Alignment of Executive Strategy with Operational Execution through Performance Dashboards

1. Alignment of Executive Strategy with Operational Execution through Performance Dashboards Association for Strategic Planning Minnesota Chapter December 19, 2006

2. Agenda • Value Proposition • Which Metrics? • Project Approach • Technology • Pitfalls • Question and Answer

3. Disconnected Organizations

4. Enterprise Performance Management Strategy + Execution  Success • Prioritize Initiatives • Allocate Resources • Identify Key Metrics • Communicate to All Employees • Measure Results • Analyze and Adjust

5. Result of Alignment Strategic Vision + Performance Visibility Management $ $ Motorpool Quality Assurance Shipping Treasurer Manufacturing Marketing Warehouse Research & Development Daily Execution + Purpose

6. Enterprise Performance Management Plan Analyze Execute Strategy Monitor

7. Why Build a Dashboard? • Single, consistent version of truth for performance management • Executive visibility • Employee alignment • Easily accessible throughout organization • Up-to-date information • Flexible solution • Simple for casual users • Advanced drill down and analysis for power users

8. Return on Investment (ROI) • Proactively identify potential issues • Exceptions – red, yellow, green • Knowledge Mgmt – send email notification • Support root-cause analysis • Learn from competitive analysis • Which business unit is best in class? • Explain performance results for future learning • Streamline communication efforts • Focus operational excellence

9. Case Study: Metric Cockpit Before • Inconsistent measures of key performance indicators • Data sourced from multiple locations • Manual effort to collect results • Periodic distribution via email or physical printouts • All data is historical After • Single source of results stored centrally in data warehouse • Current results accessible via web • Results collected automatically • Some results input through web interface • Trending information readily available • Projections included • Commentary included regarding discrepancies Impact • Enhanced management communication • “Single source of the truth” • Eliminated reporting processes

10. Agenda • Value Proposition • Which Metrics? • Project Approach • Technology • Pitfalls • Question and Answer

11. Key Performance Metrics • Should be actionable and/or manageable • Must be understood by every member of the audience • Remember to include a definition link from the dashboard! • In many cases, the ultimate source will be dependent upon company-specific definitions and application system usage • Value is found when showing trend, targets, or relationship with other metrics

12. Human Resources Metrics • Headcounts • New hires • Outgoing employees • Average length of service • Minority percentages • Full-time vs. part-time • Hiring rates • Open positions

13. Finance Metrics • Budget vs. actual spent • Cost center • Internal order or project • Plan vs. actual financial statements • Profit center • Company code • Profitability • Economic Value Added (EVA) • Production cost variances • Days sales outstanding (A/R vs. Sales) • Miscellaneous cross-functional possibilities

14. Sales Metrics • Incoming orders, shipments, and invoices • Order fulfillment (production and delivery performance) • Sales backlog (open orders) • Cycle times (order processing) • Pricing variations • Returns • Product sales mix • Quotations close rate

15. Procurement Metrics • Average delivery time • Order performance • Contracted purchases • Vendor dependency • Purchase order quantity • Ordering technology • Invoice quantity • Purchase price variances • Minority spending

16. Agenda • Value Proposition • Which Metrics? • Project Approach • Technology • Pitfalls • Question and Answer

17. General Statement of Direction • Start with the end goal in mind • Consider developing front-end first – then fill in the technical details • Favor Strategic Iterations over “Big Bang” or “Uncoordinated Projects” approaches • Maximize Return on Investment (ROI) and reduce Total Cost of Ownership (TCO) • Capture and sustain momentum through entire project lifecycle • Provide many opportunities to refine requirements

18. Strategic Iterations — Measured Success Destination

19. The Great BW Balancing Act “Big Bang” “Uncoordinated” Launch individual projects as budgeted Analyze and deliver complete warehouse Good individual ROI Builds local momentum Inability to analyze Considerable rework Poor performance Costly support Optimize decision support Efficient build process Long time to market Huge investment Continuous scope creep Risk of turnover

20. Uncoordinated — Individual Projects Approach Destination Unknown!

21. Big Bang — Complete Warehouse Approach Like driving with a microscope – you may arrive at your destination, but the journey will be slow and inefficient

22. Strategic Iterations Process • Confirm overall strategy • Stated mission, values, objectives as starting point • Prioritize aspects of performance — can’t be all things • Low cost • Exceptional product or service • Innovator • Use this overall position as a baseline in setting project priorities and goals

23. Strategic Iterations Process (cont.) • Decompose to manageable level • What performance is required to meet expectations? • Customers • Shareholders • Employees • What operational or financial information supports realizing these expectations? • Measures of past performance • Current metrics and trends • Indicators of future success

24. Strategic Iterations Process (cont.) • Identify decision points • Investment in promotional activities • Sales information • Competitor data • Continuous improvement opportunities • Returns • Customer feedback • Inventory carrying cost reduction • Forecast accuracy • Production lead times • Order fulfillment performance

25. Strategic Iterations Process (cont.) • Build core metric matrix • Measure • Characteristics • Source • Value • How well does this support decisions?

26. Core Metric Matrix

27. Strategic Iterations Process (cont.) • Identify prerequisites and dependencies • For example, must have sales before forecast accuracy • Derived metrics • Identify cross-functional relationships • Validate level of detail is supportive • For example, order fulfillment by material, but forecast accuracy by material group

28. Strategic Iterations Process (cont.) • Group by source of data • Efficiency in analyzing entire source at once • Minimize rework for future requirements • Prioritize by cost vs. metrics delivered • Develop rough estimate of duration and resources required • Consider pre-requisites • Remember there is an opportunity cost to delays

29. Strategic Iterations Process (cont.) • Develop draft of master plan • Further details to come in “Project Planning” • Staff project • Further details to come in “Project Planning” • Complete initial iteration through delivery to users • Ensure the information is accurate and users are ready • Announce the completion of phase and related milestones

30. Milestones • Tangible outcomes for each iteration • Training for target users • Classroom • Personal • Announcement • Visible delivery • Enterprise Portal • SEM Management Cockpit • BI Web applications • Excel-based analytics

31. Strategic Iterations Process (cont.) • Revisit project plan • Nothing is set in stone • Continuous adjustments are expected • Repeat for subsequent iterations • Keep a vision of the desired end point in mind • Never let the momentum fade too much

32. Management Cockpit Project Extra Effort GEM Duration: 2-4 Months R E T U R N H i g h Internal: 1 IT Bus Analyst 1 Business Resource L o w External: 1 Functional Consultant Caution Quick Hit BW Requirement: Low-Medium High Low DIFFICULTY Prerequisites • Key Performance Indicators identified • Measurement data available • Hunger to improve data visibility Return on Investment • Eliminate redundant communication • Reduce time gathering reports • Gain ability to make rapid, informed decisions

33. Agenda • Value Proposition • Which Metrics? • Project Approach • Technology • Pitfalls • Question and Answer

34. Sample Dashboard

35. Management Cockpit Demo

36. Interactive Simulation Model

37. Executive Console

38. Enterprise Performance Mgmt System Only a part of the comprehensive solution.

39. Key Dashboard Components • Branding • Status reporting • Navigation tutorial • Visibility to metric definitions • Easy-to-consume information • Detailed analysis capability • Data validity statistics (last refresh time)

40. Data Input Capabilities • Simple, integrated interface

41. Formatted Printing • Web-based solutions are notoriously poor as printing platforms • Export to Excel • Export to .pdf • Modify font size, formats, or layout • Copy-and-paste to PowerPoint presentations

42. General Technology Considerations • Stop light concept to call out exceptions • Maintenance by power users • Data collection capabilities

43. Agenda • Value Proposition • Which Metrics? • Project Approach • Technology • Pitfalls • Question and Answer

44. Metrics Pitfalls • Information overload • Functional bias • Hindsight • Limited perspective • Inconsistent definitions • Irrelevant metrics

45. Approach Mistakes • Strategic confusion • Destination unknown • No executive mandate • Misalignment • Big bang • Incorrect results • Unguided exploration

46. Technology Red Flags • Complex user experience • Only ad hoc research • No knowledge retention • Inflexible • Segregated • Dead-end audit • Outdated information

47. Key Points to Summarize • There are real opportunities for Return on Investment (ROI) through dashboard implementations • You can quickly deliver a dashboard solution • The application designer should be usable by power users and developers • Web applications can incorporate a variety of sources and publish to many different destinations • Outputs can be simple or complex to fit the audience

48. Question and Answer How to contact me: Matt Christensen matt.christensen@pragmatek.com 612.998.5202