall and employee surveys revealed a common theme to the problem, as well as suggestions for improvement.

1.      The cooking staff stated that during peak-times communication between each cooking station was chaotic, causing delays in completed dishes.  

2.      The common theme from the service personnel was waiting on the cooking staff to complete the dishes.      

After reviewing all the problem statements from the Executive Team, Managers and staff at each restaurant location, another strategy session with the Business Consulting and EM team is scheduled to cover all the strategic indicators, and how they relate to each of the four perspectives in the Balanced Scorecard. The consensus from the strategy session is to educate the cook staff in various cooking and preparation workflow procedures. The decision was to have the cooking staff watch a 30 minute video, while referencing a handbook that needed to be signed by each employee for verification purposes.  

Define the Key Strategic Indicators

Now that the strategy has been defined, the BCS team and Sheller’s Executive Management team is ready to schedule a strategic session to decide which strategic indicators will be used in the EPM solution.  The strategic indicators should be quantitative in nature, and must be aligned with a strategic goal. In our scenario, Shellers decided to develop the following key strategic indicators.

1.      Number of Training Manuals Signed by the cooking staff at each location.

2.      Average ticket time from when an order is placed, to when the food arrives at the guest’s table.

3.      Number of complaints in the Service and Delivery category from the guest surveys.

It is worth noting that a good practice at this strategy session would be to create another Mission, Vision, and Value statement for each KPI.       Assigning Goals for each KSI       After the key strategic indictors have been developed during the planning phase, a goal must be aligned with each KSI, along with a schedule.  For Shellers the EM team has decided to align each KSI with the following goal and schedule; 1.      Get 90% of our Cooking Staff sign the training manuals by the end of the third quarter of the fiscal year (March 31st). 2.      Reduce the average ticket times to 9 minutes at the end of the third quarter of the fiscal year (March 31st), for all locations. 3.      Reduce the number of Guest Complaints in the Service and Delivery Category by 30% in the first fiscal quarter (Sept 30th), 50% by the Second Quarter (Dec 31st), and 70% in the third quarter of the planning year (March 31st).      Execution Phase        The executing phase will thoroughly detail how each team, department, group, or organization from the impact statement will carry out the execution of each key strategic indicator.  At this point, we need to schedule an execution strategy session to carry out the plan, and add additional impact statements as needed.  To follow our current scenario, the Executive Management team has assigned the following responsibilities to carry out the execution.        Delegation Statement - A delegation statement will need to be created to describe the roles and responsibilities of each entity in the impact statement.

CEO

The CEO will need to delegate this process to his Executive Management team, but will be the key evangelist in getting all the employees for all the locations on-board with his strategy. It would also be a good idea to decide on a compensation plan each manager and employee will receive for the successful execution of the strategy, after the third fiscal quarter.

Executive Management

The Executive Management Team will likely hold individual sessions with each of their teams, explaining the strategy.

Information Technology

The goal of the Information Technology team is to make sure an appropriate software development plan and procedure is in place to support the new strategy.  If the data from the Point of Sale system is already transformed into a mature data warehouse (data mart) at the Corporate office, it could be as easy as integrating the guest survey and employee training data into the same data mart.

The IT department for Shellers have setup an intranet site to allow the GM of each store to enter the names of the employees that have attended the training session, and have signed the training manuals. They have also setup another intranet site for the managers at each location to enter the guest satisfaction surveys, as well as for the Guest Services department when they are called in.  The IT department has also taken all the mission, vision, goal (KSI), impact, and problem statements and entered them into a database.  The IT development team has created one dashboard that houses several reports to track the progress of the new strategy. They also consulted with the consulting team on the design of the reports.

 Human Resource

Most of the time, HR is responsible for guest services and employee satisfaction. In this case, they will need to make sure the training manuals are sent to the employees at all of the restaurant locations. If an intranet page is not available for the GM at each location to enter the number of signed training manual, they will need to coordinate this effort with IT to make sure all the data is collected.

 Operations

Operations will be responsible for the content in the training manuals, video, and demonstrations that are provided at each location.  They may also be responsible for sending out the material. In our case, the Operations Department created the training manuals, video, and made sure the GM at each location properly provided the demonstrations.

General Managers

The GM at each location is responsible to make sure his assistant managers and cooking staff receive the training. He may also be responsible for entering the names of the employees that have completed the training. In our case, the GM at each location will enter the employee names on the intranet, setup by IT to track the number of employees that have completed the training.

Monitoring Phase

The monitoring phase is one of the most critical phases of implementing a new EPM Solution.  It is important to schedule several follow-up sessions with all dependent, teams, and organization to track the progress of each KSI. It is also ideal to get the employees involved with the follow-up session, and reiterate the compensation package for achieving the goals. As more strategic decisions are made and KSIs are developed, these session will also allow everyone in the company understand what the future goals are for the company.

The visual representation of the reports, and a description of the strategy for each KSI, is important to display to make it understandable to monitor. Below are sample reports created in Microsoft Excel, and approved by the EM team.  It is also worth noting, the EM team for SHELLERS have made it visible to all employees to track the progress at each location. Below is a sample report that can be used to monitor each key strategic indicator.

Analyzing Phase

The analyzing phase of an EPM solution details the process of reviewing all KSIs after the timeline for each goal have been reached.  This strategy session should be concentrated on discussing the current and future state of the strategy and KSI.

Result Statement

A result statement for each KSI should be recorded after the goal timeline has been reached, and must describe the result of the strategy. It should also include a description of the problem and goal statement that was defined earlier for each KSI.  IIt is critical to be as descriptive as possible with each statement, as it will be used to track the history of each KSI. It will also allow new management a look at the state of each KSI, and the ability to quickly understand the strategy from the previous management teams. If the goal has been achieved, a decommission process for each KSI will need to be followed, otherwise it will most likely need to go back through the execution phase. If the outcome from this session is to create a new strategy for a KSI, the existing KSI should be decommissioned, and the new strategy should go through the process of each phase.

Conclusion

Adopting an Enterprise Performance Management Solution allows everyone in the corporation the ability to understand each strategy, as well as future goals. By carefully planning each strategy, the execution of each process will easily be understood and adopted.   You will clearly see the results of each strategy by viewing each report at timely intervals, and discussing the results with everyone within the organization. Incorporating a compensation plan for everyone involved with the EPM will make sure everyone is on-board with the strategy, allowing for accurate results.  By analyzing the results toward the end of each strategy lifecycle, new ideas and thoughts can easily be adopted or decommissioned.  The below picture is the EPM process outlined in this article.

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