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Be it Tata’s USD2500 Nano car, Lenovo’s laptop or LG’s chocolate phone, Asian companies are making their mark in the global economy, challenging conglomerates from mature economies through innovation and smart market strategies. However, the million-dollar question remains on what will separate the leaders from the pack, and how they will sustain their momentum in 2008 and beyond.

As market forces multiply, it has become imperative for companies to evaluate technologies and innovative business performance strategies that give them a competitive edge. Performance Management has been a powerful approach leveraging information technologies that has got traction in the region helping leading Asian and MNC companies tackle complicated market dynamics. SDA Asia sits down with Gary Cokins, Global Product Marketing Manager for Performance Management at SAS, a global leading business intelligence and analytical software and services company, to discuss wide-ranging issues related to Performance Management and the forces and pressures that have created interest in it and its supporting technologies in Asia-Pacific.

Q: Can you tell our readers a bit about yourself and your role at SAS?

Gary Cokins (GC): I consider myself lucky and privileged working as a strategist with SAS, the world’s market leader in data management, business intelligence, and analytical software

After earning an industrial engineering degree from Cornell University in 1971 and an MBA from Northwestern University’s Kellogg Graduate School of Management, I began my career as a financial controller and operations manager with the FMC Corporation. For 15 years, I was a consultant at Deloitte, KPMG Peat Marwick and Electronic Data Systems (EDS), where I was heading EDS’ Cost Management Consulting Services.

I have also spent time writing books on performance management and related areas. Activity-Based Cost management: An Executive’s Guide was ranked as the best-selling book of 151 titles on the topic. My latest work, Performance Management- Finding the Missing Pieces to Close the Intelligence Gap, holds a special place in my heart. It brings together many business methodologies in addition to cost management.

Q: Performance Management has changed over time and in that case could you explain how performance management can help organizations achieve their strategic goals?

GC: To say that performance management is a new concept would be wrong, it has been around for more many decades perhaps even before the origin of the computer. “Performance management is the skillful accomplishment of business, more specifically executing the executives’ strategy, through the effective use of resources.” With that objective and perspective in mind, I believe that performance management has not changed at all, but rather it is the use and integration of business management methodologies, such as the balanced scorecard, that constitute performance management and are supported by information technologies, that has improved over a period of time.

Q: What are the new developments in Performance Management related to the Asian and Indian companies in specific?

GC: One can definitely see huge growth in the Indian market and that India is becoming a great competitor to the world player, China. With increasing household incomes, consumer demand is growing here; and competitors are becoming proactive and focusing on the growth, take for example Reliance and the Tata’s. The new development is using information, not just raw data, as a competitive weapon.

Q: Many organizations use a broad set of performance measures, but there seems to be considerable confusion regarding the measures of outcomes. What is your take on that?

GC: There is confusion between outcome measures, popularly called key performance indicators, or KPIs, and operational measures that I simply call PIs. KPIs should monitor progress toward the strategic objectives of the executives. They should have targets. For example, the objective of growing international sales, an outcome, is measurable and a target of how much growth should be set. KPIs should reside in the executives’ balanced scorecard. The ultimate outcomes KPIs are financial, and they are a result of the other KPIs. In contrast, PIs monitor business processes. They are measured more frequently than KPIs and by improving them, the outcome measures improve.
Let us take the example of the spending of a marketing department; otherwise known as a ‘black hole’ the company’s accountants. The marketing department tends to concentrate on the growing the business with sales from existing and new customers. Oblivious to the ROI from their spending, the marketing department rarely addresses the following questions – What types of customers should we retain, grow, acquire or win-back from competitors. And which types not? Who are our most profitable and valuable customers to us? How much do we know about them? Do our marketing campaigns get the response we want? The truth is that many companies do not adequately understand the different segments of their customers and how to uniquely serve each segment. An unacceptable return on the marketing investment is potentially the biggest challenge organizations face as they strive to not just grow sales but also grow profitable sales. Organizations have to intelligently target the right type of customer. Marketing performance management lets you map marketing tactics to your overall corporate strategy, so you can understand, align and improve the financial return, the ROI, from your marketing efforts.

Q: How can companies bridge the gap between corporate and individual performance management systems, and why is performance management often considered to support intelligent risk management?

GC: Performance Management is about the organization as a whole, but it obviously requires employees to contribute particularly on the important priorities. Performance Management expects the executive team and their vision of the future to determine the best strategic direction for the organization and answer, “Where do we want to go?” Based on this being clearly communicated to employees, Performance Management works best when the employees are involved in answering the next question, “How will we get there?” This involves selecting the correct projects to timely accomplish and business processes to excel at. Individual performance can be improved when the executives communicate their strategic objectives, involve employees with determining the needed action, but also holding people accountable as motivation to achieve the expected results.

Q: Is business intelligence and performance management similar to each other?

GC: No matter what name people use for something, it does not alter what that something is. The same applies to the confusion today about the difference between mainstream business intelligence (BI) and performance management (PM).

Performance Management puts business intelligence into context of solving a business problem. Unlike quality management programs, like Six Sigma, that teach employees ‘how to think’; performance management explains ‘where to think’ and also enables deeper understanding for better decision-making. Performance Management deploys the power in Business Intelligence with its enterprise information platform so that organizations can advance from managing to improving.

IT-centric people often see an enterprise as a ravenous consumer of billions of bytes of data intended to manage the business, a BI view. In contrast, leaders, managers and employee teams typically view the same enterprise as an organism with a purpose and mission, a PM view. They desire solutions and applications that achieve results. How can BI and PM be reconciled? Performance Management absolutely requires a good business intelligence system so that it can convert and transform BI’s excellent information for potential use into realized results and outcomes.

Q: How do business intelligence and performance management relate to each other?

GC: BI involves raw data that must first be integrated from disparate source systems and then transformed into information; and PM leverages that information. In this context, information is much more valuable than data points, because integrating and transforming data using calculations and pattern discovery results in potentially meaningful information that can be used for decisions.

With PM, the strategy spurs the application of technology, methodologies and software. As methodologies, which are typically implemented or operated in isolation of each other, are integrated, the strength and power of PM grows. Technologies, such as software, support the methodologies that comprise PM. Software is an essential enabler, but the critical part is in the thinking. That is, one must understand the assumptions used in configuring commercial software and model building. For example, if managers select the wrong performance indicators to report in their dashboards, then regardless how good the software the best results will not be achieved.

Q: Emergent workers are concerned with gaining new experiences and look forward to opportunities such as mentoring and their own growth. What is your take on the shortage of skilled staff?

GC: Savvy organizations have discovered the answers they need are often in information they already collect. Using human capital management software, business leaders gain insight into workforce strengths and vulnerabilities, risk, and performance and productivity results.
For example, SAS Human Capital Management software is designed to analyze existing workforce data and leverage it to deliver information for decision-making. One problem it addresses is increasing the retention of existing employees. The software looks at history data of all employees such as their wage levels, wage raise amounts, time intervals between age raises, their age of and other relevant data over perhaps the last five or six years. It then isolates data for those employees who left the organization and why. It then applies those statistics to the current workforce, and it ranks, in order, the most likely employees who are most likely to resign. This analytical power allows an employer to do an intervene – if they want to – and to proactively make the prescribed type of change for that employee before they quit. Human capital management software also enables understanding of how and when workforce trends might impact an organization. It can help to proactively manage organizational risk by understanding where skill shortages are likely to occur so an employer can better target employee retention and recruitment dollars.

Q: How can performance management help Indian and Asian companies measure and analyze key indicators to track performance?

GC: To know which actions will improve your organization’s performance, you need a deep understanding of the factors that influence it. Businesses will have to be more prudent in their actions garnering insights from the data that they already have residing in their databases. The unprecedented development in the Indian economy can be tricky to manage, but with competence in using analytical software organizations can ensure having a sustained growth.

Q: Using benchmarking, organizations determine best-in-class levels of performance measures of specific business processes and then try to duplicate those performance measures in their organizations. How should an organization apply benchmark data?

GC: Internal benchmarking, such as for different branches of a bank, is more reliable than external benchmarking against other companies. This is because with external benchmarking, one cannot be sure of what data the other companies included or excludes, and if those are exactly comparable to your data. When it is internal, consistency of the measures can be controlled. The value from benchmarking is not to punish departments whose measures appear poor, but rather to encourage them to investigate what things the better performers are doing, and then make changes to be like them.

Q: The fight against global warming has certainly caused a tremor of excitement and multinationals seem to be following a trend toward programs and changes to protect the Earth. How do you see this trend and its future?

GC: Companies have to be more sensitive towards the environment and display responsibility. Companies using Business Intelligence technology can also measure their environmental performance, of conservation such as electricity usage, water usage or residual pollutants from their production. The application of Performance Management methods, such as activity-based costing will aid in the growing practice of carbon trading among organizations. It will contribute to a safer environment.

Q: Is there some thing else that you would like to add for the benefit of our readership?

GC: Performance management has much more of a social aspect about an organization than most realize. Technology serves an enabler to achieve strategic goals. Performance Management revolves around people in an organization. Companies need to spend time for the improvement of their employees. They have to consider the psychological and sociological needs of the employees in order to overcome people’s natural resistance to change. But constant change is necessary for any organization to sustain its existence. Organizations must get more competent in applying change management methods. When all is said and done, performance management is all about performance improvement.