He stresses that although performance management provides insights to improve all three choices, its power is in achieving number three - winning by adjusting and executing strategies. Performance management does this by aiding managers to sense `earlier' and respond quicker to uncertain changes.

Help from IT

Organisations are jumping from improvement programme to programme, hoping that each one may provide that big, yet, elusive competitive edge. Most managers, however, will acknowledge that pulling one lever for improvement rarely results in a substantial change - particularly a long-term sustained change. You cannot simply implement an improvement programme and exclude the other programmes and initiatives. The key for sustained and effective improvement is in integrating and balancing multiple improvement methodologies - this is where CPM comes in.

CPM interconnects business needs such as customer relationship management (CRM), supply chain management and human capital management (which is much more than just a personnel and payroll system) to provide an enterprise-wide view of the employee, the customer and the supplier for co-ordinated execution of strategy. Here, commercial software plays an important enabling role to deliver such a view in a closed-loop process. It enables strategic planning, budgeting, forecasting, balanced scorecards, costing, financial consolidations, reporting, and analysis across the enterprise - key elements of CPM. Leading vendors of statistics-supported analytics and business intelligence (BI) provide the necessary powerful forecasting and analytical tools.

CPM is an ongoing process and is about sense-and-respond balancing — striving for better organisational direction, traction, and speed. It involves linking software, such as business intelligence analytics, with core processes enhanced by improvement initiatives (e.g., Six Sigma) to prioritise efforts and align an organisation's activities with its corporate strategy.

Jagdish Ramaswamy, General Manager, Mission Quality, Wipro, says Six Sigma is the precursor to CPM. Six Sigma ensures that efficient processes and systems are in place within the company. These can then be assigned Key Performance Indicators (KPIs) to derive the company's Balance Score Card — which is a pre-requisite to CPM.

Scorecards and maps

Is CPM linked to individual employee performance? For this, Copkins says, it would be proper to delve into a bit of work activities and concept of strategy maps and balance scorecards and their link to CPM. Work activities pursue actions and projects essential to meet the objectives constructed in strategy maps and the outcome is measured in scorecards.

Here, strategy maps are like geographical maps that visually aid in understanding how one gets from A (the present capability, organisation, and focus of the enterprise) to destination B (the future) as laid out in the enterprise vision, mission, and strategy plan. Scorecards are like a "cockpit" for managers and employee teams to navigate and steer. The scorecard's critical role is to place the measures (KPIs of employees/managers/CXO) in the context of the strategy. The context elevates this methodology well above management by objectives (MBO) and spreadsheet performance reports.

"Scorecards without strategy maps may lead to failure. When scorecards are built and reported in isolation there is no direct linkage to strategy. Once created, they embody the strategic intent of the organisation and communicate to allthe strategic objectives the organisation intends to meet as well as the critical measures of success for attaining those objectives. They then keep the organisation on track as part of performance management'' he says.

Here's how CPM is linked to employee performance: CPM combines the strategic frameworks, such as the Strategic Maps and Balanced Scorecard, with intelligent software systems that span the enterprise to provide immediate feedback, in terms of `alerts' to deviations from plans. CPM allowsmanagers and employee teams to act proactively, before events occur, or proceed so far that they demand a reaction. It ensures optimal employee performance for successful implementation of strategy across the organisation.

Atul Takle, Vice-President, Corporate Communication, Tata Consultancy Services, feels the environment is a trigger. When organisations are operating globally, it is necessary to look at where one is headed to ensure maximum benefits. Wipro is another organisation that is implementing CPM.

Negatives associated with performance measurement systems? ``At the outset, there are no negatives with CPM systems. Put another way, in the absence of CPM, with the relentless pressure to perform, it is difficult for executives across functions to answer questions critical for survival and growth,'' says Copkins. .

Copkins says that the managers' dilemma is they cannot get answers to critical questions from their transaction-based operational systems. Critical questions include: "How can we foster innovation without losing control? How do we identify and retain our more profitable customers? How do I reduce my budget without sacrificing service or quality levels?" These questions aren't new. What is new is the pressure to get the accurate answers from increasingly complex and interdependent processes and from diverse software packages, legacy systems, and incompatible computing platforms. Their execution systems are adequate for processing and fulfilling an order, but not for telling them where to improve or what to change.

Enterprise resource planning systems (ERP) have become popular as a tool to fulfil orders and plan for future orders, but although ERP provides some cross-functional visibility of operations, ERP tools are not designed for analytical modelling that is central to managing performance. Another challenge is how well the executive management has communicated its strategy. Most employees and managers, if asked to describe their organisation's strategy, cannot adequately articulate it. That is, many employees are without a clue as to what their organisation's strategy is.

CPM can close this gap. After all, employees can effectively implement a strategy only when they clearly `see' how they contribute to its achievement. It also supports the concept of scorecards which helps employees and managers answer: "How am I doing on what is important?"

Mindset must change

Other challenges? Foremost, CPM demands a complete change in the mindset from traditional existing ways to implement strategy and measure its success. Even with a change in mindset, a key challenge is that CPM requires business users to agree on intangible issues (such as the process changes to be implemented or the performance management methodologies to be used) in addition to selecting applications. Most enterprises find it difficult to address these intangible issues and, as a result, may miss some of the benefits that early CPM adopters are already realising.

Further, over-ambitious projects or unrealistic expectations can make CPM fail. "CPM is not a magic wand. Successful enterprises will identify the key business pain points as the starting point, but build a long-term CPM road map to identify how short-term initiatives fit into the overall strategy", Copkins says. Why is it important for companies in India to go for CPM and what would be the benefits? "There is a principle in physics that says Nature abhors a vacuum and drives to fill it. Similarly, with economic theory, investment capital eventually flows to investment opportunities with the best returns because investors want to maximise their personal profits. A company's management has the responsibility to identify the best investment and spending opportunities to realise and secure the capital's growth. Prioritising projects and programmes becomes a critical task for management,'' he says.

Picture by S. Siva Saravanan

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