Analytics-Based Performance Management



Enterprise Performance Management from C-Suite Future Diaries

What might C-level executives write in their diaries in the future? My crystal ball is crystal clear. Seven years from now in 2023 here are the personal diary entries of the executives of a fictitious corporation reflecting on their experience implementing enterprise performance management (EPM) methods.  As you’ll see, the last diary entry written by the CEO is the most surprising.

Vice-President, Sales
Dear Diary of Sales Commissions,

Recalling 2016, I did not believe our CFO’s claim that some of our long-term customers were very unprofitable for us. That is until I saw the facts in her customer profitability reports. Also, I could not believe that our customer with the highest sales volume was much less profitable than many of our midsize customers. But then she proved that all the costs for the extra work we work did for that No. 1 customer substantially dragged down our profit. When the CEO and CFO ganged up on me to change our sales force’s commissions and bonuses to also include targets for customer profits, I thought they had flipped out. Everyone knew the name of the game was to increase market share and sales growth. Now I realize the goal is growing sales profitably – what we call smart growth. You live and learn.

Vice-President, Operations
Dear Diary of Chaos,

I remember back in 2016 when my solution to reducing the cost of our dysfunctional operations was to attempt to standardize processes. But as the years progressed, I realized that our research and development organization was increasingly tailoring differentiated products and services to each customer segment – and accordingly they kept micro-segmenting our customer base and future sales prospects! These customized services grew into a huge tsunami wave that the standardization of processes could not overcome. Now I am thankful we shifted our efforts towards attaining much higher forecasting accuracy. The better our forecasts became, the less uncertainty we experienced – and the better our scheduling and capacity planning. What was I thinking back then in 2016?

Vice-President, Marketing
Dear Diary of Spray-and-Pray Advertising,

My MBA marketing courses taught me the current fads of the time: Put your money into branding, spend heavily entertaining your largest customers, and use gimmicks to retain existing customers and acquire new ones. But then fortunately I discovered the secret to maximizing the yield the money we spent was by better understanding the unique preferences of our individual customers then targeting new customers with similar traits to our most economically valuable customers. My big “ah-ha” was when I saw how powerful analytics, such as statistics, correlation, regression, segmentation, clustering, forecasts – could provide us better answers.  At first I feared that the administrative cost and effort to collect, understand, and apply all the necessary data would be galactic and that I would have to replace my street-smart marketing staff with PhD geeks. But then I saw my team gain competency in precision targeting of their marketing campaigns and optimizing deals, offers, discounts, and service levels based on the new insights and intelligence we gained about our customers and their unique traits and preferences.

Vice-President, Human Resources
Dear Diary of Employee Turnover,

My staff and I reminisced today about how proficient we were back in 2016 processing paperwork for exiting employees and stacking inbound resumes in piles. I am so glad those days are over. The big breakthrough in our mindset was when we seriously applied workforce analytics to retain employees by predicting which employees were most likely to next quit so we could optionally intervene to prevent them from resigning. We can also now hire new employees that truly match our current and future needs as well as our culture. Now my challenge is growing our employees’ brains to accelerate their pace to innovate.

Chief Financial Officer (CFO)
Dear Diary of Jail Prevention and Bean-Counting,

When we built our second cafeteria in 2016 just for the on-site external auditors, I thought then that any aspiration for me to actually help improve our business would be consumed with a life of compliance and governance duties to satisfy the external government regulators and the investment community. Thank you, thank you, thank you for the software systems that have made those responsibilities just a minor part-time job. I now recall my excitement these past years to use my freed-up time in a much more value-adding way to help our work force and executives make better decisions and improve our profit performance. My team has helped implement a strategy map with its associated balanced scorecard and KPIs for strategy execution. We use activity-based costing (ABC) to produce a profit and loss statement for each customer. We abandoned the annual budget and now produce monthly capacity-sensitive driver-based rolling financial forecasts taking only an hour, not days. Thank you software.   

Chief Information Officer (CIO)
Dear Diary of Spreadsheet-itis,

I still laugh about the prior CIO I replaced in 2016, who was fired when our business nearly collapsed from the week that all of our spreadsheets converged into an infinite closed loop system. All our laptops kept endlessly calculating and calculating. No new data could be input or information reported. Our company logo could have been replaced with the hourglass symbol. Exclusive dependence on spreadsheets is an addiction. They are OK in moderation but not in excess. I resolved our obsession with business intelligence and business analytics systems. I wish I could laugh today about the dwindling size of my IT department – all the line and staff departments now do what we used to do for them. I guess buggy-whip makers somehow found new careers. I’ll survive.         

Chief Executive Officer (CEO)
Dear Diary of Relentless Pressure,

My fellow CEOs in 2016 dreamed that boards of directors would return to those ceremonial jobs for which you just showed up at quarterly board meetings to pick up your director’s check. In contrast, my board was an activist one in 2016. I vividly recall trying to turn around my sagging business by training everyone with Six Sigma quality and lean management techniques. With hindsight, I am glad I shifted our attention to strategy execution and our culture to embrace KPI measurements with accountability. Those strategy maps, scorecards, dashboards, and other enterprise performance management systems saved my tail. I realize now that Six Sigma and lean management programs, though relevant, are limited in that they only teach employees how to think, but our strategy management methods and enabling software technologies taught us where to think. Better yet, they gave us the focus, traction, torque and yield regarding what actions to take to continually optimize to dynamic change. My next challenge? Grow the analytic skills and capabilities of my employees. I hope my VP of human resources is thinking about that, too.  

With perfect hindsight, these 2023 diary entries could be true ones. With imperfect foresight, these C-suite executives would probably have far less successful accomplishments to write in their diary. To sustain long-term success, an embrace of the full vision of seamlessly integrated analytics-based enterprise performance management (EPM) methods is not an option – it is essential.