Operational Performance: What Sets Best-In-Class Companies Apart?
Are your daily decisions based on fact? A new report by Aberdeen Group finds that best-in-class companies succeed by finding the right key performance metrics and tying day-to-day decisions to larger corporate goals.
BENCHMARKING BEST-IN-CLASS STRATEGIES
What are Best-in-Class (BIC) companies? Aberdeen used four performance metrics to determine Best-in-Class performance:
Customer satisfaction: percent year-over-year change in customer satisfaction (past 24 months) Customer issue resolution capability: percent year-over-year change in the speed with which customer issues are resolved (past 24 months) Conversion of inquiries to sales leads: percent year-over-year change in the rate at which inquiries are converted to leads (past 24 months) Sales forecast-to-plan performance: percent year-over-year change in the accuracy of sales forecast-to-plan measurement (past 24 months)
Best-in-Class companies were defined as the top 20% in their aggregate scores for the four measures above. Industry Average companies are the middle 50% of aggregate performance scorers. Laggards are the bottom 30% of aggregate performance scorers. Aberdeen's survey results show that the firms enjoying Best-in-Class performance shared several common characteristics:
82% of Best-in-Class companies have at least one year of experience in managing operational KPIs, compared with 65% of all other respondents. 52% of Best-in-Class companies use business intelligence capabilities that are embedded within ERP applications in order to define, track, and manage operational KPIs, as compared with only 35% of Industry Average companies, and 19% of Laggards. Best-in-Class companies have improved customer service program renewal rates by a mean average of 4.7% year-over year, versus a decline in renewal rates of -2.7% among all other respondents.
Best-in-Class companies are focusing on business alignment. This pertains to the ability to tie operational activity and performance to the successful attainment of corporate goals. This single strategy is more than twice as likely than any other to be at the topmost of executives minds as they address their operational performance initiatives.
Top Five Best-In-Class Operational Performance Mangement Strategies (click image for larger view)
Unlike typical strategic business intelligence initiatives that focus on trend data that is captured over time (weeks, months, years), operational performance initiatives relate to areas of the business that experience change and activity multiple times throughout the business day. This requires the ability to access, capture, integrate, and analyze operational data quickly. Best-in-Class companies have a greater ability to capture operational information in a timely manner than all other respondents (see "Top Five Best-in-Class Operational Performance Management Strategies" chart at right).
Aberdeen's analysis of Best-in-Class firms shows that successful operational performance and KPI initiatives depend on a combination of specific capabilities and technology enablers. The research identified several capabilities that these leading companies share in order to achieve operational performance excellence.
As business dynamics change, so too must the KPIs that are used to measure performance. Best-in-Class companies are more than 50% more likely than Industry Average companies and 100% more likely than Laggards to employ a method for identifying, incorporating and reviewing/updating KPIs related to operational performance.
The process of updating KPIs on a continual basis is extremely important when it comes to operational performance. KPIs may become obsolete very quickly. For example, an online retail company that is presenting a new product line on its Web site may set KPIs initially based on past performance of similar products. However, after the first few days of activity, results may indicate a new method for presentation or a new offer type to be introduced. The KPIs used to measure performance, therefore, may need to be altered.
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