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 *2 * Focused Management Inc.*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 facts3 * Focused Management Inc.*The Fish Tank Syndrome If each person described what they saw, would it be the same description?Perspectives vary! Which is correct?4 * Focused Management Inc.*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 knowledge5 * Focused Management Inc.*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 products6 * Focused Management Inc.*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.7 * Focused Management Inc.*Performance Architecture to Drive ValueSystems EnabledStakeholder Need/Values Customers Shareholders Employees etc.Process ManagementHuman PerformanceIN OUTPerformance Measures ScorecardOrganization Design and CompensationBest PracticesActivity BasedManagementActivity Goals Measures ResultsProcess Goals Measures ResultsOrganization Goals Measures ResultsTIMEQUALITYFINANCIALQUANTITYStrategic Plan8 * Focused Management Inc.*Understand the Organization9 * Focused Management Inc.*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?10 * Focused Management Inc.*Value Creation is an Operational Issue!Linked to Seven Value Drivers:v Sales growth ratev Operating profit marginv Cash income tax ratev Working capitalv Fixed capitalv Cost of capital - (WACC)v Growth duration periodCreating 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 11 * Focused Management Inc.*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.12 * Focused Management Inc.*How We Organize Ourselves The Three Levels of PerformanceMarketSupplier sCIO FIII. Performer/Job LevelII. Process LevelI. Organization LevelProducts ServicesNeeds13 * Focused Management Inc.*Organization Work is Performed by Systems of ProcessesAlignment of jobs, activities and processes with total organization goals is critical to the success of the organization. Shared service organizations are an integral component.purchaseorderordersinvoicesamples /specs.product requestsextrusionsSUPPLIERSCUSTOMERSpromotionsOrder FulfillmentStorePick, pack, shipbill, collectStrategic PlanningPlanning & ControlProduct DevelopmentTest dieBuild diedesignProductionProduct madeProcurementBuy materialStore & issueOrder GenerationOrder enteredpromotionIn StockWork orderSales orderproductRequisitionMaterialsLine timeNew DiesGoals/plansPerformance reportsPrice targetsYesNoHuman Resources / Systems / Maintenance / Facilities Support processesCorp. Gov.6%7%4%48%22%13%14 * Focused Management Inc.*Detailed Process MapCustomerCall CenterFirst Level Technical DeptSecond Level Technical DeptInventory ManagementSchedulingLogisticsSite TechnicianEscalationR&DCall CloseTransfer or RerouteCustomer informed of SolutionCall TransferReference docsPredictive c