Cost and Performance Management: Creating Value with Measures Presented by Focused Management Inc.,Facilitating Performance Improvement Through Better Use Of Information And The Application Of Decision Support Tools,2020/8/3,At Issue,Every organization needs to measure and manage performance to satisfy the demands of stakeholders Todays measurement and management methods are much better than in the past but need to be connected together The speed of change and information age computing and communications leave little margin for errors Decision making needs facts,The Fish Tank Syndrome If each person described what they saw, would it be the same description?,Perspectives vary! Which is correct?,Implications of The Fish Tank Syndrome,We need a variety of perspectives and with which to obtain a balanced, disciplined and dynamic view of our businesses We need to develop a common / agreed understanding of the business and all of its characteristics We need a constantly available set of reference points to which we can return We need a living repository in which locate and maintain knowledge,Result What Is At Stake,Inappropriate measurement systems can be costly experiments Sobeys $50m ERP write off Boeings production problems in the late 1990s Malcolm Baldridge winner, Wallace Co bankrupt Fortune 500 companies will face a $31.5 Billion knowledge deficit next year By how much can profit be increased by changing your product/market mix to focus on your most profitable products,Performance Architecture,A combination of a business logic methodology, relevant software and systems capability. The links between the tools are as important as the tools themselves.,Performance Architecture to Drive Value,Systems Enabled,Performance,Activity Goals Measures Results,Process Goals Measures Results,Organization Goals Measures Results,Strategic Plan,Understand the Organization,Value-Based Management,“VBM is a holistic management approach that encompasses redefined goals, redesigned organizational structures and systems, rejuvenated strategic and operational processes, and even revamped human resources practices”. “This holistic practice of VBM is in sharp contrast to the finance-driven appearance that VBM has taken on in the past ” INSEAD Working Paper, Are you (Really) Managing for Value?,Value Creation is an Operational Issue!,Linked to Seven Value Drivers: Sales growth rate Operating profit margin Cash income tax rate,Working capital Fixed capital Cost of capital - (WACC) Growth duration period,Creating shareholder value requires intense focus on: Delivering benefits to customer in most efficient way Hiring/retaining motivated workforce Maintaining excellent supplier relationships Good citizen in local communities,Processes are where the work is done,“If you cant describe what you are doing as a process, you dont know what you are doing.” W. Edward Deming,Processs are connected to the appropriate knowledge and learning elements. All focused on the successful performance of a single task. Processes link organization goals and measures to human performance and activities.,How We Organize OurselvesThe Three Levels of Performance,Organization Work is Performed by Systems of Processes,Alignment of jobs, activities and processes with total organization goals is critical to the success of the organization. Shared service organizations are an integral component.,6%,7%,4%,48%,22%,13%,Detailed Process Map,Service Delivery Process,Activity Cost Results,ABC & Process Analysis: Thoughtful Interaction,Service Delivery Process,Costed Process,Activity Analysis,The first step in an ABC analysis is to understand what activities are performed in the organization. Activity Survey Questionnaire (ASQ) facilitates simple and efficient collection of activity data throughout the organization, prepares the data for import into analysis tools and produces draft activity and process costs. Lets see ASQ in action,Pharmacy,Best Practice AnalysisUnit Cost Comparison,Product / Customer ABC Profit,VBM Product / Customer Economic Profit,Key Process Measures,Measures can be limited to M1 (end of process) and M2 (sub-process) measures M1-E (External) measures should be derived from goals,M2,M1-I,External/Customer Measures Internal/Business Measures Subprocess Measures,M1-E,Linking Process to Job,Consequences,Input,Output,Feedback,Human Performance System,“IS” PROCESS MAP,Measures Everywhere,Process Measures Worksheet,Material Acquisition Process Total Process Measures,Dimension,Current Performance,Measure,Short Term Goal,Long Term Goal,Actions to be taken,Process Output,Bench- marks,Perspectives of Measurement,(Create & Gather),(Store & Deploy),(Use & Learn),processes,knowledge,training,Insights, Procedures, Guidelines, Expertise,Front lines,Business Repository: your corporate DNA,Feedback,Knowledge Management Creates “Living Processes”,Web/ Intranet,Internal or External Customer,The Performance Point !,Measures Software to Influen