BI Concept: Performance Management

Once upon a time, each Monday the management of a typical business unit huddled around a large stack of reports on green bar computer paper that the data processing department had printed over the weekend. They were trying to figure out from these reports if they had met their sales or profit goals, or some other goal that was critical to themselves and/or to the business.

There is no time for that sort of thing anymore. The paper costs too much (to mention nothing of the trees). And wouldn't you rather have your key people working on improving the business instead of standing around a desk or conference table with their heads in reports?

If you've read elsewhere on this blog, you've come across my PRIME concept of how people relate to data, in short:

They Produce it by capturing, processing, or communicating it.
They Review it, as in a static report.
They Investigate it by drilling, slicing, and dicing.
They Monitor it for changes in data values.
They Extrapolate it to find future opportunities or threats.

The increasing progress toward business intelligence that is more mobile and delivered in real- or near-real time is forcing BI strategists to shift their thinking away from a "Review-oriented" presentation strategy to a "Monitor-oriented" strategy. This means moving from traditional static reports that are updated at regular (but too-slow) intervals to a targeted presentation of the key numbers that will allow a quick assessment of a business' performance, updated as conditions change. This "targeted presentation" is the idea behind performance management.

Performance Management vs. Reporting

Traditional reporting tells you that something happened in the business. It shows you a "bottom line," whether that is income, cash flow, headcounts, etc. It usually has some sort of formal, top-down or aggregate, presentation of the numbers. Traditional reporting often has a "one-size-fits-all" approach, or may have some flexibility to be run by department or region, etc. This may not sound like much, but it's easy to put together if you're familiar with the data and the reporting tool.

Performance management attempts to zero in on why something is happening. Rather than focusing on everything that adds to or subtracts from the bottom line, performance management focuses on those measurements that have the biggest impact on the bottom line. These are often called "metrics" or "key performance indicators" (KPIs). Ideally these metrics are compared against goals so that you can easily see if you are performing well or poorly. This sounds wonderful, but there's a catch: how do you know what's truly a KPI and what isn't? Thus it may take a lot more time (a. k. a. money) to devise a performance management system than to just pump out another profit-and-loss or cash flow report. We'll examine some approaches to performance management in future articles.