By Gary Cokins, Founder of Analytics-Based Performance Management LLC
In my prior blog I described the acceleration in the adoption rate for integrated enterprise performance management (EPM) methods, and new deployment options like mobile and Cloud, will have an effect similar to the one Ludwig van Beethoven’s masterpiece – his third symphony, Eroica – had on the future of classical music. We will get to Beethoven in a minute.
First, however, some background. My interests in integrated EPM waver back and forth from explaining the mechanics and outcomes from its various components to wagging my finger at those who have been naughty for not yet implementing its components. Should I be a teacher or a police officer?
First, what do I mean by the integrated components of EPM? In my prior blog I wrote “the core EPM methods include strategy management (strategy maps, balanced scorecard, dashboards); profitability analysis (by products, channels, and customers); driver-based budgets and rolling financial forecasts), enterprise risk management (ERM); and continuous improvement (lean and six sigma quality management).” There are several more minor EPM methods that I could name, but the key phrase is “integrated” methods.
Most of the EPM methods like these have been around for decades, and arguably even before there were computers. So EPM’s components are not new methods that managers have to learn. But like a table top jigsaw puzzle, the challenge is integrating them without seeing the puzzle box cover. The additional challenge is to imbed in each method business analytics of all flavors, such as segmentation analysis, but especially predictive analytics as managerial styles shift emphasis from being reactive to proactive.
Beethoven and Heroics
Now let’s return to Beethoven. I was educated as an industrial engineer, and I do not view myself as a scholar of the performing arts, literature, or classical music. However I have always been a careful observer and listener of what I see and hear. As I continuously witness the success and failure of attempts to fully implement various EPM methods, I compare them with Beethoven. Why?
During Beethoven’s “middle period” of music composition he was attracted to heroes and heroic efforts. This was the time period around 1810 that he composed some of his most popularly recognized pieces such as Eroica (his Third Symphony that I wrote about in my prior blog), Egmont(from Goethe, and his Op. 84), and Emperor (piano concerto no. 5 in E-flat, Op. 73). What is common about Beethoven’s interest in heroics and champion-like project managers who take on the challenge to implement and integrate EPM’s methods? It is these three heroic phases: crisis, struggle, and triumph.
Crisis
The initiation of an EPM project, such as developing a balanced scorecard or an activity-based cost management system, may not result from a crisis. But you could liken typically quickly emerging organizational interest and eventual need in such a method to being a crisis situation. The spark typically occurs when an executive (or a champion or coalition of concerned managers) realizes disturbing deficiencies.
Examples of these sparks are employees that have little or no clue as to what the executive team’s strategy is. Performance measures are too summarized, too late, and have little explanatory value to what caused their result. There is little trust in the managerial accounting system to accurately calculate the costs and profit margins of products or standard service-lines (or outputs government organizations). And further, there is no inclusion of the increasingly more important non-product costs-to-serve (e.g., distribution, selling, marketing, customer service) to measure the channel and customer profitability levels. There are other similar types of deficiencies I could describe, but the point here is the crisis moment emerges when some motivated managers start asking, “How long do we want to perpetuate operating this way and making decisions with no data or with flawed and misleading data, measures, and financial reporting?”
This is when, in my opinion, Beethoven is at his best. It begins with the first of his four orchestral movements. The music starts with a single note or a few brief chords or with a melodramatic song giving the feel of a thunderstorm or being lost in a blinding snow storm. You know how Beethoven’s 5th symphony begins. The famous four notes – “da da da duh.”
Struggle
The next stage of heroics in Beethoven’s works is the struggle. How do we get started? What is the road map? How do we get buy-in, both from executives at the top and co-workers and employees at the bottom? How do we get funding? How do we select the correct key performance indicators (KPIs)? How do we construct an activity-based cost assignment model? How many activities should we divide our processes into? At what size is our model too complex to understand or unmanageable to maintain? Where do we get all the input data to feed our systems? Do we even have the data? If we have the data, are there quality and integrity problems with it? Is the data scattered about in disconnected and disparate data sources?
Life and work can be a struggle.
How did Beethoven compose his music to deal with this phase in his second and third movements? Sometimes moody. Sometimes sad.
Triumph
Not everyone wins. It is so tragic to me when during my international business travels that I visit an organization that initiated and even completed an EPM component method, like activity-based costing; and then they abandoned it (see my earlier blog on this topic). An executive pulled the plug on it. The reason may be that it already provided the answer they wanted (so it was more like a one-time project rather than a permanent, repeatable production system). Alternatively they may have concluded it is not worth the administrative effort to collect, calculate, and report the information (meaning someone excessively over-engineered the system and made it unnecessarily complex). Alternatively the method may be something a new executive does not understand (like in Kipling’s poem, the blind men and the elephant … touching the tail, it must be a rope).
But you can triumph and win.
Beethoven provides you the thrill of triumph in his fourth and last movement. The decibels grow louder. The chords are crisper. At this point you want to march with your feet to his music.
What does it take to triumph in successfully implementing an integrated EPM framework of methods? A few tips. Do not over-plan and under-execute. Analysis paralysis. Just get going. Make mistakes early and often, to learn from, and not later when it is costly to make changes. Even more critical, do not under-estimate the magnitude of peoples’ resistance to change and the need for behavioral change management.
So, how successful would Beethoven have been implementing EPM? Read my prior blog, “Beethoven’s ‘Eroica Effect’…is this the Cloud for Enterprise Performance Management?”.
I already provide you the answer there.
About the Author: Gary Cokins, CPIM
Gary Cokins (Cornell University BS IE/OR, 1971; Northwestern University Kellogg MBA 1974) is an internationally recognized expert, speaker, and author in enterprise and corporate performance management (EPM/CPM) systems. He is the founder of Analytics-Based Performance Management LLC www.garycokins.com . He began his career in industry with a Fortune 100 company in CFO and operations roles. Then 15 years in consulting with Deloitte, KPMG, and EDS (now part of HP). From 1997 until 2013 Gary was a Principal Consultant with SAS, a business analytics software vendor. His most recent books are Performance Management: Integrating Strategy Execution, Methodologies, Risk, and Analytics and Predictive Business Analytics.
gcokins@garycokins.com; phone +919 720 2718
http://www.garycokins.com
Linkedin.com contact: http://www.linkedin.com/pub/gary-cokins/0/15a/949.
