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Engraining a Business Performance Process and Culture


Published in the Houston Business Journal in August, 2005.


Authors:
Manuel J. Perez de la Mesa, Director, Chief Executive Officer and President, SCP Pool Corporation, a $1.6 Billion distributor of swimming pool supplies and equipment.
Ravi Kathuria, President, Cohegic Corporation


Perez de la Mesa

Kathuria

Most organizations understand the importance of measuring and managing business performance. However, engraining within the organization a systematic and repeatable mechanism for managing business performance is a difficult challenge. Performance management systems are sometimes seen as an administrative burden, a distraction to making things happen.

Engraining a performance management process and culture requires special attention to several aspects - four of them are 1: Value in decision making; 2: Holistic application across the board, 3: Advancement of the strategy; 4: Integration with resource allocation and individual advancement.

Value in Decision Making
Business performance systems typically highlight financial or operational data that the executives are already intimately familiar with and hence add marginal value. The performance system must bring forth a new insight and deliver information that was previously unavailable or overlooked.

For instance, sales dashboards include metrics such as size of the sales pipeline, win-ratio and sales cycle-time. However, increasing insight into the sales process requires additional information - quality of the opportunities in the pipeline (a large pipeline with poor quality opportunities is futile), the efficacy of the sales drivers (which sales drivers are contributing to wins and how is it changing) and the efficiency of opportunity qualification (how quickly are undesirable opportunities being eliminated). Such insightful information adds value to decision making and leads to inherent adoption of the performance system.

Holistic Application across the Board
A holistic approach delivers a unifying message across business lines and functional groups. Sales and manufacturing cannot be measured to extremes while marketing, product/service development and internal support services are measured lightly. The objectives and metrics across all the groups must align with each other and with the corporate goals. Coherence across groups is the key to success.

The holistic viewpoint must include a company’s suppliers, customers, partner organizations and the community. It is important to ensure that the design of metrics reflects customer interests and viewpoints. A holistic approach ensures that the performance improvements do not happen in a lopsided manner.

Advancement of the Strategy
The performance system’s most important objective must be to advance and evolve the strategy. It must provide an early indication of trends and the status of activities that are critical to the strategy. Which message is resonating with buyers? Which product/service features does the market like compared to the competition? Where is the easiest market penetration and why? At what pace is the organization increasing its value proposition to clients? At what pace is the organization improving its internal processes, systems and capabilities?

Integration with Resource Allocation and Individual Advancement
The performance system must drive allocation of resources – financial (budgeting), skills (people) and executive time and focus. Performance must be the only criterion that drives further investment – top performing projects get more resources, poor performing projects get resources taken away.

Performance must also be the key determinant in the way executives and employees get compensated, promoted or discharged from the organization. Tenure, influence and authority must not be allowed to become factors in such decisions. Performance should be the mantra. Of course, the criteria for performance must be carefully selected as it will now heavily influence behavior.

Delivering Results
Focusing on the above factors will make the organization take the performance system seriously and engrain it in its way of doing business. An engrained performance system will then become a highly potent tool for the organization to deliver extraordinary results.