Every year, managers, directors and executives go through the annual ritual of looking ahead, looking behind, talking amongst themselves and deciding where they will spend money and where they will not spend money. Performance management, driven by performance metrics, seeks to evaluate every aspect of the company’s operational processes, strategies and expenditures.
Reports are run, stories are spun and the budget is done!
It has been said that truth is the first casualty of war, and that may well be an accurate statement. But, too frequently truth is also a casualty of the budgeting process. Planners want to protect their pet projects while the cost-cutters want to chop anything that moves. Many times what’s left is not at all what will enable success in the coming year.
IT has a special responsibility during this time to assure that data provided and formatted for the budgeting process is complete, unvarnished and enlightening. But, what data should be included?
Performance management without performance metrics is like setting out on a journey without a map or knowledge of the area in which one is traveling. You simply cannot make informed decisions without being informed.
Product Performance Management
Consider the products your company makes and sells. No doubt there are some winners and some losers in your portfolio. But you have to look deeper than the surface sales numbers to evaluate a product’s performance. You need performance metrics that reflect more than sales by SKU.
Consider the lowly automobile entertainment system—what some of us still call the “car radio.” By itself, this device is probably not a big money-maker for the car company. No one is coming into the dealerships asking to have a “Ford” radio installed. The margin line for bundled radios is pretty slim as well. By that I mean the company doesn’t make much on radios that are factory installed.
It would be tempting for the bean counters to say, “Dump the radios; they just cost us money.”
Almost anyone with a pulse can see that this logic is flawed. Why? If you drop the radio, no one is going to buy your car. People expect cars to have a radio — or an MP3 player or Pandora access. They won’t buy your car if it has no radio or entertainment system.
IT can supply the data that supports this conclusion. How many cars were sold without radios?
Look at Your Options
How about all those options you are offering. How many color options are available?
Now there is an opportunity to save some money!
Painting cars is expensive and time-consuming. If you are painting three cars per year in dusty magenta sunset, it means you are not painting one of the thirty thousand cars purchased per year in executive black or Tuscan red. Clearly dusty magenta sunset is costing you money.
The product performance metric data you evaluate has to take you below the surface and into the selling processes and buyer behaviors that are manifested in selling activities of the company. IT must drive that process.
Smart people must be given the data they need to make smart decisions.