Quick Stats

Quick Stats

    You are here

    MANAGEMENT: Can performance be managed?

    Corporate performance management was hailed as one of the century's top business tools. But only 10 percent of corporations have implemented it.

    By Patrick D. Heaney

    Supermarket executives prize foresight over hindsight, they'd rather their companies have their own practices than industry best practices, and they're looking for killer implementation, not more killer apps.

    Those are among the findings of M>Prove Results' first Executive Corporate Performance Management Study, which was conducted in the fall. Corporate performance management, or CPM, describes the tools, processes, and technology employed to support the people in the organization to measure and manage the thousands of daily activities conducted by a retail business to better serve consumers.

    Global organizations are examining ways to improve their corporate management reporting systems. While many tools have been available over the past 10 years, executives have focused their financial and IT priorities on other initiatives. Now that improving performance has resurfaced as a critical factor, executives are exploring ways to improve corporate performance management.

    According to Gartner Research, only 10 percent of the Global 1000 companies have successfully implemented CPM. A CPM tool called Balanced Scorecard is used by more than half of the Global 1000. Yet only a handful of grocery chains have implemented this tool that Harvard Business Review has tagged as one of the major business ideologies of the past 75 years.

    This report summarizes the survey's key discoveries from comprehensive interviews of 65 senior executives of leading grocery chains.

    Discovery No. 1

    Real-time access will not improve strategic decisions.

    Executives have been conditioned to believe that receiving information faster will help them make better decisions. Yes, store and department managers require instant data access to make better ordering and stocking decisions. However, senior executives don't need real-time access to make strategic decisions.

    Discovery No. 2

    Lagging indicators will not insure future performance.

    Executives have been conditioned to believe that lagging indicators alone will help them make better decisions. Not so. Without leading indicators, how will an executive intuitively anticipate future opportunities? Do we really believe that Sam Walton relied on last year's performance to drive his future growth? By reconnecting with consumers and employees (leading indicators) through better tracking, retailers can learn to anticipate opportunities or thwart serious threats.

    Over 90 percent of grocery executives confirmed that their companies rely predominately on traditional quantitative and key performance indicators to measure performance. While these lagging indicators provide good insight into past performance, they indicate only one thing: past performance.

    Few grocery chains have some form of Balanced Scorecard, which provides both quantitative and qualitative metrics, even though other industries have discovered its value. Leading or qualitative indicators such as customer tracking surveys or employee morale surveys were rarely chosen as the most important measurement. However, leading chain executives mentioned customer tracking as an important measurement tool for their performance.

    Discovery No. 3

    Performance measurement tools must be inclusive.

    Executives have widely diverse views for improving their performance measurement tools, based on their management level within the company and the role they play in the organization.

    Chief executives desire better analytics and forecasting, yet c.i.o.'s, who have primary responsibility for data integrity, want to standardize reporting and eliminate or reduce customized reporting.

    While many organizations have become more networked and flexible, most grocery chains continue to operate with a command and control culture. Therefore, influential senior executives will continue to drive these decisions. CPM must include all levels of the company.

    Discovery No. 4

    Best practices will not improve future performance.

    Consultants push companies to implement best practices based on their years of managing projects across multiple companies, but leading retail chains have learned to rely on their own resources and capabilities to improve performance. This makes sense. No two organizations operate alike. No two executives make decisions alike. Therefore, CPM tools and technology will be unique for each company. Companies need to implement "our practices."

    Executives in this study did not feel strongly about using best practices to improve their CPM tools. The leading chains rely more on their own processes and tools. That is why they are leaders.

    Discovery No. 5

    Technology hasn't failed; companies have failed to implement.

    Technology has failed to meet strategic and financial expectations because expectations were set unrealistically high. Technology has enabled companies to improve productivity and capture value even though this value number has not been tracked to the dollar. The real technology frontier may not be in breakthrough killer applications as many consultants and solution providers would like us to believe. The next frontier will be killer implementation.

    Those who thought technology fell short generally held the title of c.e.o., c.f.o., or c.o.o. The c.i.o.'s, for the most part, disagreed.

    Retailers must take a hard look at how they will measure performance in the future. While c.e.o.'s, c.f.o.'s, and c.o.o.'s strongly believe CPM will be important to their companies' future, c.i.o.'s are slightly less enthusiastic.

    Patrick D. Heaney is c.e.o. of M>Prove Results, a firm that helps retail and consumer product companies improve performance measurement. He will present expanded findings of this study on Feb. 24 at FMI MarkeTechnics in Dallas.

    By Patrick D. Heaney
    • About Patrick D. Heaney

    Related Content

    Related Content