VideoKnowing what to change and knowing how to implement change are, to be sure, entirely different propositions. Our interviews identified a number of steps necessary to improve corporate performance management processes after the proper technology has been selected. Chief among them are:
- Identifying the right metrics to monitor
- Overcoming cultural inertia to gain the buy-in of line managers and other non-finance professionals
- Considering process changes before implementing a technology solution
- Demonstrating financial benefits
1. Identifying the Right Metrics
Getting metrics right means knowing which ones to track, making sure they are widely and readily available throughout the organization, and incorporating them into planning activities. Companies also have to determine the right number of measures. If they are too few, managers fly blind. Too many, and managers suffer from information overload, with the result that important details can be obscured or overlooked. "We try to keep them pretty straightforward," says Carl Caputo, finance director for software maker Computer Associates, of the metrics his company follows. "It's very important to us that people at the lowest levels of the organization understand how their performance metrics roll up to the total company, and how what they do affects the total company." Two of the key metrics his firm tracks, at all levels of management, are simple ones: revenue and costs per employee.
Robert Wojciechowicz, CFO for J.P. Morgan Mortgage Capital, a subsidiary of J.P. Morgan Chase, says it is only with ready access to key metrics like these that managers can develop strategies that drive their businesses where they want them to go. "Sometimes you'll hear people say, 'We want to double sales,' " he explains. "Well, that doesn't help anybody." Why? Because it doesn't say anything about what must be done to double sales. "Your metrics need to be very specific, by function, so that when your president says, 'We want to double our sales but we don't want to double our expense base,' you can say, 'Okay, here's how we can do it,' " says Wojciechowicz.
2. Overcoming Cultural Inertia
Getting the "buy-in" of business unit executives and their front-line managers is important for two reasons. One is to ensure they will use the information the system generates. The other is to get their cooperation in entering into the system the raw data on which it feeds (this can speed up budgeting and forecasting and eliminate much of the duplicative work that occurs when finance assumes sole responsibility for those activities).
But it's not always easy to do. Non-financial managers may prefer to receive information in the old format, or may balk at assuming a greater role in the budgeting process. In addition to obvious steps such as clearly communicating what the company wants to do and why, interviewees suggested some ways finance can smooth the path for a new performance management process.
One is to make sure business units and their managers will have access to the metrics they need. According to Rusty Hamner, VP of finance at Bank One's National Enterprise Operations, each business group in his part of the company has helped to develop its own performance "scorecard" — a set of metrics tailored to its business that is updated and reviewed monthly with his finance team. The metrics are available to all employees, both online via their computers, and, for those who don't have access to a computer at work, on "quality boards." According to Hamner, this has given employees visibility into how their work affects business results. "Everyone's working for the same goal."
At Benco Dental, says CFO Ralph Hromisin, "the finance group sat down with all the senior managers one at a time and said, 'Look, if you had your wish list, what type of data would you like to see? Help us challenge this [performance management] system. What kind of drivers would you want to see? What information is important to you on a weekly, monthly, quarterly basis?' " Having gone through that exercise, Hromisin says the company — a privately held $240 million dental products distribution company — is now selecting the 10 or 12 metrics that should be reported to senior management. "As we cascade lower and lower into the organization, the number of metrics we're looking at will expand," he explains. "There may be three or four metrics that flow into one metric that's reported to a senior manager, for example, but to the manager operating his particular piece of the business day-to-day, that probably explodes into many more metrics."
Another way to win the participation of the business units, says Blum of Taubman Centers, is to involve them in the process of selecting and installing the software. As is the case at many companies, the finance group at Taubman Centers had complete responsibility for the budgeting process prior to implementing a new performance management system. Now, Blum says, "We have pushed that down to the operational units." The company was successful in doing so, in part, because finance involved the business units early in the process and solicited their help in selecting the software. Today, the business units feed data directly into the system and keep a closer eye on their actual results versus budget. "It's provided them with a terrific tool to be able to monitor their performance," Blum says, "and to make business decisions based on that."
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