Analytics vs. Performance Management
Like everyone does, I first approached the ‘Oxygen’ of virtual knowledge ‘Google’ for this term. Obviously it gave me link to google analytics. But on refining got this good definition of analytics that I could find on the web –
‘Sophisticated data analysis and modeling, including developing customer profiles, determining customer and merchandise price profitability, database and other in-depth analyses.’.
Now the tougher one was Performance management – you can get a whole bunch of definitions for this, here are few –
Performance management links strategy with corporate objectives in ways that make the best use of a company’s resources by coordinating the efforts of every member of the organization. Using a set of tools and approaches to measure, improve, monitor and sustain the key indicators of a business.
What is the real difference?
The key difference that I always mention is that of past vs past + future. Analytics involves looking at insights from past data and analyzing that. A typical role that became very popular in every organization is the analyst role – whether he or she is a financial analyst, or a supply chain analyst or a treasury analyst. These folks helped analyzing what is going on in the past and presenting it to their management. Now when we talk about performance management, it is always future targets or plans based on the past analysis. So the main difference is analytics is past and performance management is planning plus analytics.
Performance Management = Analytics + Planning
From a management tool perspective, dashboards vs. scorecards are the typical example of what is analytics vs. performance management (see Jonathan Becher’s blog on this topic). Dashboards (analytics construct) are presentation, slicing and dicing, drill down of all the past, present actual data. Whereas scorecards (performance management construct) sets out the targets and reviews the actuals against the targets, and the targets are reset. Balance scorecard is a typical example of how performance management is realized.
One more important distinction between analytics and performance management is the process element. Performance management is a process, whereas analytics is just a step or point in the process. This is a very important factor since the performance can be modeled as a process, refer to P Square with SAP CPM that covers how Performance and Process go together.
Another distinction would be with respect to the timeframe/frequency factor. Analytics involves reviewing things online and sometimes real time. Performance management on the other hand is always done over a period of time. so goals are set for a period and then actuals monitored against the goal. It can never be an online or realtime goal. It has to be a goal to be achieved over a month, quarter or year. So analytics can be real time/online (Present time context) in addition to being a relevant over a period of time, whereas performance management is always over a reasonable period of time.
One more point of distinction is the top down and bottoms up approach in an organization. Analytics is normally bottoms up, whereas performance management flows top down in an organization.
In many cases analytics involves very detailed metrics, very granular detail analysis. Many a time Performance management in the past has been focussed at an aggregate level or summary level. But with the availability of great tools, performance management can also taken to very detailed levels.
In the current context of technology solutions, the analytics solutions have evolved into performance management, where the planning and strategy/target element is added into analytics, to eventually lead to end to end performance management solutions. SAP also has evolved their solutions into being a truly Performance Management solutions, by adding Strategy management and Planning solutions into their analytics fold, making availability of the end to end performance management process.