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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.

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4 Comments

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  1. Ramesh Ramaswamy
    You have rightly mentioned that “analytics” is a step.
    The performance management,besides going in to past for evolving the bench marks is also about the externals,such as “Industry bench mark”-here we compare the internal performance with say the “Industry norms”.
    Am aware of companies bringing about comparisons such as
    1]Performance Vs the Internal Targets.
    2]Performance Vs the Industry bench marks.
    3]Performance Vs the Ideal.
    Based on this,the maturity is assesed.This helps to lay the road map for moving from [1] to [2] and so.”Analytics” can’t be used to assess the maturity or to expedite the transition from maturity model [1] to [2].

    Thus the perf.Mgmt.is more of qualitative in nature like setting the bench marks,monitor,compare and act.Analytics is an adjunct to this;helping the comparisn etc.
    Regards.
    Ramesh

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    1. Muthu Ranganathan Post author
      Ramesh – These are excellent points. The kind of things you highlighted is what the people in this space have started to call as Pervasive performance management. If you have seen one of my other blog on beyond budgeting, the comparitive or benchmark aspect is what companies preach. Companies have to benchmark against competition, and measure everything relative. They cannot survive without looking at what their peers are doing. This helps in sensing the opportunity that exists, and that is where the whole planning or performance management should start from an industry level, and not be just at an internal level.

      Your point of distinction through the qualititive vs. analytics being more quantitative is a very valid point.

      Regards

      Muthu

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