The Art of Performance Management

At most large companies, the performance management system is a hodgepodge of legacy systems. KPIs are not aligned across the organization. Different information systems categorize data differently. Decision rights as to who decides what data to collect are so distributed that there is no consistent approach to reporting across the entire company.

As a result, the finance organization spends an inordinate amount of time simply putting the data together and trying to resolve the inconsistencies so that executives can make apples-to-apples comparisons.

Too often, however, companies try to address the issue as if it were mainly a software problem. They focus on selecting the right vendor to build a state-of-the-art information system for performance management and “business intelligence.” And they make massive investments in new technology without first thinking through what kind of metrics really matter for the business or what kind of organizational interactions and governance are necessary to translate data into effective decision making.

There is a better way. Companies can significantly improve performance management without investing substantial resources in new IT systems. To do so, however, they need to step back and take a more strategic and holistic approach. The senior management team, led by the CFO, needs to start by identifying the metrics that really matter in guiding the business and building an organizational system for translating that data into actionable business insights and more effective decision making. Automation and software can be important enablers, but only when their use is informed by this strategic perspective.

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