Performance Controller

"However beautiful the strategy, you should occasionally look at the results"...WC Print

There is so much conversation about social media, but it is not only network marketing media who are interested in exploiting its potential. The criminal elements in our communities, it seems are very interested to see how they can put it to use.

Are you one those people hooked on twitter who tells the world every time you leave home or go to some event.

If you do, think again before you this do next time. You may well be telling thieves to take advantage of you.

In his oz-analytics post this week headlined mining social media, Steve Bennett updated us on a site he found that detail how robbers can now see who is not at home using simple twitter stream search.

For many of us who have our emails on websites and public profiles, we may also seek to simplify our lives in the explosion of social networking. For this can join it all up on Facebook or similar sites. But beware what you include as it does not take super intelligence for someone to use this to put it together and then watch and wait till we tell them the coast is clear.

Any robber with a phone and a twitter account, may get an our open invitation from to take what he likes because as we tell him we are not at home. A simple key word search on twitter give easily robbers the scoop on you . If you don’t believe me, do a search and see how many people say they are not at home. The web on the phone also provides maps and satellite photos of your street and your house to make the job plundering job even easier And it is even easier with an alerting tool to send an email when someone says they’re not home.

The only issue then is it may get a bit crowded at your house if more than one robber turns up with the same idea.

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Do you struggle to get the numbers you need to manage your business? Many others do too!

Dashboard reports are of great value when they always reflect the reality of the here and now.

And when they come to life with always current information and an ability to rotate perspectives and drill to detail in moments it gives a buzz that, for some, is better than sex.

This week in our firm, our professional team in Asia at Sherwood Group Consulting using Infor PM. rolled out the preliminary design and a working prototype of a BI tool for a large sales force based organization.

Impressive, beyond our expectation, excellent and just what we need were some of the comments, along with it can do this that and the next thing on analysis.

It made me feel good to hear that, but the truth is, all we did was assemble their data and present it in an homogenized way in a BI web tool.

In this early adopter stage in their business, with warts and all and unfinished screens, this had people just so pleased to see their data assembled and in a meaningfully presented way, in their familiar organization structures. In the end, despite any effort it may take to clean up the data, that is all that matters.

They were also excited that  it presented as useful information and that they could drill down  immediately. This meant there was no need to go elsewhere for more information. Canned reports can be reduced as people will already have what they need to run their operations.

With much of the hard work done, as this BI tool gets more populated on a daily basis it may never get past the design stage . Why so? Because it will likely be constantly changing as the business learns how to manage with it and matures its use. No issue there, as reflecting the most up to date view of both the data and the organizations is what BI tools do well. Things like products, as they are added to the database, then appear in context, as the numbers come in. This also occurs without any need to change the reports.

Over time, in any business, everyone knows that the dynamics that created a report in the first place will mature as intuitive understanding of the base level data evolves. This often leads to legacy reporting being no longer focused properly or even being relevant.  As for the myriad of reports that have been specified, in our BI rollout, there are now many questions as to their need.

For example on any given day in the month a business typically needs to be able to see a single value of its sales.

  And then to be able to drill down into the lower levels and the details, like products, the customer or group, the business and channel it was sold through and even the salesperson who sold it.

Being able to see the invoice detail may be useful too.

And to be sure sales are profitable, operations need product gross profits all at the same levels,

Canned reports typically only report at the end of the month and then only in summary, which is far too late to stop any real time attrition.

Vital information like the component cost and who suppliers are plus breakdowns of department activity costs that went into to production and getting things delivered is a nightmare to get hold of.  Even Blind Freddy knows that a canned reports only tell us to go looking. But with BI tool it does the looking too and  it is a snap.

Canned reports simply fail to deliver at the levels needed to run a business. And even if they get half way there they are slow to produce and clumsy to use.

Using traditional reports can be as unwieldy as the middle ware process that prepares them. In larger organizations this is typically the cause of much of the frustration where the dynamics of matrix cross functions see lags dilute focus and time to take action.

So why do so many organizations persist with traditional dashboards and summary reports that just focus on fixed or functional areas?

And why do they persist in spending valuable time to dig for the detail, by going to another report or a listing of the raw data, to do further analysis?

At the grass roots, getting sales information may be quite easy, just by listing the invoice detail. And if your supply chain and costing people are on the ball, costing sheets will be there as well to show supplier and department activity and costs for each product.

If you think BI is new then take a look around. The tools have been there for decades but are often lost in the functional Sales Hype or in IT speak.  You will find managers using sales invoiced and sales order lists to get sales information! And if they don’t have a decent system to roll it all up and group it, a personal spreadsheet will likely be  doing  the job and it will also work for analysis. But what ever way they do it, linking product sales and cost information will mean they can calculate gross profit on each product sold, as it occurs.

With  this information, even in such tools as an Excel  pivot table, it can easily show total sales for the day month or year for any business by channel customer and salesman etc.. And by adding a dimension for budgets and agreeing on targets, performance can track that way too.  So you see, BI is nothing new.

In large and small organizations alike it is that simple. Bigger guys have more resources to access their database directly with enterprise BI tools that allow this “business intelligence” to be applied directly to the raw data. But the process is no more or no less the same. They use the raw information to first rollup then drill down and analyze in detail so they can ask questions that allow them to take actions to correct matters of concern.

But even for small guys, having disparate systems and processes still leaves a quandary. Organizations who have flattened to cut out middle managers who once did the analysis, see direct access to detail no longer a choice but an imperative. Small guys need it too as middle managers have always been a luxury so they generally only do BI  themselves the hard way.

These days with efficient and well organized transaction systems, adding a simple BI tool on the top allows executives and mangers to see the big picture then get straight to the detail.

Managed the same way, information like sales activity can mean sales people can see the value of their weekly activity such as lead generation and lead conversion and so on.

Here are a couple of examples

Sales Activity

By collating sales activity for example, lead generation and conversion can be measured weekly. With numbers of leads generated, calls made, meetings booked, and prospects qualified, sales closed, and sales completed added to tracking information, the performance can be measured to focus time on helping the back enders .

This is vital to ensure sales numbers are achieved even for small teams but even more so in large widely spread sales forces. For  good salespeople they do this anyway and they also keep track of commission they will get.

Sales Development Impact

For cross functional activity measuring  the value of sales force development and customer service impact is vital to know where to focus to grow the business. By tracking these activities to a salesperson’s results makes it much easier to focus on   areas that need development to improve.

Pre and post training evaluations are also very easy to see once you connect the development activity to the sales person’s results.

Managing business is not about chasing reports but about systematically managing the numbers on  sales and operational aspects that drive the business.

Large or small, without good business intelligence, access to data  is still seat of the pants or intuitive management, despite the plethora of static reports that continue. In large organizations with thousands of players, reactive response management is too slow. So the need for a BI tool is a “No Brainer”.

Dashboard reports too are of great value if they always reflect the reality of the here and now. And when they come to life with always current information with an ability to rotate perspectives and drill to detail in moments it gives a buzz that for some is better than sex.

In the past as we focused on speeding up or reporting processes our aim was  spend more time on analysis and less on the preparation.

These days with the business intelligence transparency maturing in organizations, it is letting managers and operations alike get to the heart of their issues on a day to day basis. This means they spend less time in analysis more time in action.

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About

Sherwood Group Consulting        Performance Management matters Since 1993. Sherwood Group Consulting has been advising business on best practice in reporting and business performance management. As specialists, Sherwood Group Consulting has high expertise in key aspects of business management and finance across a wide spectrum of business domains. Using leader software and working closely with vendors we add change management and project delivery services to the mix to make it all work.   Australia – Executive Director – Gordon Wood Essendon Fields House, Level 2, 7 English Street Essendon VIC 3041  +613 9018 5302 Facsimile: +613 9438 4278  Thailand -  Director – Kitipan Kitbamroong Level 29, Offices at Centralworld 999/9 Rama I Road Pathumwan, Bangkok 10330, Phone: +66 2207 2340 Facsimile:+66 2 207 2626 . Singapore – Director – Larry Russell Level 42, Suntec Tower Three 8 Temasek Boulevard Singapore 038988 Phone: +65 6866 3340 Facsimile:   +65 6866 3636 Europe / Germany Director – David Brown Springiersbacherstrasse 10, 56862  Punderich, Germany. Phone: +49 6542963578  Mobile: +49 1578 497 8614

 

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I recently had a chance to join a Kickoff meeting of a very interesting BI project.

Normally stakeholders and key players are invited to join such meetings as they share an interest in the outcome of the project.

Stakeholders also bring a unique value to the project, especially in the beginning, aligning together to support it to get off to a good start.

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 Poor decisions are most often caused by lack of understanding, not lack of data. But another challenge is unquestioned acceptance of the business processes being measured.  At times many appear very logical, but are often obscured by the very data itself.

I notice when managers look at unacceptable results, they often do one of two things. Me too!! They either pick up the phone to call someone to ask for more information on why. Or they  pick up the mouse to dig deeper for the reason.  Once the answer comes,  corrective decisions are made. This tram line management style is a norm and the bias of most Performance Management systems. It works well to make sure the process,  the “tram”, stays on the tracks.  But many fail to follow the learning rule that to improve you need to look around at things nearby that may be obvious.

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Figures can lie but lies cannot figure. That was a saying our business school lecturer would throw at our class to make sure we presented correct numbers in our stories.

There are many variations of this. Possibly the most nauseous, but still very useful is what we hear still being trooped out by IT people and software vendors is their aim to give us “The same version of the truth“.

But to be fair, these days in the transparent world of information and behavioral influence you need good systems for recall. Or to use another well warn cliché , “To remember your last lie”

Here is something out that makes this point.  Headed Obama Quietly Killed Two-Million American Muslims, the piece refers to conflicting estimates of Muslims living in America.

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Stephen Few and Nigel Pendse, are examples of business experts, each with quite distinctly different styles and modes of working. Both call it as they see it without fear or favor .

They can do so because they do the ground work and run their business in a way they can claim that right.

Pendse, is widely known and respected by all in the performance management business community that he serves on all continents,

Stephen Few, is a US based consulting specialist and author. His style is no nonsense to the point and he calls a  spade a spade.

Something each wrote recently under a clever headlines got my attention.

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Climate change is an accepted fact, as are measured temperature increases over the last 50 years that are causing it. And C02 emission is well understood to be causing the planet overheating, with potential to destroy life as we know it. Energy depletion is a issue too, so cutting C02 by reducing energy is clearly a good thing if only for that reason.

As facts the understanding seems irrefutable. But is it possible there are flaws in the information intelligence that drives them?

This graphic oddly is against popular expectations telling us polar ice has actually increased so surely this must be a fake.

I am not saying one way or the other but if you are sailing you should watch your dashboard to be careful not to also hit an iceberg.

Understanding what put measures on the board in the first place, is important. But also is being alert to question and challenge is what good Business intelligence is about. So we need to be open to the unusual.

So when you get some information that challenges conventional thinking. It may be flawed. but don’t just ignore it.

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Today I was delighted to see Anthony Watt’s post on receiving Best Science Blog in the 2008 Weblog awards for his blog at  Wattsupwiththat.com.

 

Like so many (millions per day now) I follow this blog with great interest. Aside from the great information it provides on science, weather, climate change and related technology,  I am constantly inspired by the fact based rigor of his succinct analytical writings and many of the contributing discussion debaters.

 

His transparent informed approach augers so well for balancing opinion and decision making, which to be sure is why his site is so popular.  His approach to deliver it so successfully, in this highly visible and challenging world of blogging, is a lesson for us all on how to communicate to make decisions by using information well.

I also suspect his resource now supports many changes to improve climate based management processes in the world. And it is almost certainly used for related environment decisions in business the political arenas.

In reading some of the congratulatory comments on his post today I noted this light hearted contribution from Aussie John who wrote:

It was April and the Aboriginals in a remote part of Northern Australia asked their new elder if the coming winter was going to be cold or mild. Since he was an elder in a modern community he had never been taught the old secrets.

‘How can you be so sure?’ the elder asked. The weatherman replied, ‘Our satellites have reported that the Aboriginals in the north are collecting firewood like crazy, and that’s always a sure sign.’

When he looked at the sky he couldn’t tell what the winter was going to be like. Nevertheless, to be on the safe side, he told his tribe that the winter was indeed going to be cold and that the members of the tribe should collect firewood to be prepared.

But being a practical leader, after several days he had an idea. He walked out to the telephone booth on the highway, called the Bureau of Meteorology and asked, ‘Is the coming winter in this area going to be cold?’

The meteorologist responded, ‘It looks like this winter is going to be quite cold.’ So the elder went back to his people and told them to collect even more wood in order to be prepared.

A week later he called the Bureau of Meteorology again. ‘Does it still look like it is going to be a very cold winter?’
The meteorologist again replied, ‘Yes, it’s going to be a very cold winter.’ The elder again went back to his community and ordered them to collect every scrap of firewood they could find.

Two weeks later the elder called the Bureau again. ‘Are you absolutely sure that the winter is going to be very cold?’ he asked.’ Absolutely,’ the man replied. ‘It’s looking more and more like it is going to be one of the coldest winters ever.’

Another comment followed Aussie John,  pointing out there is no winter in the north of Australia.

All jokes aside, this re-enforces the points we all  try to make about adding the “Intelligence Process” as the key for making information of value.

Congratulations Anthony.

 

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Incident reporting: static analysis is the first step normally used to identify losses. Summary statistics first display frequency and severity data by event type and by business line, according to the regulatory categories. This report is of certainly needed for compliance purposes, however it might be not the best tool for the risk management of a financial institution, which has a different structure or nature of activities.

An example of a more useful set of summary statistics would match the organization chart of the financial institution, bank, or company that uses its database. With a capability in viewing the reports in dimension splits by department, by people in charge, or by geographical zone of activity.

For a bank retail network for instance, the reporting may be split by bank branch, and, or by type of client. Even before detailing the frequency and the severity of each type of loss, incident reporting in an organization or in a department should first display the total loss amount caused by operational events.

Several simple measures, long neglected and sometimes never measured in financial institutions in the past, may provide a powerful tool to raise awareness on operational risk within an organization

Next, the analysis can identify the “low severity, high frequency” losses and the “high severity, low frequency” losses, with the remaining events. Both need further investigation, since they can be the symptoms of serious breaches in control within the organization. One of the key criteria in operational risk management is whether a possible loss is capped or not. That is, in case of an operational event, the potential loss amount is limited by any type of control. Capping potential losses is, and should be, a main concern for senior management. To that extent, rare events of large amounts are the first candidates in the identification of uncapped risks.

Likewise, recurrent minor losses require further investigation, at least once. They might also be the consequence of an effective cap of losses in an activity highly exposed to operational risks. Operational losses due to processing errors are frequent but limited due to effective control procedures and systems design. But recurrent losses could also be a more worrying symptom of a systematic breach in control or in process that lead to systematic or frequent losses, with possibly very large amounts at stake.

An incident database is a view of the operational losses in an organization that can provide, if interpreted correctly, a list of priority controls and investigations to be performed. Database analysis provides the facts, but does not identify the risks.

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Today I had a chance to discuss with a client regarding Operational Risk for banking and financial sectors and would like to share the ideas here. 

Operational risk is defined as “the risk of losses resulting from inadequate or failed internal processes, people, and systems or from external events. The definition includes legal risk, but excludes strategic risk and reputation risk.” [1].

1. Incident Reporting – static analysis. It gives a chronology of past events, their nature, their cause and how the case was handled.
2. Dashboards – dynamic analysis. They describe the evolution of operational events by activity or by department, providing a dynamic representation of the losses.
3. Key Risks Indicators (KRI’s) / Key Performance Indicators (KPI’s) – benchmarking analysis. Allows a comparison of the dashboards to predefined standards and an assessment of the evolution of the risk.
4. Risk and Control Self Assessment (RCSA) – proactive analysis. Provides a prospective view of the potential risk based on the collection of information by experts in the field.

In our discussion, we realized that banking and financial sectors in Thailand still deploys only up to static analysis from the various case studies that could be found and read in public forums like http://pantip.com/cafe/sinthorn. The point addressed was now that the Bank of Thailand has announce that commercial bank has to compile with the BIS policy, where should they start, which solution should be considered and weather the solution deployed completely answers the subject given. I’ll write about this in the coming articles.

[1] Bank of International Settlements, (2003): “The New Basel Capital Accord”, Consultative Document, Basel Committee on Banking Supervision.

[2] Bank of International Settlements, (2002) “Sound Practices for the Management and Supervision of Operational Risk”, Basel Committee on Banking Supervision.

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