Analytics Based Performance Management

Many organizations are far from where they want and need to be with improving performance, and they apply intuition, rather than hard data, when making decisions. Enterprise performance management (EPM) is now viewed as the seamless integration of managerial methods such as strategy execution with a strategy map and its companion balanced scorecard (KPIs) and operational dashboards (PIs); enterprise risk management (ERM); capacity-sensitive driver-based budgets and rolling financial forecasts; product / service / channel / customer profitability analysis (using activity-based costing [ABC] principles); customer lifetime value (CLV); lean and Six Sigma quality management for operational improvement; and resource capacity planning. Each method should be embedded with business analytics of all flavors, such as correlation, segmentation, regression, and clustering analysis; and especially predictive analytics as a bridge to prescriptive analytics to yield the best (ideally optimal) decisions. This presentation will describe how to complete the full vision of analytics-based enterprise performance management.

• How to view enterprise and corporate performance management (EPM/CPM) as the seamless integration of managerial methods rather than as a process.
• Understand how business analytics is an advance over business intelligence and where Big Data fits in.
• How to identify and differentiate strategic KPIs in a balanced scorecard and operational performance indicators (PIs) in dashboards.
• How to properly calculate product, service-line, channel, and customer profitability for analysis, insights and actions.
• How to perform “predictive accounting” for driver-based budgets / rolling financial forecasts, what-if analysis, and outsourcing decisions
• How to overcome implementation barriers such as behavioral resistance to change and fear of being held accountable.

• What the pressures are compelling organizations to adopt EPM (eg, greater volatility, uncertainty, insights for problem solving)
• Why business analytics, with emphasis on predictive analytics and pro-active decision making, is becoming a competitive advantage differentiator and an enabler for trade-off analysis
• How strategy maps and their companion balanced scorecards communicate strategic objectives with target-setting to help cross-functional employee teams align their behavior to the strategy and better collaborate
• How all levels of management can quickly see and assess how they are doing on what is important using key performance indicators (KPIs)
• How activity-based cost management (ABC/M) provides not only accurately traced calculated costs (relative to arbitrary broad-averaged cost allocations), but more importantly provides cost transparency back to the work processes and consumed resources, and to what drivers cause work activities
• Why measures of channel and customer profitability and customer value now supersede profit and service-line measures - and shifting from product to customer-focused organizations including future potential value - customer lifetime value
• How managerial accounting enables internal chargeback invoices of shared services (eg, information technology services)
• How analytics-based enterprise performance management solves the problem of poor budgeting
• How three types of project-related costs are included in the budget: capital, risk mitigation, and strategy execution projects
• How improvements to the managerial accounting system not only provides accuracy and visibility to costs, but they enable predicting required future resource capacity expense requirements
• The increasing need for probabilistic financial projections
• The increasing need for "what if scenarios"
• How effective planning increases productivity from processes and reduces costs
• How to overcome implementation barriers such as behavioral resistance to change and fear of being held accountable

• The fear, uncertainty, and doubt (FUD) concerns Many organizations struggle answering these types of questions:
• How well do our managers and employees understand our executive team’s strategy?
• Are we measuring the right metrics?
• If we are measuring key performance indicators (KPIs), are they “balanced” between financial outcomes and the non-financial measures related to customer loyalty, process improvement, employee learning & growth, and innovation?
• Are we measuring too many strategic KPIs where many are arguably operational performance indicators (PIs)?
• Are our product and service-line costs accurate? Or are our accountants mis-allocating indirect expenses (i.e., overhead support)?
• Do we measure non-product channel and customer costs to report profit or loss by each customer?
• How effective is our annual budgeting process? Does its benefit exceed the costs to produce it?
• Is the budget out of date within a few months after it is published?
• Do experienced managers “pad” their department’s budgets?
• Is consolidating cost center budgets bottom-up cumbersome?
• Do we understand incremental / marginal expense analysis classifying the behaviour of our resource capacity expenses as sunk, fixed, step-fixed, or variable based on the planning time horizon?
• Are many of our decisions based on intuition or experience rather than on fact-based data?
• How much competency does our organization have with analytics?
• How much resistance to change does our organization have that is slowing our adoption rate of progressive managerial methods?

• CFO
• Financial Controller
• Accounting Staff
• CIO and Information Technology Staff
• Strategic and Business Planning
• Marketing and Sales Managers
• Budget Managers
• Risk Managers

Gary Cokins is an internationally recognized expert, speaker, and author in advanced cost management and performance improvement systems. He is the founder of Analytics-Based Performance Management, an advisory firm located in Cary, North Carolina at www.garycokins.com . Gary received a BS degree with honors in Industrial Engineering/Operations Research from Cornell University in 1971. He received his MBA from Northwestern University’s Kellogg School of Management in 1974.
Gary began his career as a strategic planner with FMC’s Link-Belt Division and then served as Financial Controller and Operations Manager. In 1981 Gary began his management consulting career first with Deloitte consulting, and then in 1988 with KPMG consulting. 1992 Gary headed the National Cost Management Consulting Services for Electronic Data Systems (EDS) now part of HP. From 1997 until recently Gary was in business development with SAS, a leading provider of enterprise performance management and business analytics and intelligence software. His two most recent books are Performance Management: Finding the Missing Pieces to Close the Intelligence Gap (ISBN 0-471-57690-5) and Performance Management: Integrating Strategy Execution, Methodologies, Risk, and Analytics (ISBN 978-0-470-44998-1). His most recent book co-authored with Larry Maisel is Predictive Business Analytics (ISBN 978-1-118-17556-9) published by John Wiley & Sons. Mr. Cokins can be contacted at gcokins@garycokins.com .