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STRAYER UNIVERSITY

BUSINESS PERFORMANCE MANAGEMENT: HOW BPM CAN ASSIST MANAGEMENT IN MAINTAINING AND IMPROVING BUSINESS PERFORMANCE LEVELS IN THE CURRENT FINANCIAL C LIMATE.

A DIRECTED STUDY PROJECT SUBMITTED TO THE FACULTY OF THE GRADUATE SCHOOL OF BUSINESSS IN CANDIDACY FOR THE DEGREE OF MASTER OF SCIENCE IN MANAGEMENT INFORMATION SYSTEMS

TO DR. LAWRENCE R. NESS

Business Performance Management ii FALL 2009

CERTIFICATION AND APPROVAL This directed study project on Business Performance Management: How BPM can assist Management in maintaining and improving business, performance levels in the current financial climate. is submitted as my own research for approval of the Graduate School of Strayer University in candidacy for the degree of Master of Science in Management Information Systems. Submitted by Cora N. Malcolm, Date

Approvals

___________________________ , _________ Instructor DRP supervisor

Business Performance Management iii ABSTRACT The researcher seeks to understand how BPM, using BI or DSS can assist management in maintaining and improving business performance levels in the current financial climate. In the current period of recovery and restructuring, does BPM play a role in the Strategic Management and Decision making processes? Research into the history, concepts, and methodologies, of DSS, BI, BPM and SM shows that currently, BPM has become the most successful tool for the achievement of strategic management objective. BPM is more popular in most companies, and implemented with BI rather than DSS in achieving the strategic management goals. BPM has proven more useful with a BI foundation, than one with DSS foundation; BPM is easily adapts to the Strategic Management cycle.

Business Performance Management iv TABLE OF CONTENTS


ABSTRACT ............................................................................................................................. iii TABLE OF CONTENTS ......................................................................................................... iv LIST OF FIGURES ................................................................................................................... v CHAPTER 1: INTRODUCTION.............................................................................................. 1

Context of the Problem ................................................................................................... 1 Statement of the Problem ................................................................................................ 2 Research Questions ......................................................................................................... 3 Significance of the Study ................................................................................................ 3 The Definitions of Terms ...............................................Error! Bookmark not defined. Research Design and Methodology ................................................................................ 3 Limitations of the Study.................................................................................................. 4 Organization of the Study ............................................................................................... 4
CHAPTER 2: LITERATURE REVIEW................................................................................... 5

Introduction ..................................................................................................................... 5 Business Performance Management ............................................................................... 5 Business Intelligence .................................................................................................... 10 Decision Support Systems ............................................................................................ 13 Strategic Management .................................................................................................. 17
CHAPTER 3: Business Performance Management: Its History, Concepts and Methodologies.19

Introduction ................................................................................................................... 19 Research Analysis and Findings ................................................................................... 19


CHAPTER 4: BI Architecture & DSS: Concepts, Methodologies and Technologies ............ 27

Introduction ................................................................................................................... 27 Business Intelligence Architecture ............................................................................... 27 Decision Support Systems ............................................................................................ 30 Summary ....................................................................................................................... 34
CHAPTER 5: BPM in Strategic Management ........................................................................ 36

Introduction ................................................................................................................... 36 Data Collection/Research.............................................................................................. 36 Analysis......................................................................................................................... 41


CHAPTER 6: INTRODUCTION, SUMMARY, CONCLUSIONS AND RECOMMENDATIONS ........................................................................................................ 45

Introduction ................................................................................................................... 45 Summary ....................................................................................................................... 46 Conclusions and Recommendations ............................................................................. 51


APPENDIX A DSS Timeline ................................................................................................. 54 APPENDIX B Typical Key Performance Measures .............................................................. 56 REFERENCES ........................................................................................................................ 57

Business Performance Management LIST OF FIGURES

Figure 1: Evolution of BI .................................................................................................. 11 Figure 2: The Evolution of Managing Performance ......................................................... 21 Figure 3: Typical Key Performance Indicators ................................................................. 24 Figure 4: Six Sigma Methodologies ................................................................................. 25 Figure 5: BPM in Computer Software .............................................................................. 26 Figure 6: Components of Business Intelligence Architecture .......................................... 28 Figure 7: Performance Dashboard Sample View.............................................................. 40

Business Performance Management CHAPTER 1: INTRODUCTION Context of the Problem In todays world of high stakes deals, advanced technology, world recession, collapsing banking industry, and accounting scandals, companies small and large are obliged to

understand and manage their funds/accounts to maintain successful business performance. There have been a number of financial scandals over the past three decades; the new decade has brought with it some more notable scandals. Between 2000 and 2009, there were 35 notable accounting scandals. Some of the more notorious accounting scandals include ENRON, WorldCom, and AIG in the United States; and from Italy, Parmalat. These incidents have had far-reaching ripple effects on the business community at large, as well as, more directly on the accounting industry. The recent banking scandals have resulted in a collapse of the banking industry, and increased the pace of the world recession, as they occurred some of the major world financial centers. The collapse of the banking industry has pointed out that executives were conducting many unscrupulous practices in the business community with little care for the common investor, and the continuity and success of the business or corporation. Because of these scandals, the world has seen business reactions such as, declaration of bankruptcy, wind-up of business, and large governmental bailouts. There have also been criminal prosecution of executives and management officers of businesses, some resulting in jail time and or financial fines. On an industry basis a total overhaul and reform of legislation regulating Corporate Governance, Accounting Standards and Procedures, and the US Securities Exchange Commission procedures have come into effect. An

Business Performance Management

article on computing giant Dell showed that executive had manipulated the accruals and account balances, in order to meet Wall Street projections in the years prior to 2007 (Moltzen, 2007). The U.S. Securities and Exchange Commission and the U.S. Attorney General for the Southern District of New York, conducted their own investigations into the financial accounting and reporting practices of Dell. Because of these investigations, and their resultant announcements, Dell had to restate its earnings, thereby restating its share value. The result of this was the firing of a number of executives at Dell (Moltzen, 2007). The question that should be asked is, how, in this period of recovery and restructuring of businesses will Business Performance Management (BPM) play a role in the Strategic Management and Decision Making processes in business. Statement of the Problem In recent years, the world economies have experienced an economic and financial decline, commonly referred to as a recession. Many organizations have experienced decline in profits and in some cases have gone out of business. Due to huge losses in share and investment values, many investors and regulators require organizations to display significant control over all factors that impact corporate performance (Alenchery, 2005). The problem to be addressed is the effective incorporation of technology -- particularly BI architecture and or DSS -- in business corporate strategy to aid management in the maintenance and improvement of business performance levels to endure the current financial climate. This study will examining and discuss the ethos of BPM, encompassing the advantages and disadvantages of BI and DSS to BPM; A review of BI and DSS concepts, methodologies and technologies will enable the researcher to make recommendations on BPM technological systems to be used by organizations to achieve their SM objectives.

Business Performance Management Research Questions The main research question for this paper is: How Business Performance Management

can support management in the maintenance and improvement of business performance levels in the current financial climate. To respond to this question the following three questions will be addressed: RQ1. What is Business Performance Management (BPM) its history, concepts and methodologies? RQ2. What are the concepts, methodologies, and technologies of Business Intelligence (BI) architecture and Decision Support Systems? RQ3. How does BPM apply to SM? Significance of the Study The recent collapse of the banking and real estate industries and the world economys steep plunge into recession, businesses must tweak practices and find efficient solutions that will allow them to endure the recession and continue to be profitable. As such, the study could become an essentiality to many industries and businesses, across geographical boundaries and regions. This researcher hopes to facilitate corporate management by identifying BPM solutions and accessible options for continued profitability and triumph through Strategic Management. Research Design and Methodology In this study research will be qualitative in nature, conducted via the internet; reviewing articles from various journals, newspaper and organizational websites. The researcher will discuss the relationship between Business Intelligence, Decision Support Systems, Strategic Management, and Business Performance Management, and make recommendations on the best BPM solutions to attain corporate Strategic Management objectives.

Business Performance Management The review of relevant journals, white papers and available texts will aid in understanding BPM and its impact on Strategic Management in business. Once the qualitative information has been compiled and interpreted from the various sources recommendations will be made regarding optimal technological components for BPM, to ensure continued successful business performance. Limitations of the Study This study is limited to the technological advancements of business intelligence architecture and decision support systems. The study will acknowledge the existence of expert

systems and Knowledge Management systems not focus on them. The study is also limited to the financial impact of the worlds economic crisis and the technological impact on improving performance and decision making in organizations. Organization of the Study Chapter 1 provides and introduction the research topic; discussing the context and making the statement of the problem, it identifies additional sub-problems to be discussed in later chapters. Chapter 2 provides a literature review of BPM, its application under Strategic Management, and its relationships to Business Intelligence and Decision Support Systems. Chapters three through five discuss the three sub-problems. Chapter three addresses the research discussion in terms of sub-problem one, which discusses Business Performance Management highlighting the history, definition and concept, and methodologies of BPM; sub-problem two, it discusses the components of Business Intelligence architecture and Decision Support Systems concepts, methodology, and technologies. It also discusses sub-problem three analyzing and discussing BPM and Strategic Management; how BI architecture and DSS are used in both. Chapter 4 will tie the discussions together in the Summary and Conclusion.

Business Performance Management CHAPTER 2: LITERATURE REVIEW Introduction This chapter is an examination of the research literature on Business Performance

Management (BPM), Business Intelligence (BI), Decision Support Systems (DSS), and Strategic Management (SM). This examination or review will be split into four sections; the first discussion will focus on BPM; the second discussion focuses on BI; the third discussion on DSS; and, the fourth on SM. Business Performance Management According to a definition for BPM in the textbook, Decision Support and Business Intelligence Systems, business performance management has a number of names including BPM, corporate performance management (CPM), enterprise performance management (EPM), and strategic enterprise management (SEM), all defined as the management techniques, metrics, and related tools designed to assist companies in making high-level strategic decisions. (Turban, Aronson, Liang, & Sharda, 2007, p. 386) Alenchery defines CPM as an approach to bring in systematic and integrated improvements across the performance management cycle (Alenchery, 2005). The BPM Standards Group defines it as a framework for organizing, automating, and analyzing business methodologies, metrics, processes, and systems to drive the overall performance of the enterprise. IT helps organizations translate a unified set of objectives into plans, monitor execution, and deliver critical insight to improve financial and operational performance (Turban, et al., 2007, p. 386). In a discussion of the history of BPM, Decision Support and Business Intelligence Systems (Turban, et al., 2007, p. 386) stated that, BPM is an outgrowth of BI An article on Ezine Articles by Josh Riverside, states, corporate performance management was introduced in

Business Performance Management 2001 as a result of technological improvements to BI and advanced management techniques (Riverside, 2006). This article also tells us the process through which DSS, BI and finally BPM emerged as a solution for real-time management reporting issues. An article from IBM on corporate performance management, purports that business or corporate performance management is an area of business intelligence. The area concerned with monitoring and managing the performance of the enterprise - with enterprise planning, consolidation and modelling capabilities in accordance with Key Performance Indicators (KPI) (Search Data Management, 2008). The BPM Standards Group released a framework for the installation of BPM in business enterprises in 2004. According to the article BPM Standard Group Releases Framework, on the Eweek.com website, the framework recommends a technological architecture that facilitates

information flow from operational systems to planning systems and between functions within the organization. It must also facilitate action taken based on the metrics generated, such as, revisions to plans, targets and operational activity. That is the last step of the recommended process. The first step is to set goals and metrics, then to set planning and budgeting processes, both financial and operational. Then monitor and analyze data and compare it with the plan. The textbook, Decision Support and Business Intelligence Systems (Turban, et al., 2007, p. 387), summarizes the BPM process as encompassing a closed-loop set of processes that link strategy to execution in order to optimize business performance, as described below. The process loops because it tends to be never ending; the process includes the following phases: Strategize -- in this phase, management identifies the strategic plans for the organization and define the strategic maps to be utilized for achieving the strategic plan. Plan -- in this phase management, produce plans, budgets and scenarios, technically an analysis of the organizations

Business Performance Management requirements to meet the strategic plans. Out of these plans, specific projects and initiatives are identified for the way forward. Monitor -- in this phase, management implements differing methods of assessing and monitoring the effectiveness of the project or initiative in achieving the goals of the strategic plan. They utilize scorecards, reports, and alerts to achieve monitoring. Act & Adjust -commonly referred to as feedback, at this phase the analysis of phase 3 is used to produce

forecasts and models for the way forward. Any adjustments required are made to the system and the process starts again. The discussion by Turban, et al goes on to say that the loop entails that optimum performance is accomplished by establishing goals and objectives, formulating initiatives and plans to achieve those goals, scrutinizing actual performance against the goals and objectives, and taking corrective action. Alenchery discusses and defines the closed-loop process as a performance management cycle. He goes on to say that, the performance management cycle is considered to be the entire array of management processes that commences with strategy formulation and is followed by alignment of corporate objectives and measures across levels. Vigorous performance analysis is the next step. Finally, regimented review and strategy refinement grounded in business insights complete the cycle (Alenchery, 2005). According to figurative evidence provided by Alenchery, the four areas of the Performance Management Cycle lead to competitive advantage for organizations. The four phases of The Performance Management Cycle are discussed below: Strategy Formulation This phase requires management to formulate strategies to achieve the corporate vision of the organization. This entails: Understanding stakeholder needs; Analysing market dynamics; Define strategic objectives and measures; and develop operational plans. Strategy

Business Performance Management Execution This phase requires management to align the entire organization along key strategic objectives. This entails: Communicating strategy and plan; Aligning objectives and measures across organization levels; Allocating resources; and Managing organizational change. Performance Analysis In this phase, management must measure the organizations performance and track strategic initiatives. This entails: Modelling the business information architecture; Tracking progress along Key Performance Indicators (KPIs); Forecasting performance; and Analyzing What-If scenarios. Continuous Optimization In this phase,

management conducts collaborative planning for holistic improvements. This entails: Reviewing performance; Collaborating with other decision makers; Generating integrated insights; and Refining strategy and execution plan. The Performance Management Cycle evidences the involvement of strategic management and planning in the performance management cycle. Turban, et al tells us that performance measurement is more than simply keeping score. An effective and efficient performance measurement system should help to, align top-level strategic objectives and bottom-level initiatives; identify opportunities and problems in a timely fashion; determine priorities and allocate resources based on those priorities; change measurements when the underlying processes and strategies change; delineate responsibilities, understand actual performance relative to responsibilities, and reward and recognize accomplishments; take action to improve processes and procedures when the data warrant it; and plan and forecast in a more reliable and timely fashion. (Turban, et al., 2007, p. 402) The discussion goes on to say, A holistic or systematic performance measurement framework is required to accomplish these aims, as well as others. (Turban, et al., 2007, p. 402) Over time various systems were proposed, Probably the best-known and most widely used

Business Performance Management performance management system is the Balanced Scorecard (BSC) (Turban, et al., 2007, p. 402).

BSC is defined by Balanced Scorecard Institute as a strategic planning and management system that is used extensively in business and industry, government, and non-profit organizations worldwide to align business activities to the vision and strategy of the organization, improve internal and external communications, and monitor organization performance against strategic goals (Balanced Scorecard Institute, 1998-2009). The BSC concept was proposed by Robert Kaplan (Harvard Business School) and David Norton in 1996, as a performance measurement system (Balanced Scorecard Institute, 1998-2009). Turban, et al, tells us that BSC carries out its measurement objective through the translation of an organizations vision and strategy into a set of interrelated financial and nonfinancial objectives, measures, targets, and initiatives. These relationships among the financial and nonfinancial objectives of the Balanced Scorecard are discussed below. Turban, et al goes on to identify the three nonfinancial perspectives as: 1. Customer. These objectives define how the organization is perceived by its customers if it is to accomplish its vision. 2. Internal business process. These objectives specify the operatives the organization must master in order to satisfy its shareholders and customers. 3. Learning and growth. These objectives indicate how an organization can improve its adaptability and improve in order to achieve its vision. (Turban, et al., 2007, p. 403) They go on to say, The term balance appears because the combined set of measures is intended to encompass indicators that are, financial and nonfinancial; leading and lagging;

Business Performance Management 10 internal and external; quantitative and qualitative; and short term and long term. Turban, et al also pointed out that as a methodology of strategic management, BSC enables an organization to align its actions and strategies (Turban, et al., 2007, p. 403). Jan Aertsen tells us, once a strategic map and objectives have been identified, key performance indicators (KPI) can be used to monitor performance. The specific measures should be based on an organizations strategy (Aertsen, 2007). Appendix B identifies some Typical Key Performance Measures utilized in Balanced Scorecards. Another method of implementation for BPM is known as Six Sigma. The General Electric website tells us that, Six Sigma is a greatly disciplined process that aids management and employees in focusing on developing and delivering near perfect products and services (General Electric). Motorola that today enjoys extensive application in many sectors of industry initially implemented Six Sigma. Six Sigma seeks to enhance the quality of process outputs by detecting and eradicating the causes of defects (errors) and variations in manufacturing and business processes (Six Sigma). It employs an array of quality management methods, including statistical methods, and establishes a special infrastructure of people within the organization (such as "Black Belts") who are experts in these methods. Each Six Sigma project implemented in an organization follows a distinct sequence of steps and has quantified financial targets (cost reduction or profit increase) (Six Sigma). Business Intelligence Turban et al, defines BI as an umbrella term that combines architectures, tools, databases, analytical tools, applications, and methodologies (Turban, et al., 2007, p. 24). BI has a number of tools that aid organizations with improving their overall performance through assistance with planning, tracking, monitoring, analyzing and reporting on the business activities.

Business Performance Management 11 Currently a shift exists in the BI sector today, because businesses are moving towards achieving real time BI, This change is partly due to advances in technology and the constant state of flux of business conditions and environments (Azvine, Cui, & Nauck, 2005). The term was thought up by the Gartner Group in the mid-1990s, however as a concept it is much older; its roots lie in the MIS reporting systems of the 1970s. (Turban, et al., 2007, p. 2425) Below is a Figure 1: Evolution of BI showing the evolution business intelligence:

Figure 1: Evolution of BI A discussion in the article Create an intelligent and flexible solution with BPM, Business Rules and Business Intelligence: Data warehouse visibility states that BI evolved from the traditional model. A model where transactional data is acquired and disseminated to a staging server through a batch process normally scheduled to run daily or weekly; through to the most advanced closed-loop BI model, where transactional data is automatically captured and incorporated into the data warehouse which supplies the business intelligence tools, such as OLAP or mining tools (Medicke, Mago, & Chen, 2003).

Business Performance Management 12 Turban, et al discuss the benefits of BI, which they have identified through research of a survey, to be timely and improved reporting accuracy (81 percent), effective and efficient decision making (78 percent), effective and efficient customer service (56 percent), and increased revenue returns (49 percent). They also pointed out that many of the benefits of BI are intangible (Turban, Aronson, Liang, & Sharda, 2007). In their research Turban, et al noted, the most universal application areas of BI are general reporting, sales and marketing analysis, planning and forecasting, financial consolidation, statutory reporting, budgeting, and profitability analysis. According to Turban et al, BI architecture depends on its applications; MicroStrategy Corp. characterizes five styles of BI and offers special tools for each (Turban, et al., 2007, p. 27). The tools are categorized as follows: Spreadsheets Reporting and querying software OLAP Digital Dashboards Data mining Process mining Business performance management (Turban, et al., 2007).

With the exception of spreadsheets, many of these tools are standalone tools, suites of tools, components of ERP systems, or components of software targeted to a specific industry. The tools are regularly packaged in data warehouse appliances.

Business Performance Management 13 Decision Support Systems Decision Support System Resources defines a DSS as an interactive computer-based or subsystem intended to help decision makers use communications technologies, data, documents, knowledge and or models to identify and solve problems, complete decision process tasks, and make decisions (Decision Support System Resources). The DSS assists management by retrieving, summarizing and analysing decision relevant data (Power, What is a Decision Support System?, 1997). A decision support application might typically gather and present information such as, an inventory of all current information assets (including legacy and relational data sources, cubes, data warehouses, and data marts), comparative sales figures between one week and the next, projected revenue figures based on new product sales assumptions, and the consequences of different decision alternatives, given past experience in a context that is described (Decision Support Systems, 2006). The text goes on to discuss the components of a DSS; it states a DSS encompasses three primary components: 1. Model management to apply the appropriate model; 2. Data management to select and handle the appropriate data; and 3. Dialog management to facilitate the user interface to the DSS. (Pearson Prentice Hall, 2006) A brief discussion of the components of the DSS, as put forward by Worldwide Excellence in Business Outsourcing website, state that the components of a DSS include: Model Management Subsystem, Specialized databases, and User interface, it may also include a Knowledge-based Subsystem, May include External Models and Mail/Collaboration Subsystem. (Worldwide Excellence in Business Outsourcing, 2004)

Business Performance Management 14 The history of DSS as discussed by DJ Power in A Brief History of Decision Support Systems, tells us that in 1960s, researchers began systematically studying the use of computerized quantitative models to assist in decision making and planning (Power, A Brief History of Decision Support Systems, 2007). The article goes on to discuss the research and results of leading researchers in the field of computerized decision-making support systems. In 1970 business journals started publishing articles on management decision systems, strategic planning systems, and decision support systems. The first use of the term DSS was in a Sloan Management Review article by Gorry and Scott Morton, in 1971. They argued that Management Information Systems primarily focused on structured decisions and suggested that the supporting information systems for semi-structured and unstructured decisions should be termed Decision Support Systems (Power, A Brief History of Decision Support Systems, 2007). The article goes on to discuss other milestones of the history of DSS, as listed in Appendix A: DSS Timeline. It continued the discussion of DSS theoretical development by pointing out that in the mid-to late 1970s, both the practice and theory related issues of DSS were being debated at academic conferences, in US and around the world. At the same time, around 1978 Morton and Keens DSS textbook, provided the first broad behavioral orientation to decision support system analysis, design, implementation, evaluation and development; it became an influential textbook, that provided a framework for teaching DSS in business schools. However, McCosh and Mortons textbook (1978) was more influential in Europe (Power, A Brief History of Decision Support Systems, 2007). Power goes on to say that sin 1980 Steven Alter published his MIT doctoral dissertation, in which he stated that decision support systems could be categorized in terms of the generic

Business Performance Management 15 operations that can be performed by such systems. Alter categorized the DSS into seven distinct types, 1. File drawer systems 2. Data analysis systems 3. Analysis information systems 4. Accounting and Financial models 5. Representational models 6. Optimization models 7. Suggestion models From the list above we can see that the generic operations extended from extremely data-oriented to extremely model-oriented (Power, A Brief History of Decision Support Systems, 2007). Turban, et al, in Decision Support and Business Intelligence Systems, discusses further detail the different components of the Decision Support System. Turban et al, hold that a DSS application can be composed of four subsystems. They describe each subsystem as follows: 1. The Data Management Subsystem includes a database that contains relevant data for the situation and is managed by software called the database management system (DBMS). The data management subsystem can be interconnected with the corporate data warehouse, a repository for corporate relevant decision-making data. Usually the data restored or accessed via a database Web server. 2. The Model Management Subsystem is a software package that includes financial, statistical, management science, or other quantitative models that provide the systems analytical capabilities and appropriate software management. Modeling languages for building custom models are also included.

Business Performance Management 16 This software is often a model base management system (MBMS). This component can be connected to corporate or external storage of models. Model solution methods and management systems are implemented in Web development systems (such as Java) to run on application servers. 3. The User Interface Subsystem the user communicates with and commands the DSS through the user interface subsystem. The user is considered part of the system. Researchers assert that some of the unique contributions of DSS are derived from the intensive interaction between the computer and the decision maker. The Web browser provides a familiar, consistent graphical user interface (GUI) structure for most DSS. 4. The Knowledge-based Management Subsystem can support any of the other subsystems or act as an independent component. It provides intelligence to augment the decision makers own. It can be interconnected with the organizations knowledge repository (part of a knowledge management system [KMS]), which is sometimes called the organizational knowledge base. Knowledge may be provided via Web servers. Many artificial intelligence methods have been implemented in Web development systems such as Java and are easy to integrate into the other DSS components. (Turban, et al., 2007, p. 9294) Turban et al, go on discuss the integration of the DSS components. They state that they can be connected to a corporate intranet, to an extranet, or to the Internet. Typically the components communicate via Internet technology; Web browsers typically provide the user interface (Turban, et al., 2007, p. 96).

Business Performance Management 17 The benefits of a DSS are identified as follows: 1. Improves personal efficiency 2. Expedites problem solving 3. Facilitates interpersonal communication 4. Promotes learning or training 5. Increases organizational control 6. Generates new evidence in support of a decision 7. Creates a competitive advantage over competition 8. Encourages exploration and discovery on the part of the decision maker 9. Reveals new approaches to thinking about the problem space. Strategic Management The definition for Strategic Management, as provided by the Virtual University of Pakistan, states Strategic Management can be defined as the art and science of formulating , implementing and evaluating cross-functional decisions that enable an organization to achieve its objective (Virtual University of Pakistan). The article from the University of Pakistan identifies the benefits of SM as follows; the major benefits of SM are, proactive in shaping the firms future, initiates and influence action, and formulate better strategies (systematic, logical, rational approach). Financial benefits are, improved productivity, improved sales, and improved profitability; non-financial benefits are, increased employee productivity, improved understanding of competitors strategies, greater awareness of external threats, understanding of performance reward relationships, better problem-avoidance, and lesser resistance to change (Virtual University of Pakistan).

Business Performance Management 18 Professor Emeritus, Glenn Gomes, Ph. D. discusses strategic management and its principles as defined by Richard Irwin. Discussions of the principles highlight pursuing strategic objectives that build a stronger long-term competitive position. It goes on to say, Innovative state of the art support systems can be a basis of competitive advantage, if they give a firm capabilities that rivals cannot match (Gomes). The use BPM systems with either BI or DSS base could prove advantageous to the corporations objectives to survive the current economic crises. BI Architecture and DSS are types of information systems, in actuality they are types of Expert Information Systems. Hardcastle defines the role of information systems as to provide information to management which will enable them to make decisions which ensure that the organization is controlled (Hardcastle, 2008). Hardcastle goes further to say control systems can be classified into open-loop and closed-loop systems (Hardcastle, 2008). Both BI Architecture and DSS are advanced closed loop systems. Hardcastle defines Business Information Systems (BIS) as a group of interrelated components that work collectively to carry out input, processing, output, storage and control actions in order to convert data into information products that can be used to support forecasting, planning, control, coordination, decision making and operational activities in an organization (Hardcastle, 2008). In todays business environs information technology is a common business tool, a standard component utilized extensively in an organization today is a personal computer the most basic BIS. Computerized BISs are prevalent in business today because they provide organizations with advantages such as speed, accuracy and dependability (Hardcastle, 2008), providing in many cases a competitive advantage to organizations.

Business Performance Management 19 CHAPTER 3: Business Performance Management: Its History, Concepts and Methodologies. Introduction This chapter will be a discussion of the concept and methodologies of BPM. This discussion will encompass the histories advantages and disadvantages of BPM. Business Performance Management has become a powerful management tool in recent years and decades. Many would say that it has provided executive management with real-time access to a little too much information. This statement has been evidenced recently; however, it can be said that the information access could have been used to the benefit of both the company and its stakeholders, rather than to their detriment. In todays world of high stakes deals, advanced technology, world recession, collapsing banking industry and accounting scandals, companies must understand and manage their funds and accounts to maintain successful business performance. The question must now be asked, how in this period of recovery and restructuring for business will Business Performance Management (BPM) play a role in the Strategic Management and Decision Making processes in business? Research Analysis and Findings A review of many sources provided a consensus on the definition of BPM in general terms, for the purposes of this directed research project we will utilize the definition provided by the BPM Standard Group. BPM is defined as, a framework for organizing, automating, and analyzing business methodologies, metrics, processes, and systems to drive the overall performance of the enterprise (Riverside, 2006). BPM assists management/decision-makers in transmuting the organizations strategic plan objectives into key performance indicators and

Business Performance Management 20 plans, monitors implementation and provides critical feedback to improve the financial and operational performance of the organization. Business Performance Management was and still is considered by many researchers and practitioners, as an offshoot of Business Intelligence (Turban, et al., 2007, p. 386) it was introduced to the business community under the designation of Corporate Performance Management (CPM), in 2001 (Riverside, 2006). However, the earliest form of CPM emerged in the 1970s with the introduction of Decision Support Systems to the business environment (Riverside, 2006). Due to the limitations of DSSs, the business community was introduced to Executive Information Systems (EIS) in 1980 (Riverside, 2006). The alias Business Intelligence, (BI) replaced EIS in 1990, when it was it was suggested that EIS had been improved through the introduction of computer technologies (Riverside, 2006). As technology is continuously improving on itself, management was able to improve and introduce advanced management techniques. As a result of integrating the two, the methodology of CPM or BPM was introduced in 2001 (Riverside, 2006). Figure 2: The Evolution of Managing Performance below demonstrates the evolution of managing performance from 1970 to present day (Coveney, 2003). It shows that as technology improves the pace of business accelerates; with the improved technology came specialized solutions, such as customer relationship management (CRM) systems. Management quickly realized that whilst the new technology was good and much needed, businesses required a means that effectively managed and employed the increased levels of information being provided.

Business Performance Management 21

Figure 2: The Evolution of Managing Performance

In the 1990s, many articles were published identifying new management methodologies that focused on how better to implement the organizations strategic plans. One of the more popular methodologies introduced was the Balanced Scorecard (BSC). BSC reiterated the need for organizational strategic planning and monitoring all aspects of the business (Coveney, 2003). Management soon realized that these methodologies were not complete on their own; through combining the different methodologies with other management processes and technology, management were able to effectively influence the implementation of corporate strategy, thereby heralding the entrance of Corporate/Business Performance Management (Coveney, 2003). In 2004, the BPM Standard Group released a framework for the installation of BPM in business enterprises (Callaghan, 2004). The framework provided by the BPM Standards Group recommends a technological architecture that facilitates information flow from operational systems to planning systems and between functions within the organization. It must also

Business Performance Management 22 facilitate action taken based on the metrics generated, such as, revisions to plans, targets and operational activity. That is the last step of the recommended process. The first step is to set goals and metrics, then to set planning and budgeting processes, both financial and operational. Then monitor and analyze data and compare it with the plan. (Callaghan, 2004). BPM is a closed-loop set of process that link strategy to execution in order to optimize business performance (Turban, et al., 2007, p. 387). The discussion by Turban, et al goes on to say that the loop entails that optimum performance is accomplished by establishing goals and objectives, formulating initiatives and plans to achieve those goals, scrutinizing actual performance against the goals and objectives, and taking corrective action. (Turban, et al., 2007, p. 386-387). The data employed by the recommended framework comes from various sources (Callaghan, 2004). Research has shown that performance management encompasses more than simply keeping score (Turban, et al., 2007, p. 402). Turban et al, tells us that, to be effective, a systematic performance management framework should work toward: Aligning top-level strategic objectives and bottom-level initiatives, Identifying opportunities and problems in a timely manner, Determining priorities and allocate resources, Changing measurements when necessary as strategies change, Among other aims, it should also delineate responsibilities, understand actual performance relative to responsibilities, and reward and recognize accomplishments, Taking action to improve processes and procedures when the data warrant it, and

Business Performance Management 23 Planning and forecasting in a more reliable and timely manner (Turban, et al., 2007, p. 402). As previously stated many methodologies exist for the implementation of the BPM framework. Some of these include Six Sigma, Balanced Scorecard, Activity-Based Costing (ABC), Total Quality Management, Economic Value-add, and Integrated Strategic Measurement. Many researchers and businesses have identified the Balanced Scorecard (BSC) method as the most widely adapted for the implementation of BPM in an organization (Turban, et al., 2007, p. 402). The BSC method, as Bill Hickman tells us, came about in 1990 as a direct response to the rather narrow focus that shareholders had of deciding a companys performance strictly on financials. David Norton and Robert Kaplan, at the time conducted a far-reaching multi-company study to identify new and different ways to measure corporate performance (Hickman, 2003). The BSC transmutes its measurement objective through the translation of an organizations vision and strategy into a set of interrelated financial and nonfinancial objectives, measures, targets, and initiatives. (Turban, et al., 2007, p. 402). The Vision and Strategy of the organization is interrelated and integrated in all four objectives. Typically, the non-financial objectives or perspectives are identified by Turban et al, as: 1. Customer. These objectives define how the organization should appear to its customers if it is to accomplish its vision. 2. Internal business process. These objectives specify the processes the organization must excel at in order to satisfy the shareholders and customers.

Business Performance Management 24 3. Learning and growth. These objectives indicate how an organization can improve its ability to change and improve in order to achieve its vision (Turban, et al., 2007, p. 403). The combined set of measures should comprise markers that are, financial, nonfinancial, leading and lagging, internal and external, quantitative and qualitative, and short-term and longterm (Turban, et al., 2007, p. 403). In satisfaction of its function as a strategic management methodology, BSC facilitates an organization in aligning its actions with its overall strategies (Turban, et al., 2007, p. 403-405). Under BSC and by extension BI, key performance indicators (KPIs) should be derived from the organizations strategic plan and used to track performance in an organization. Once the strategy map and strategic objectives of said plan, have been identified (Aertsen, 2007); Examples of typical performance measures or KPIs are identified by and presented in Figure 3: Typical Key Performance Indicators below:

Table of Typical KPIs Financial


1. 2. 3. 4. 5. Cash flow Return on Investment Financial Result Return on Capital Employed Return on Equity 9.

Internal Business Processes


6. 7. 8. Number of Activities Opportunity success rate Accident ratios & Environment compatibility Overall equipment effectiveness

Learning and Growth


10. Investment Rate 11. Illness rate 12. Internal Promotions % 13. Employee Turnover 14. Gender Ratios

Figure 3: Typical Key Performance Indicators One other popular method of implementation for BPM is known as Six Sigma. The I Six Sigma website defines Six Sigma as a disciplined, data-driven approach and methodology for eliminating defects (driving towards six standard deviations between the mean and the nearest

Business Performance Management 25 specification limit) in any process from manufacturing to transactional and from product of service (Six Sigma). Initially Six Sigma was implemented by Motorola and today enjoys widespread application in many sectors of industry Six Sigma strives to enhance the quality of process outputs by detecting and eradicating the causes of defects (errors) and variations in manufacturing and business processes employing a measurement-based strategy (Six Sigma). . Every Six Sigma project implemented in an organization follows a distinct sequence of steps, and has quantified financial targets (cost reduction or profit increase). There are two fundamental Six Sigma methods as defined in Figure 4: Six Sigma Methodologies below (Six Sigma).

Figure 4: Six Sigma Methodologies

For the purposes of this research project, we will look at the two methodologies mentioned above, in more detail as the discussion continues. However, Figure 5: BPM in Computer Software (below), provides an idea of what BPM looks like in computer software. We can see that all areas of the BPM framework can be encompassed in computer software. This software can be represented in both BI and DSS.

Business Performance Management 26

Figure 5: BPM in Computer Software

Business Performance Management 27 CHAPTER 4: BI Architecture & DSS: Concepts, Methodologies and Technologies Introduction This chapter will be a discussion of the concept and methodologies of BI architecture and DSS. This discussion will encompass the histories, and advantages and disadvantages of BI and DSS. The history of BPM has evidenced that BI is, in actuality, a primary level of BPM. Many definitions for BI exist out in the ether. Review of a sample of these definitions aided in providing the definition that bears merit for this research project. Turban et al, defines BI as an umbrella term that combines architectures, tools, databases, analytical tools, applications, and methodologies (Turban, et al., 2007, p. 24). Business Intelligence Architecture BI has a number of tools that aid organizations with improving their overall performance through assistance with planning, tracking, monitoring, analyzing and reporting on the business activities. Figure 6: Components of Business Intelligence Architecture below, shows the components of BI architecture inclusive of the end users.

Business Performance Management 28

Figure 6: Components of Business Intelligence Architecture Figure 1: Evolution of BI shows the evolutionary models of Business Intelligence; BI began with a traditional model, a batch process model that would normally be run on a daily or weekly basis a model that was more commonly used in payroll processing. Once processed the information is transferred to the data warehouse where reconciled and stored for access by end users of reporting systems. (Medicke, Mago, & Chen, 2003). The evolutionary process of BI continued until a closed-loop process was achieved; in the closed-loop, process of BI

Business Performance Management 29 transactional data is automatically captured and integrated into the data warehouse. The data is then fed to BI tools such as OLAP or mining tools; the information produced is then fed to the decision makers in the form of recommended actions (Medicke, Mago, & Chen, 2003). This process forms a closed-loop, which affords an organization the opportunity to achieve a zero latency environment. In a zero latency environ, management of organizations are able reduces the business decision to action period through the interjection of analytics to day-today business operations (Medicke, Mago, & Chen, 2003). Figure 6: Components of Business Intelligence Architecture demonstrates the four major components to BI Architecture: The first component, Data Warehouse is where raw or source data is stored, catalogued and processed to produce reports and other end user documents. In the data warehouse environ we find many of the BI tools, such as OLAP (Turban, et al., 2007, p. 202); The second component is Business Analytics, where end users enter the process for the second time, the data is used by management to produce reports which aid in the decision making process, employing tools such as spreadsheets, reporting and querying software, digital dashboards, data mining, and process mining (Aertsen, 2007); The third component is Performance and Strategy where the reporting results of business analytics brings executives and managers to BPM. This is where programs such as Balanced Scorecard, Performance Dashboards, and Six Sigma. Information produced by these programs aid management in the strategic management process by reporting the case of the scorecards or dashboards against Key Performance Indicators (Turban, et al., 2007). The fourth component, User Interface can be incorporated into either of the other three components, without the end user the BI system is just that a system without a clear purpose, if

Business Performance Management 30 people do not use it. Turban et al, reminds us that BI Architecture is dependent on its applications which are special tools for the five styles of BI; BI styles are identified as Report Delivery and Alerting; Enterprise Reporting; Cube Analysis; Adhoc Queries; and Statistics and Data Mining.

The common application areas for BI tools are general reporting, sales and marketing analysis, planning and forecasting, financial consolidation, statutory reporting, budgeting, and profitability analysis (Turban, Aronson, Liang, & Sharda, 2007). Research shows four major benefits to BI, and they are considered, intangible benefits, these are, timely and improved reporting accuracy, effective and efficient decision making, effective and efficient customer service, and increased revenue returns. (Turban, et al., 2007, p. 28) Decision Support Systems BI is not the only technological method that can be employed in the implementation of BPM; Decision Support Systems (DSS) can be used as well. Decision Support System Resources defines a DSS as an interactive computer-based or subsystem intended to help decision makers use communications technologies, data, documents, knowledge and or models to identify and solve problems, complete decision process tasks, and make decisions (Decision Support System Resources). Turban et al points out that DSS can be, either an umbrella term to describe any computerized system that supports decision making in an organization; or, a specific application. For the purposes of this study, the former reference applies.

Business Performance Management 31 DSS aids users/managers in compiling useful information from raw data, documents, personal knowledge, and or business models. Some examples of this information are, an inventory of current information assets, comparative weekly sales figures, and projected revenue figures based on product sales assumptions (Pearson Prentice Hall, 2006). The scholarly text CIS 500: Information Systems for Decision Making identifies three primary components of a DSS, they are; Model management a software package that includes financial, statistical, management science, or other quantitative models that provide the systems analytical capabilities and appropriate software management, it can be connected to corporate or external storage of models; Data management -- a database that contains relevant data for the situation and is managed by the DBMS software; and dialog management to facilitate the user interface to the DSS. (Pearson Prentice Hall, 2006) (Turban, et al., 2007, p. 93) In integrating the DSS components, they can be connected to a corporate intranet, an extranet, or the internet; typically, they communicate via internet technology, and web browsers provide the user interface. Figure 7: Decision Support System - Conceptual Model below shows us that in addition to the three primary components mentioned above, the DSS may also include: Knowledge-based subsystem; External Models; and Mail/Collaboration Subsystem (Worldwide Excellence in Business Outsourcing, 2004).

Business Performance Management 32

Figure 7: Decision Support System - Conceptual Model

Historical research of DSS denotes that in the 1960 researchers began focusing on computerized quantitative models to assist in decision-making and planning (Power, A Brief History of Decision Support Systems, 2007). In the 1970s, articles were being published in business journals, on management decision systems, strategic planning systems, and decision support systems (Power, A Brief History of Decision Support Systems, 2007). For historical information on DSS, see Appendix A, a table on the historical timeline of DSS. Powers articles shows that in 1980 Steven Alter published his MIT doctoral dissertation, in which he stated that DSS generic operations could be categorized into seven distinct types: 1. File drawer systems, 2. Data analysis systems, 3. Analysis information systems, 4. Accounting and Financial models,

Business Performance Management 33 5. Representational models, 6. Optimization models, and 7. Suggestion models. The list above shows that those categories ranged from extremely data-oriented to extremely model oriented (Power, A Brief History of Decision Support Systems, 2007). In the 1980s, researchers and practitioners of DSS began developing DSS applications; these theories of DSS applications are: 1. Model-Driven DSS emphasizes access to and manipulation of financial, optimization and/or simulation models. They are simple quantitative models that provide the most elementary level of functionality (Power, A Brief History of Decision Support Systems, 2007). 2. Data-Driven DSS emphasizes access to and manipulation of a time-series of internal company data and sometimes external and real-time data. They are typically simple file systems accessed by query and retrieval tools that provide the most elementary level of functionality (Power, A Brief History of Decision Support Systems, 2007). 3. Communications-Driven DSS utilizes network and communications technologies to facilitate decision-relevant collaboration and communication. Communication technologies are the dominant architectural component. Tools include groupware, video conferencing and computer-based bulletin boards (Power, A Brief History of Decision Support Systems, 2007). 4. Document-Driven DSS utilizes computer storage and processing technologies to provide document retrieval and analysis. Large document databases may

Business Performance Management 34 include scanned documents, hypertext documents, images, sounds and video. A search engine is a primary decision-aiding tool associated with a document-driven DSS (Power, A Brief History of Decision Support Systems, 2007). 5. Knowledge-Driven DSS can suggest or recommend actions to managers. These are person-computer systems with specialized problem-solving expertise, that consists of knowledge about a particular domain, understanding of problems within that domain, and skill at solving some of these problems (Power, A Brief History of Decision Support Systems, 2007). 6. Web-based DSS World-wide Web and global Internet provided a technology platform for further extending the capabilities and deployment of computerized decision support. Summary A comparison of BI and DSS shows that they have very similar architecture, with one fundamental difference; BI requires a data warehouse in its structure, whereas it may be optional in a DSS architecture. This is evidenced in figures 1 and 4. On this point, alone it can be said that BI is more suitable to large organizations; however, DSS can be suitable for any type of organization (Turban, et al, 2007, p. 29-30). The DSS structure more actively supports specific decision-making and BI systems support the decision support process indirectly by providing timely and accurate information (Turban, et al., 2007, p. 29). This situation will continue to change as more decision support tools are added to BI software packages (Turban, et al., 2007, p. 29). BI systems consist of commercially available tools and components that are fitted to an organizations needs (Turban, et al., 2007, p. 29). In producing DSS the organization may be interested in constructing solutions

Business Performance Management 35 to much-unstructured problems; this means that the user may have to do additional programming to provide or customize solutions (Turban, et al., 2007, p. 29). Most of DSS methodologies and some of its tools were produced in academia, whereas the software companies developed and marketed BI technologies and tools ((Turban, et al., 2007, p. 29). The biggest similarity between DSS and BI is that, many BI tools can also be considered DSS tools. An initial review shows that both DSS and BI can be employed with BPM.

Business Performance Management 36 CHAPTER 5: BPM in Strategic Management Introduction All discussions of BPM tell that in order to be effective it must begin with the organizations strategy. This brings Strategic Management into play. Strategic Management is defined as the art and science of formulating, implementing and evaluating cross-functional decisions that enable an organization to achieve its objectives (Virtual University of Pakistan). The article goes on to discuss the benefits of SM to business, the major benefits include proactively shaping the firms future, initiating and influencing action, and formulating better systematic, logical, and rational strategies (Virtual University of Pakistan). Data Collection/Research The SM process and ongoing process requires that executive management develops and revises the organizations strategy the following are the steps to be taken in the development of an organizations strategy and or strategic plan. The steps are: Develop the strategic mission and vision of the organization; Set the objectives of the organization; Craft a strategy to achieve the objectives set; Implementing and executing the strategy set; and evaluating and correcting the strategic plan and strategies where and when required. (Irwin, 1995) SM process goes through three stages, strategy formulation, strategy implementation and strategy evaluation. Once the organizations strategic plan is developed, management must construct performance indicators to provide measurement of the SM plan for an organization. Generally, the strategy measures are knows as Key Performance Indicators (KPI). Once the measures or KPIs are selected the organizations management must decide on targets for the organization, and the processes that would be help the organization to achieve its strategic goals. The organization should ensure that the human resources assets are properly

Business Performance Management 37 trained, and have received a copy of the KPIs and strategic plans of the organization. The final stage in this is the technology (Coveney, 2003). Once the organization has its business strategy and measures in place, the tools purchased should be selected to assist in achieving the strategic aims and goals of the organization (Coveney, 2003). In order to implement an effective BPM the following rules should be adhered to: A multi-dimensional BPM system that describes each option separately. The dimensions, dimension members, business rules and data of the BPM should be a common set. Financial intelligence should be an integral function of the BPM system; and should automatically understand the different measurement types when processing data. Measures must carry business rules that avail access to values in any other measure, dimension, and dimension member combination. This capability allows the setting up of allocation rules that based on the volume of product that was budgeted by each. The concept of time is a critical criteria for BPM systems. First, financial accounting cycles of any length are supported; Next, a BPM models promote historical comparisons and trend analysis because they can hold data for any length of time both in the past and in future years. The functionality of BPM systems must manage and support the core BPM processes of strategy formulation, scenario analysis, tactical planning, budgeting, communication, monitoring, forecasting, and reporting.

Business Performance Management 38 BPM systems should be built around a central database to which everyone attaches. Thus controlling the use and access to data. The technology used in these databases is either, multidimensional, relational or a hybrid of both. Each has unique characteristics and needs to be carefully chosen to match the organization's requirements. BPM systems should employ a web architecture that permits simple, intuitive access that is independent of machine, location or the technology being used. A web architecture means more than just accessing the system via a web browser (Coveney, 2003). In addition to utilizing the 10 rules above, the organization can implement performance dashboards or scorecards to help with achieving the strategic goals of the organization (Vasiliu, 2006). Vasiliu defines dashboard as a style of interactive user interface designed to deliver userspecific information relating to the health of the business, typically represented by KPIs and links to relevant reports (Vasiliu, 2006). DSS Dashboards allow users to view and focus on the financial and operational information of the organization, which allows the user to address the question, how and why did I miss my goal? Eckerson highlights the functionality of performance dashboards as; monitoring critical business processes and activities using KPIs that triggers alerts when potential problems arise; Analyzing the root cause of problems through the exploration of relevant and timely information for multiple perspectives and at various levels of detail; and managing human resources and processes to improve decisions, optimize performance, and achieve key performance goals to maintain corporate health of the organization. (Eckerson W. W., 2005)

Business Performance Management 39 The historical timeline for performance dashboards follows that of the time line for BI, in that the need for and types of dashboards progressed from the 1970s to today. Figure 8: Performance Dashboard Sample View below provides a sample view of a performance dashboard. Eckerson tells us that The Data Warehousing Institute (TDWI) conducted a study in 2004 that showed, performance dashboards or scorecards were already being used in 51% of organizations, and 17% of organizations were in the process of developing a scorecard or performance dashboard (Eckerson W. W., 2005). The benefits of dashboards and scorecards are many and varied; available in all levels of the organization, from the upper echelons of executive management to middle management to lay staff. The list of benefits include: Communicate Strategy Refine Strategy Increase Visibility Increase Coordination Increase Motivation Give a Consistent View of the Business Reduce Costs and Redundancy Empower Users Deliver Actionable Information. (Eckerson W. W., 2005)

Business Performance Management 40

Figure 8: Performance Dashboard Sample View

Vasiliu indicates that the core of a strategy management system is a scorecard (Vasiliu, 2006); users are now able to see KPIs in relevancy groupings of individuals, departments, business units, or strategic objectives, focusing on future strategic business goals (Vasiliu, 2006). Scorecards allow the user to view and measure the long-term and short-term goals, incorporating corporate and industry performance benchmarks and risk factors (Vasiliu, 2006). As part of the Strategy Management system, scorecards serve managerial purpose by improving processes and reducing costs by: 1. The alignment of strategy, plans, targets, and forecasts through the creation of a consolidated, strategic view of existing data,

Business Performance Management 41 2. The communication of organizational strategy, improving the collaboration and management process in general, and creating a dynamic and effective environment that supports initiatives, 3. Compelling execution through accountability and performance measurement (Vasiliu, 2006). Analysis Both scorecards and dashboards are major components in the BI implementation, analysis and reporting processes of a BPM system. Current global economic pressures, of increase regulation and demanding investors, force businesses to demonstrate significant control of all aspects of corporate performance (Alenchery, 2005). Many of the pressures have materialized in the form of legislature and accounting standards, such as Sarbanes-Oxley Act in the USA and the new International Accounting Standards in Europe, both of which demand increased accountability at all levels of the organization (Alenchery, 2005). Technology and the globalization of business have resulted in increased competition, and more complex corporate structures, as such organizations have been forced to reexamine their management processes (Alenchery, 2005). Thus, management must reexamine the Corporate Management Cycle. According to Alenchery, the Corporate Management Cycle achieves competitive advantage management through the following 3-step process: 1. Define and plan -- formulate corporate strategy and objectives, 2. Align and execute design a strategy to achieve the corporate objectives, 3. Measure and analyze evaluate performance against KPIs, and

Business Performance Management 42 4. Review and refine assess performance and provide feedback to the strategy formulation team, for refinement of the business strategies and objectives. (Alenchery, 2005). This is confirmed by Professor Gomes, in his discussion of the principles of Strategic Management for the course he lectures at University of Southern California. In his discussion he points out that, the successful company will implement strategic objectives that pursue strong long-term competitive advantage (Gomes). One means of achieving this is using innovative state of the art support systems , if they give a firm capabilities that rivals cannot match (Gomes). BPM implemented utilizing a BI or DSS base can prove extremely useful in helping a company survive the current economic crises by providing competitive advantage. Leading performance measurement specialist, Stacey Barr recommends that organizations introduce the role of Performance Measure Practitioner to the work place (Barr, 1998-2009). The Performance Measure Practitioner should set clear goals for where he or she can improve the organizations approach to performance measurement (Barr, 1998-2009). Barr recommends the following five goals as a realistic place to start (Barr, 1998-2009) with goal setting: Improvement of management and employee perception of the value and importance of measuring performance. Elevating the skill set levels of managers and employees in choosing meaningful measures and using measures to support their decisions. Increasing and improving the active involvement of employees in the selection and implementation of performance measures, and reducing of the cycle time for implementation of new performance measures, from choosing them to using them.

Business Performance Management 43 Increase the proportion of strategic and operational business objectives that have meaningful measures identified. (Barr, 1998-2009) The Performance Measure Practitioner will be able to manage the BPM function of the SM plan for the organization. He or she would be responsible for selecting the technology, whether balanced scorecards, six sigma, or performance dashboards could be used; or a combination of these programs, for the performance management. The earlier discussion of performance dashboards showed that dashboards are used by themselves or in conjunction with balanced scorecards and other software programs. Will Kaydos, of The Balanced Scorecard Institute, discussed key areas organizations that could be measured, in addition to financial results (Kaydos, 1998-2009). In determining what should be measured Kaydos recommends combining a number of measurement frameworks, in addition to BSC, to produce a measurement model. The additional measurement frameworks include, the Performance Prism, the Quantum Performance Management Model, and the Tableau de Bord, all considered useful but none measured everything (Kaydos, 1998-2009). Kaydoss merging of various measurement frameworks yielded the following measurement model: 1. The primary strategy drivers are customer and stakeholder needs and expectations. The stakeholders include but are not limited to, shareholders and employees; other important stakeholders could be suppliers, the community, government entities, and other organizations. 2. Strategy requirements are defining your intended market niche and how you will compete for market share. The strategy of a company consists of individual strategies, which are the key actions a company must take to achieve its vision

Business Performance Management 44 and goals. All other elements of the model taken into consideration when developing strategies. 3. Operations that execute strategies and produce products and services for customers and stakeholders, include direct and support business activities. 4. Efficient satisfaction of customer and stakeholder requirements are achieved by the capabilities of a companys organization and infrastructure. There are shortand long-term aspects to stakeholder capabilities that may also be important to a companys operations. In the short-term, capabilities can limit what strategies are feasible; in the long-term they may need to be developed to implement certain strategies. 5. Products and services essential to operations are included in stakeholder contributions. For example, suppliers may provide critical technical support for designing products. 6. Financial returns are created from products and services provided to customers and other stakeholders as well (Kaydos, 1998-2009). When using this model, Kaydos advises, the Performance Measure Practioner should develop critical questions; executive management must answer about the organization, as well as the performance measures that would be related to said questions (Kaydos, 1998-2009). There exists, areas that should be measured in business; companies should track and measure areas such as, customers, stakeholders, strategies, operations, stakeholder contributions, and capabilities. Each are should have but questions and performance measures that would assist in the measurement process.

Business Performance Management 45 CHAPTER 6: INTRODUCTION, SUMMARY, CONCLUSIONS AND RECOMMENDATIONS Introduction In todays world of high stakes deals, advanced technology, world recession, collapsing banking industry, and accounting scandals, companies small and large are obliged to understand and manage their funds/accounts to maintain successful business performance. There have been a number of financial scandals over the past three decades; the new decade has brought with it some more notable scandals. Between 2000 and 2009 there were a total of 35 notable accounting scandals. Some of the more notorious accounting scandals include ENRON, WorldCom, and AIG in the United States; and from Italy, Parmalat. These incidents have had far-reaching ripple effects on the business community at large, as well as, more directly on the accounting industry. The recent banking scandals have resulted in a collapse of the banking industry, and increased the pace of the world recession, as they occurred some of the major world financial centers. The collapse of the banking industry has pointed out that many unscrupulous practices were being conducted in the business community by executives with little care for the common investor, and the continuity and success of the business or corporation. As a result of these scandals, the world has seen business reactions such as, declaration of bankruptcy, wind-up of business, and large governmental bailouts. There have also been criminal prosecution of executives and management officers of businesses, some resulting in jail time and or financial fines. On an industry basis a total overhaul and reform of legislation regulating Corporate Governance, Accounting Standards and Procedures, and the US Securities Exchange Commission procedures have come into effect. The question that must now be ask is this, how,

Business Performance Management 46 in this period of recovery and restructuring for business will Business Performance Management (BPM) play a role in the Strategic Management and Decision Making processes in business. Summary A review of the information presented in chapters 3 through 5, the researcher sees that both DSS and BI are employed along with BPM. However, not all organizations can use BI. BI is a costly investment and is better suited to large organizations. BI systems require a datawarehousing module, which can be costly to develop or purchase. Whereas DSS does not require a data warehouse module, even though it can be implemented and included this makes DSS accessible to all types of organizations. In establishing a BPM system in an organization, Balanced Scorecards and Performance Dashboards, have proven to be useful tools in assisting the organization in achievement of its strategy. Both tools use KPIs for the measurement and analysis processes; both performance dashboards and balanced scorecards are employed in BI and DSS. Riverside points out the important steps of BPM, and what is entailed in each. The steps are strategic planning, scorecarding, budgeting, forecasting, consolidation and business intelligence (Riverside, 2006). The term strategic planning is self-explanatory and is an essential building block to business; scorecarding is the recording and examining of performance related to the strategic planning. Scorecarding is achieved with KPIs, balanced scorecards, and dashboards (Riverside, 2006). Under BPM, the budgeting and forecasting processes are sped up, accuracy improved, and budgets are auditable. Forecasting affords the organization the opportunity to decide on the appropriate action for the situation at the time. The consolidation process is important in that is culminates in the Financials of the organization. As evidenced in the discussion BI is simply the

Business Performance Management 47 translation of data into information used for the decision-making process (Riverside, 2006).The DSS also provides its own module for the conversion of data into information. The DSS utilizes its four components -- of Data Management subsystem, Model Management Subsystem, User Interface, and sometimes, Knowledge-based Management Subsystem to aid decision makers in identifying and solving problems, completing decision process tasks, and making decisions (Decision Support System Resources). Each subsystems works separated and cohesively with each other, using communication technologies to assist management in the decision-making process (Decision Support System Resources). Decision Support System components can be integrated or connected via a corporate intranet, an extranet, or to the internet (Turban, et al., 2007, p. 96). However, the more typical DSS communication vehicle is via internet technology (Turban, et al., 2007, p. 96). The following are samples of typical information a decision support system might gather and present: an inventory of all current information assets (including legacy and relational data sources, cubes, data warehouses, and data marts), comparative sales figures between one week and the next, projected revenue figures based on new product sales assumptions; The consequences of different decision alternatives, given past experience in a context that is described. (Decision Support Systems, 2006) Decision Support System is still beneficial to those small or medium-sized companies without the budgetary allowance for a bigger, more advanced and expensive system. For those companies, both medium-sized and large, that can afford a more technologically advanced and expensive system, BI systems would be the accepted option. BI is a higher level of DSS, EIS and advanced technology.

Business Performance Management 48 Figure 2: The Evolution of Managing Performance (Coveney, 2003) evidences, from 1970s through to the early 1980s DSS were the key support for the management process. In 1980, it was supplanted with EIS, which provided management with access to financial reports, and other data. In 1990, the term BI came into use, for the cohesive relationship of EIS, and computer technologies (Riverside, 2006). Because information technology is constantly improving on itself, management is able to improve and introduce advance management techniques through the integration of BI and advanced management techniques the term CPM alias BPM (Coveney, 2003) (Riverside, 2006). The review of research on BI and BPM shows a interwoven relationship, BI is in actuality, a primary level of BPM (Turban, et al., 2007, p. 386). It is literally an umbrella term that combines architectures, tools, databases, analytical tools, applications, and methodologies (Turban, et al., 2007, p. 24). BI Architecture, as shown in Figure 6: Components of Business Intelligence Architecture (Aertsen, 2007), evidences there are four major components to the BI system. These components consist of the Data Warehouse, Business Analytics, Performance and Strategy, and the User Interface. The key and most significant component being the Data Warehouse. The data warehouse houses all source data, catalogs and produces reports, and other useful end user documents, it is utilized by the business analytics component for the processing of data into the aforementioned reports and documents (Turban, et al., 2007, p. 193). Performance and strategy component utilizes the reports and information stored by the data warehouse to examine and review corporate performance and determine whether re-engineering of the business strategy is required (Turban, et al., 2007, p. 26, 195-196).

Business Performance Management 49 The end user user interface componentusers programs such as Balanced Scorecard, and Performance Dashboard to generate and analyze performance data and reports; these are then review against the existing KPIs to determine whether corporate strategy needs to be amended or tweaked (Turban, et al., 2007, p. 27, 410). There are several common application areas for BI tools, areas such as general reporting, sales and marketing analysis, planning and forecasting, financial consolidation, statutory reporting, budgeting, and profitability analysis (Turban, et al., 2007, p. 28). The benefits of BI are considered intangible benefits, they are: Timely and improved reporting accuracy, Effective and efficient decision making, Effective and efficient customer service, and Increased revenue returns. (Turban, et al., 2007, p. 28)

BPM main goal is to optimize business performance (Turban, et al., 2007, p.387). However, to do so the business must set goal and objectives, establish initiatives and plans to realize those goals, monitor actual performance against those goals and objectives, and take corrective action as required through feedback loops (Turban, et al, 2007, p. 388). BPM encompasses more than just keeping score, to be effective a systematic performance management framework should work toward: Aligning top-level strategic objectives and bottom-level initiatives, Identifying opportunities and problems in a timely manner, Determining priorities and allocate resources, Changing measurements when necessary as strategies change,

Business Performance Management 50 Among other aims, it should also delineate responsibilities, understand actual performance relative to responsibilities, and reward and recognize accomplishments, Taking action to improve processes and procedures when the data warrant it, and planning and forecasting in a more reliable and timely manner (Turban, et al., 2007, p. 402). The researcher, in the discussion above, has shown the interlocking relationship between BPM and SM, through the setting of business strategy SM is introduced into the BPM process, and does not stop with just the planning phase. BPM tends to follow the cycle of SM very closely, the review of actual performance against KPIs typically supplied by management and selected from the strategy planning process- further cements the relationship. The final analysis and strategy review that occurs, totally marries BPM and SM. Typically we see the BI components of BPM interlocking, and providing a strong base for BPM in Strategic Management and Business. In todays trying economic climate executives should be looking at or revisiting the organizations strategy. Once a new strategy has been determined, management should revise the KPIs to ensure that they are in-line with the current corporate or organizational strategy. One important and crucial advantage of BPM software, is its forging a collaboration between IT and business strategists to drive organizational success (Vernon, 2005). The BPM helps to align the goals of IT with those of the business strategists. For the banking industry, this could mean the rejuvenation of cooperation will reap greater benefits than simply successful BPM projects.

Business Performance Management 51 BPM projects evidencing a BI foundation and strong data warehousing, have proven very successful (Eckerson W. , 2004). The benefits and reasons for organizations implementing BPM with a BI foundation, as identified by Eckerson, are: 1. Greater visibility into the business; 2. Better execution of strategy; 3. More efficient processes; 4. Faster reaction to events; 5. Better strategic planning; 6. Single version of the truth; 7. Better coordination among groups; 8. Revenue and customer growth; and 9. New regulations (Eckerson W. , 2004). Tools for BI are extensive, as well as vendors of these tools. Some vendors of BI tools include, IBM, Microsoft, A3 Solutions, Hyperion Systems, and Oracle, just to name a few. These vendors, and other produce software tools in both the financial and non-financial areas of BI, and by extension BPM. Conclusions and Recommendations In todays business environs information technology is a common business tool, a standard component utilized extensively in an organization today is a personal computer the most basic BIS. Computerized BISs are prevalent in business today because they provide organizations with advantages such as speed, accuracy and dependability (Hardcastle, 2008), providing in many cases a competitive advantage to organizations.

Business Performance Management 52 The researcher has seen that BI has become synonymous with BPM. Even though DSS is a popular tool, it does not incorporate the IT department to the same extent that BI does. The researcher has found that BI is an advanced level of BI. The more successful implementations of BPM are heavily integrated with a strong data warehouse and BI background. The dashboards and scorecards, will allow businesses, in the current economic environment, to control the costs and performances. The following benefits are available to those organizations that implement BPM based on BI:

1. Strategy, accountability, and cause-and-effect maps that visualize the objectives and actions, and identify inefficiencies 2. Overview of enterprise-wide initiatives, prioritized and ranked based on current corporate strategy, tied into costing and timelines 3. Communication and collaboration tools to support flawless execution E-mail alerts on scorecards, initiatives, and measures Discussion threads, notes, annotations, attachments, and comments 4. Executive Views to summarize the status in a simple, easy-to-use interface.

We must not forget that key to this is the IT department of the organization; without collaboration between Information Technology and business strategists, costs could get out of hand and the implementation could fail. Information Technology is critical to the implementation as it standardizes on a single BPM platform, interact with all systems in the organization, and provide managers with up-to-date information from all aspects of the organization. Unless a business has the budget to afford a BI base BPM framework, the cost of such an installation should be examined and compared with that of a DSS based BPM installation.

Business Performance Management 53 Where appropriate the business should consider investing in the option that is cost effective for them. In examining their options a business should also look at it capital and physical size. If it is more feasible for the business to use a DSS-based BPM system, they will not lose because it is not BI-based. The business should still be able to utilize the advanced management techniques of BPM to achieve improved performance management and continued profitability in the long term. As more companies use BPM in achieving their strategic goals, the business community may have fewer scandals and the business can survive the recent economic downturn, and strengthen their performance.

Business Performance Management 54 APPENDIX A

DSS Timeline
Year
1945 1947 1952 1955 1956 1960 1962

Major Milestones
Bush proposed Memex Simon book titled Administrative Behavior Dantzig joined RAND and continued research on linear programming Semiautomatic Ground Environment (SAGE) project at M.I.T. Lincoln Lab uses first light pen; SAGE completed 1962, first data-driven DSS Forrester started System Dynamics Group at the M.I.T. Sloan School Simon book The New Science of Management Decision; Licklider article on Man-Computer Symbiosis Licklider architect of Project MAC program at M.I.T.; Iversons book A Programming Language (APL); Engelbart's paper "Augmenting Human Intellect: A Conceptual Framework" Englebart established Augmentation Research Center at SRI Stanford team led by Feigenbaum created DENDRAL expert system; Problem Statement Language/Problem Statement Analyzer (PSL/PSA) developed at Case Institute of Technology UNIVAC 494 introduced; Tymshare founded and Raymond article on computer time-sharing for business planning and budgeting Scott Mortons dissertation completed on impact of computer-driven visual display devices on management decision-making process; Turban reports national survey on use of mathematical models in plant maintenance decision making Scott Morton and McCosh article; Scott Morton and Stephens article; Englebart demonstrated hypermediagroupware system NLS (oNLine System) at Fall Joint Computer Conference in San Francisco Ferguson and Jones article on lab study of a production scheduling computeraided decision system running on an IBM 7094; Little and Lodish MEDIAC, media planning model; Urban new product model-based system called SPRINTER Little article on decision calculus support system; Joyner and Tunstall article on Conference Coordinator computer software; IRI Express, a multidimensional analytic tool for time-sharing systems, becomes available; Turoff conferencing system Gorry and Scott Morton SMR article first published use of term Decision Support System; Scott Morton book Management Decision Systems; Gerrity article Man-Machine decision systems; Klein and Tixier article on SCARABEE PLATO Notes, written at the Computer-based Education Research Laboratory (CERL) at the University of Illinois by David R. Woolley Daviss book Management Information Systems; Meador and Ness article DSS application to corporate planning Alter completed M.I.T. Ph.D. dissertation "A Study of Computer Aided Decision Making in Organizations"; Keen SMR article on evaluating computer-based decision aids; Boulden book on computer-assisted planning systems Sprague and Watson article "A Decision Support System for Banks"; Grace paper on Geodata Analysis and Display System Alter article "A Taxonomy of Decision Support Systems", Klein article on Finsim; Carlson and Scott Morton chair ACM SIGBDP Conference DSS

1963 1965

1966 1967

1968

1969

1970

1971

1973 1974 1975

1976 1977

Business Performance Management 55


Conference Development began on Management Information and Decision Support (MIDS) at Lockheed-Georgia; Keen and Scott Morton book; McCosh and Scott Morton book; Holsapple dissertation completed; Wagner founded Execucom to market IFPS; Bricklin and Frankston created Visicalc (Visible Calculator) microcomputer spreadsheet; Carlson from IBM, San Jose plenary speaker at HICSS-11; Swanson and Culnan article document-based systems for management planning Rockart HBR article on CEO data needs Sprague MISQ article on a DSS Framework; Alter book; Hackathorn founded MicroDecisionware First International Conference on DSS, Atlanta, Georgia; Bonczek, Holsapple, and Whinston book; Gray paper on SMU decision rooms and GDSS Computer named the Man of the Year by Time Magazine; Rockart and Treacy article The CEO Goes On-Line HBR; Sprague and Carlson book; Metaphor Computer Systems founded by Kimball and others from Xerox PARC; ESRI launched its first commercial GIS software called ARC/INFO; IFIP Working Group 8.3 on Decision Support Systems established Inmon Computerworld article on relational DBMS; IBM DB2 Decision Support database released; Student Guide to IFPS by Gray; Huntington established Exsys; Expert Choice software released PLEXSYS, Mindsight and SAMM GDSS; first Teradata computer with relational database management system shipped to customers Wells Fargo and AT&T; MYCIN expert system shell explained Procter & Gamble use first data mart from Metaphor to analyze data from checkout-counter scanners; Whinston founded Decision Support Systems journal; Kersten developed NEGO Houdeshel and Watson article on MIDS; DeSanctis and Gallupe article on GDSS; Frontline Systems founded by Fylstra, marketed solver add-in for Excel Turban DSS textbook; Pilot Software EIS for Balanced Scorecard deployed at Analog Devices Gartner analyst Dresner coins term business intelligence; release of Lotus Notes; International Society for Decision Support Systems (ISDSS) founded by Holsapple and Whinston Inmon book Using Oracle to Build Decision Support Systems; Eom and Lee co-citation analysis of DSS research 19711988 Inmon books Building the Data Warehouse and Database Machines and Decision Support Systems; Berners-Lees World Wide Web server and browser, become publicly available Codd et al. paper defines online analytical processing (OLAP) HTML 2.0 with form tags and tables; Pendses OLAP Report project began The Data Warehousing Institute (TDWI) established; DSS journal issue on Next Generation of Decision Support; Crossland, Wynne, and Perkins article on Spatial DSS; ISWorld DSS Research pages and DSS Research Resources InterNeg negotiation software renamed Inspire; OLAPReport.com established; Wal-Mart and Teradata created then worlds largest production data warehouse at 24 Terabytes (TB) ACM First International Workshop on Data Warehousing and OLAP DSSResources.com domain name registered First AIS Americas Conference mini-track on Decision Support Systems Association for Information Systems (AIS) Special Interest Group on Decision Support, Knowledge and Data Management Systems (SIG DSS) founded International Society for Decision Support Systems (ISDSS) merged with AIS SIG DSS

1978

1979 1980 1981 1982

1983

1984

1985

1987 1988 1989

1990 1991

1993 1994 1995

1996 1997 1998 1999 2000 2001 2003

Business Performance Management 56 APPENDIX B

Typical Key Performance Measures


Financial Cash flow Return of Investment Financial result Return on capital employed Return on equity Internal Business Processes Number of activities Opportunity success rate Accident ratios & Environment compatibility Overall equipment effectiveness Learning and Growth Investment Rate Illness rate Internal Promotions % Employee Turnover Gender Ratios

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