What are the biggest reasons companies state for pursuing a performance management strategy? Two we hear most often are improving information "visibility" and tightening the alignment of disparate divisions with corporate strategic objectives. In both cases, like Lewis Carroll's Alice, companies may be in for some surprises as they look — and step — through the looking glass otherwise known as "metrics."
Database, data warehousing and business intelligence (BI) professionals can take credit for a major reason why metrics and dashboards are so hot today. Executives look around and see that successful competitors are often the most data-driven organizations. They see how visibility into the data can enable business opportunities. With a good view of the data, consumer packaged goods (CPG) manufacturers, for example, can tighten operations by basing decisions on what's actually selling, not on wishful forecasts. Their retail partners can use similar, if not the same data to push inventory management responsibility back onto CPG suppliers and lower overhead costs. And they can work together to avoid delayed or failed shipments of perishable products and adjust to seasonal changes in demand.
In CPG and most other industries, spreadsheets and e-mail have been the default tools available for such analysis and business collaboration. "But old ways are falling apart under the stress of new demands," says Diaz Nesamoney, president and CEO of Celequest. The company is a rising player in the operational performance management dashboard craze sweeping organizations as they try to "let the data do the talking" and employ metrics and key performance indicators (KPIs) to communicate whether numbers are on or off target with strategy. Nesamoney sees service-oriented architecture as a big enabler for the integration of dashboards with business process management and role-based, workplace portal systems.
The open question, however, is what happens when metrics intentionally or unintentionally distort reality. Will organizations have checks and balances in place if the metrics miss aspects of business relationships that are hard to measure? What if metrics steer execution in the wrong direction? To correct problems or resolve inaccuracies, firms may reach for more data, refreshed even more quickly. This will put pressure on IT organizations. Automated, process-oriented analytics will become increasingly necessary to keep up with metrics and KPIs. Once in motion, the engine will be hard to stop.
Metrics and the democratization of data analysis also might lead to more a bottom-up questioning of corporate strategy, which as Wayne Eckerson notes in our cover story is frequently based on executives' "erroneous assumptions." Although some executives may welcome analysis from below, if the metrics don't show "alignment" with corporate strategy, will others be more inclined to shoot the messenger and get new metrics? Corporate executives also will have to weigh the impact on other stakeholders, such as investors and regulators, if metrics are out there for all to see.
Efforts to use metrics to bring geographically distributed divisions more in line with corporate objectives may put the most stress on performance management systems. Such metrics are often part of a bigger, if not tectonic shift in how an organization plans to do business. It will be imperative for organizations to communicate the full meaning of the metrics.
Dashboards and metrics hold great promise for users weary of the data "hunting and gathering" that BI tools alone haven't solved. But be prepared for a forever-altered reality.
David Stodder is the Editorial Director and Editor in Chief of Intelligent Enterprise. Write to him at [email protected].