Dashboards, Scorecards, Portals, KPI’s, Business Intelligence, Business Alerts…

December 17, 2009

These terms are often used in business today, sometimes interchangeably, and it’s helpful to understand the nuanced differences, as part of an overall Enterprise Performance Management (EPM) strategy.

I liken these concepts to driving your car on a road trip to a new destination that you’ve never been to before, just as an executive drives their business toward new strategic short term and long term goals. Your vehicle dashboard tells you how fast you’re going, the amount of gas in the tank, the coolant temperature, and engine RPM’s, just to name a few. These are Key Performance Indicators (KPI’s) or taken as a whole, your Business Intelligence (BI). In business, depending on the industry and department, KPI’s might include margins, sales, inventory, turnover, etc. It’s measuring and monitoring the performance of your car or business, but it’s not leading you to your destination. No, that’s where your onboard GPS navigation system comes in.

The navigation system keeps score, like a scorecard, constantly updating your results, noting how long it will take to reach your destination, checking off way points along the trip, factoring in wrong turns, and making adjustments as needed until you arrive at your final target. The scorecard helps your business focus on reaching your goal, and monitors the results of the execution of your strategic plan. The dashboard, on the other hand, is less concerned with your overall strategic objective, and more focused on specific operational goals that will ultimately contribute back to the strategic plan.

Along the way, you may stop at an information booth to read about your destination, and nearby attractions. This would be considered a portal, an area that stores vast amounts of data and information, some relevant, and some not so relevant, but that you may find helpful to peruse and consider.

As you’re driving along and enjoying the scenery, suddenly, your low fuel indicator light shines on your dashboard, signifying it’s time take an action. This would be considered a business alert, often in the form of an email, notifying you of a potential problem that needs to be addressed asap.

So, the next time you hear the terms dashboards, scorecards, KPI’s and business alerts, think first of your vehicle dashboard, and the rest will fall into place. Consider what KPI’s you’d like to see on your own personalized dashboard, to help you achieve your own goals which should be in alignment with the company’s strategic plan. Consider the business alerts, or red flags, that should alert you to a potential problem, and a required action. And what scorecard functionality, or benchmarks, both financial and non-financial, will help the company determine if they are indeed effectively implementing their strategic plan.

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EPM solutions can achieve IFRS and GAAP compliance, and improve business performance

December 10, 2009

Another aspect of an EPM system is to provide the flexibility to capture and report global accounting information for the enterprise, and meet the unique local reporting requirements, and General Accepted Accounting Principles (GAAP), of each country’s regulatory agencies. A major shift in accounting standards is underway as the leading world economies attempt to standardize on a single global accounting standard called the International Financial Reporting Standard (IFRS).

The European Union (EU) was first to adopt IFRS back in 2005, and today over 9000 publicly listed European companies have conformed to IFRS. Canadian companies are next, required to report under IFRS by 2011, with large US corporations to follow by 2014. The global adoption of this standard will provide a commonly accepted accounting methodology, enabling more accurate comparisons between global companies, and reducing the need to maintain numerous reporting standards for various stock exchanges and regulatory agencies alike.

One of the main reasons for the adoption of IFRS in the US is for improved transparency. Today, most US companies report under US GAAP, a rules-based accounting standard, which is different than IFRS’s principle’s-based standard. Some feel the problem with a rules-based system is that companies can meet the required reporting rules and still misrepresent their true financial condition. In addition, by attempting to address as many contingencies as possible, US GAAP rules have become complex and lengthy, not only increasing the reporting burden, but confusing the results. Too many different rules and contingencies can become arbitrary, unwittingly opaque, enabling companies to structure transactions in a more favorable light, and misrepresent the reality, a la Enron Corporation.

Differences between the US GAAP and IFRS are often minor, such as the form of inventory and cost of goods sold evaluation. US GAAP permits last-in-first-out (LIFO), but IFRS mandates a first-in-first-out (FIFO) accounting standard. As subtle as these differences may be, they can have a more significant impact on financial results. Also, the US Securities and Exchange Commission (SEC) has been increasing scrutiny against companies, such as Xerox and Gateway, for improper revenue recognition, another area susceptible to misrepresentation under US GAAP.

Nevertheless, the worldwide adoption of IFRS changes the playing field, and therefore it’s critical for EPM systems to not only provide IFRS and GAAP compliance, but more importantly, reveal the differences between the two reporting standards to alter financial strategies accordingly. An EPM system needs to be scalable and flexible enough to accommodate these changes, help you understand the strategic impact of these changes, and facilitate a change in course as a result.

Consider the game of basketball, which is now played all over the world today. But the rules of the game differ based on the league, whether it’s the NBA, NCAA or International play. Even though rule variations may be minor, they could alter your strategy. For example, the 3-point line in NBA ball is farthest from the hoop, and thus a lower percentage shot when compared to International or NCAA play. Perhaps you will want to attempt fewer 3 point shots in the NBA as a result? Zone defense is illegal in the NBA, but perfectly acceptable in NCAA. In NCAA, the shot clock is 35 seconds vs. 24 seconds for the NBA and International leagues. Will these variations change how you approach the game? Undoubtedly the answer is yes, and it’s critical for an EPM solution to accommodate all the rules, show the resulting differences, and facilitate strategic adjustments as needed.

What’s the difference between Business Intelligence (BI) and Enterprise Performance Management (EPM)?

December 3, 2009

BI helps you understand your business, and EPM helps you improve your overall business performance based on BI. BI is an important component of any EPM solution because it delivers actionable business information, but an EPM system is where the rubber meets the road.

An HR Dept. may be tasked with reducing turnover within an organization or a particular dept., because when you consider recruiting, training, COBRA, and the opportunity costs associated with a vacant position (lost productivity, lost knowledge, added constraints to manage workloads through the transition period), high turnover can be a costly drag on performance.

Using BI, preferably through an interactive, real-time dashboard with business alerts, an HR Dept can monitor their turnover company-wide or by dept, and drill down to the manager and employee levels to understand the reasons. Is high turnover compensation, employee performance or managerial related? Are trends developing, and can these considerations be tied back into the budgeting and planning processes that are an integral part of any EPM solution, to effect positive change. BI delivers the metric, turnover, but an EPM solution delivers the tools to react quickly and decisively, and improve performance enterprise wide.

Consider the New England Patriots humbling loss to the New Orleans Saints on Monday Night Football. BI was the score of the game, it was the number of passing yards, rushing yards, and interceptions or turnovers. This data provides valuable insights as to why the Patriots lost, but it doesn’t show them how to win, or how to initiate a change w/in the Patriot’s organization to improve competitiveness. That’s not only where Bill Belichick comes in, but more importantly, Belichick’s coaching (EPM) system. The coaching staff and players need to review the tapes, understand their mistakes, make adjustments, and not only focus on improvements for next week, but consider recruiting efforts to fill gaps in talent for years to come. That’s what an EPM system enables by linking and aligning corporate objectives company-wide. And that’s also why when selecting an EPM solution, it’s critical to consider scalability, and integration capabilities to either interact with, or replace disparate applications and point solutions. Vendor viability, Service Oriented Architecture (SOA), and proven technology to standardize, consolidate and deliver a single, trusted version of company-wide information are other important considerations.

Hello world!

December 3, 2009

Hello – I decided to start a blog to summarize my thoughts/concerns/questions/advice about topics of interest or things I’ve learned over the past 15+ years from roles in sales, support and consulting at ADP and Oracle.