19 Mar How Well Are Companies Measuring Business Performance?
It seems hard to believe that anything to do with data, content management and business performance management could be 20-years-old. But it is. To mark the 20th anniversary of the Balanced Scorecard, the Advanced Performance Institute and Actuate carried out a survey of over 3000 companies worldwide to find out how well they did at measuring and managing their business performance.
Business Performance Management, Actuate
Tools may have changed over the years — there may be new versions of performance management reporting tools like Microsoft Excel or PowerPoint and new technologies like analytics and big data displayed on increasingly sophisticated and popular dashboards — but the measurement basics behind these technologies remain the same.
Before looking at what the report, appropriately entitled 20 Years of Measuring and Managing Business Performance: From KPIs and Dashboards to Performance Analytics and Big Data, has found, just a few words about Actuate to put it in perspective.
Actuate is founder and co-leader of Eclipse BIRT (Business Intelligence and Reporting Tools) open source project — BIRT being a development environment for data visualizations and an integral part of Actuate products. Current offerings include the BIRT suite, the Performance Scorecard application that embeds BIRT wherever users need it and the Xenos Enterprise Server that transforms legacy documents and data into BIRT friendly formats.
So Actuate, as you can see, has considerable interest in business performance management, which points to the kind of things that Actuate may have wanted to find out through its research with the Advanced Performance Institute, a company specializing in researching organizational performance adding its experience in the field.
Business Performance Survey
The research findings are the result of 3083 responses to a survey sent to companies all over the world — broken down as follows:
- North America (32%)
- Europe (41%)
- Australia (7%)
- Africa (6%)
- Middle East (3%)
- South America (3%)
The companies involved ranged from SMBs to big multinationals, with companies of more than 5000 employees making up the majority of respondents.
Asked as to whether they had a performance management measurement strategy the responses broke down as follows:
- Little or no performance data (5%)
- Sporadic and ad hoc data collection (15%)
- Collect data but get limited insights (12%)
- Collect and report performance data in order to produce reports or dashboards (36%)
The striking fact here is that 20 percent of companies don’t collect performance data, or use relatively primitive tools, putting them 20 years behind their competitors.
At the other end of scale are the 11 percent of companies that collect data in a coordinated fashion, leading to improved operational and business efficiencies and decision making.
What Business Performance Tools are Used?
The most common tools used by enterprises to assess performance are Key Performance Indicators (KPI), with two thirds of company’s surveyed saying they use KPIs.
However, a deeper look at the figures indicate that the two-thirds figure is actually even higher, as some respondents state that they use tools like dashboards, benchmarking or Balanced Scorecards, instead of KPIs — although most require KPIs anyway.
But there are other tools being used too:
- Mission and vision statements: Responses show that these are used by over half of the companies surveyed.
- Management dashboards (also referred to as Executive Dashboards): These were popular across a large number of companies and the fourth most used tools in the survey.
- Lean management and Six Sigma: Lean management or Six Sigma is used by just under half of the companies.
- Benchmarking: Benchmarking also proved popular, with 41 percent of those surveyed stating that they use benchmarking. This sits well with lean management approaches where benchmarking its used to identify improvement targets.
- The Balanced Scorecard (BSC): Used by 38 percent of companies, the finding is in line with other similar approaches into performance management. The survey also found that this is an increasingly popular tool that is only beginning to create traction.
- Reward and recognition systems: These are used by just over one third of all companies.
- Rolling forecasts: Again, one third of companies have used these in combination with their original forecasts to measure progress and apply new insights.
- Enterprise risk management: Of the companies surveyed, 20 percent use risk management as a tool to manage performance.
Another interesting fact — it is very common for enterprises to use a number of tools to manage performance with some, for example, that are using KPIs also using benchmarking and dashboards. Two-thirds of the companies surveyed use three tools or more and just under half of them use five tools or more.
What Do Businesses Monitor?
But what is it that companies are measuring? Not surprisingly, the most commonly measured indicator for all businesses was the financial performance. However, if public service or government is taken out of the equation, then the figure for financial performance measurement is 100 percent. After that, the table goes as follows:
- Operational performance (75%)
- Customer performance (69%),
- Employee performance (68%)
- Send sales and marketing (53%)
At the lower end of the scale, the survey found that enterprises were also using these tools to measure IT performance, business culture and leadership, social responsibility and environmental performance.
Business Performance Management Maturity
Another important element that was examined in the survey was the level of satisfaction that companies derive from their efforts to manage performance. The survey identified seven factors that were considered the most important elements of a mature business performance management model.
1. Buy-in and ownership of Business Performance Management
The most effective implementations are those that are have been accepted across the entire business. This is achieved by providing and communicating reasons why management performance products should be used across the enterprise. This survey showed about 50 percent of enterprises have witnessed top-down buy-ins with little buy-in at the grass roots.
2. Internal and Voluntary
The most successful implementations are those that are introduced voluntarily by companies that are looking to improve their decision making and to generate better business insights. The survey showed that about one third of companies did this voluntarily, while a further third saw it as a means of reporting upwards to demonstrate performance.
3. Strategic — Operational Alignment
Many enterprises are struggling to align their strategic with their operational metrics. This creates a disconnect between operational and strategic management and priorities. In addition, those enterprises that only use KPIs to measure performance got the lowest level results and benefits but, when aligned with Strategy Maps or Mission and Vision, they get the most out of them.
4. Traditional Performance Measurement and Analytics
Those that combined KPIs with Balanced Scorecards and business intelligence and analytics generate more benefits in the form of richer and more comprehensive insights. This also ensures a more real-time view of performance.
5. Measuring and Managing the Future
In order to get the most of performance management, it needs to be measuring the future quarters rather than the previous ones. One third of companies in the survey are assessing the past without looking at performance enhancing objectives. Only 11 percent see their focus as mainly real time.
6. Data Quality
The most sophisticated companies have a well-governed data quality management process that enables them monitor data quality across the enterprise. Nearly half of those surveyed said that they had reactive quality management.
7. Dedicated Technology
Like other surveys, this one found that 61 percent of the companies surveyed use Office tools like Excel or PowerPoint to report on and analyze performance. Twelve percent use dashboard software, 15 percent use Business Intelligence or analysis software and only 10 percent use integrated performance management and analytics software.