IN TOUCH: Closing the intelligence gap

Dilbert jokes underline serious business issues in the mind of Gary Cokins. For if Cokins had his way business would be lot less muddly than it typically is. Cokins is global product marketing manager – performance management for the SAS Institute and author of Performance Management: Finding the missing pieces in which he argues that performance management (PM) can unleash an epidemic of common sense within an organisation.
Performance management embraces the methodologies, metrics, software tools, processes and systems that bind together company. It meshes together tools that have existed for ages with more recent ones – balanced scorecards, Six Sigma and activity-based management – into an über-mother of all systems. Handled well, they enable managers to gain bird’s eye view of their company and, with it, an ability to trim its feathers for better flight.
Since publishing his book in 2004 Cokins has been circling the globe talking through its message with groups of business folk. In New Zealand recently, he says he’s long lost track of the total number of presentations but has been ballparking around 30 countries year for the past two years.
This global perspective, he says, validates something he’s always suspected: that business problems worldwide are far more similar than they are dissimilar. “A bank in Wellington faces similar issues to bank in Denmark or in Prague,” he says. “So it’s hard to distinguish any national uniqueness.”
Cokins admits that organisations with fewer than 10 employees – the lion’s share of New Zealand companies – may prove the exception to the rule. “That’s because they use management by sight where the entrepreneur is running nine other employees. But when you get to 25 or 50 people working together things become much more complex and many of these companies do not have clear idea of what their profit margins are in certain areas.”
PM, he says, is about navigation, “it’s about aligning the behaviour of employees with the intent of the executive… If an organisation’s engine handles the operational stuff – take an order, make an order, deliver it – then senior management is about where to point the car. For all roads are not straight and narrow and the environment is constantly changing.”
That organisations increasingly need PM, he says, is the result of bunch of converging influences worldwide. Senior executives are frustrated with strategy formulation which typically details where the company wants to go but leaves out the strategy map explaining how to get there. Others fail to tie key performance indicators to strategic objectives, he says. The resultant mismatch stops executives answering each day the single most important question: am I doing what is important?
“Six or seven years ago software may have been an impediment to good performance management but that’s not the case now. Today [the stumbling block] is the thinking and the management will to use technologies in an intelligent way to maximise company’s advantages.”
That’s not helped by creeping mistrust of the myriad accounting systems available and their flawed cost allocations. These churn out misleading cost reporting of products, services, channels and outputs.
“When most people get financial reports they are usually happy or sad but they are rarely any the wiser… In the absence of facts, anyone’s opinion is valid.”
Such contentious budgeting reveals disconnect from both corporate strategy and the realities of daily operations, says Cokins. “The typical budget process is invasive and time-consuming with few benefits, is obsolete within two months due to changing events and generates ‘use it or lose it’ mentality.”
One solution is to set up funding for strategic initiatives at the capital, strategic and operational levels.
“Success in business depends on how fast the right information gets to the right person in an organisation… It’s not about monitoring dials, it’s about moving them.”
Cokins sees performance management as flock of birds flying in formation. It’s an environment in which managers can line up and leverage their organisation’s energies, closing the “intelligence gap” between high-end strategy and tactical operational systems.
“Unfortunately, most companies don’t recognise this intelligence gap,” Cokins writes in his book. “ERP tools, for example, report raw data, but they don’t enable workers to actively manage business drivers that result in outcomes.”
What, he asks, is the answer for executives who need to expand their focus beyond cost control, into economic value creation, and toward more strategic directives? “What’s the answer for business strategists trying to navigate more profitable course in turbulent seas? How do they gain control of the direction, traction and speed for their enterprise?”