Similarly, Norris of Nissan imagines a digital dashboard that would highlight the automaker's key performance indicators from across the company and afford a look at business dynamics as they unfold. Current systems at Nissan can look through a data warehouse to create reports on, say, profitability by product or market, but this data is largely historical, static, and not forward-looking. And while the company is currently implementing a data-warehouse reporting system for budget data, its next step would be to actually build business plans in a budgeting system; however, says Norris, "we're not quite there yet — we're still living in [Microsoft] Excel."
When asked to design his ideal system, Charles Schwab & Co.'s vice president of finance, Greg Wilson, imagines an executive information system with "drill-down" capabilities. "You'd pull up a screen and the screen would show the most recent data for my top 20 indicators, maybe even closer to 10," he says. "I'd be able to look at any one of those — let's say, its daily average revenue trades — and say, 'Gee, it looks like my trend is down. I wonder why that would be.' Then I could click on that number to drill down to maybe weekly data, or maybe I could drill down to understanding whether my weakness is in active traders or affluent clients or our core clients. It would allow me to drill down through several iterations to figure out where my trend has gotten off."
Most succinctly, Brokaw of Pep Boys says: "If we were to start from scratch, we would have one common database for everything. That is the biggest thing."
This article is excerpted and adapted from The Convergence of Compliance and Performance Management: Extending the Impact of Finance Across the Enterprise, a report that summarizes how companies are combining compliance information and business metrics with new performance management technology to support better decision making. CFO Research Services and SAS, a provider of business intelligence software and services, developed the hypotheses for the research jointly. SAS funded the research and the publication of the findings; CFO Research Services produced the final report. You may download a copy of the full report by filling out a brief form.
DuPont Centralizes and Standardizes Measures
in Pursuit of Performance Management
John Shannon likes to measure. In a corporate culture that reveres engineering, that works out just fine.
Shannon is managing director of finance at DuPont's Performance Materials business group, which is essentially a big company within an even bigger company: Performance Materials does business in the Americas, Europe, and Asia, and generates annual sales of nearly $7 billion. The group's best-known products are used in packaging applications, golf balls, wet suits, electrical insulation, gaskets, and magnetic recording tape.
By Shannon's own admission, measurement at Performance Materials "gets a little granular sometimes." If anything, that's an understatement. This DuPont group measures anything that moves — and some things that don't.
First, Performance Materials gets on top of the financial performance metrics: profit margins (by product and customers), sales, and cash generation — and in that order. So Shannon's team starts with a financial forecasting system that looks ahead 12 months to predict revenue, sales volume, prices, and fixed costs. Then they update the forecast on at least a monthly basis. "This affords us an opportunity to put in corrective actions or measures to stay on expectation,” Shannon explains. "Or, if we do not think that is possible, then we can signal to corporate management what might happen or what might be the consequences of not being able to get back on track."
Also, each of Performance Materials' four business units tracks revenue on a daily basis. These daily figures are compared against the monthly forecasts. Then, during a biweekly conference call, Shannon and some 20 other DuPont finance leaders review the numbers. "We add up the inputs from the different businesses to tell whether we're on track," he says.
The group tracks and measures non-financial results, too. The goal: to measure the performance of groups of employees as well as individuals — and to help set year-end performance bonuses.
One such non-financial measure is safety. In fact, DuPont measures safety even more rigorously than required by OSHA, Shannon says. Another measure for employees is their performance of critical operating tasks, or COTs. Employees are evaluated twice a year against their COTs, with a more formal and rigorous evaluation conducted at year's end. (Many managers conduct these reviews quarterly as a means of monitoring progress.) Yet another non-financial measure for employees is responsible business behavior, which, says Shannon, is a key component of the company's "four core values — ethics, people treatment, safety, and environment." These core values at Performance Materials govern how employees treat both fellow workers and the natural environment. Finally, within the group's manufacturing plants, two important non-financial measures are up-time and production yields. The first measures a plant's efficiency; the second, its effectiveness.
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