Seeing the big picture: new data tools are enabling CEOs to get a better handle on performance across their organizations - Technology - business performance management

Chief Executive, The, Nov, 2003 by Russ Banham

For much of its existence, Harrah's Entertainment was a loose compilation of casinos operated autonomously by well-intentioned general managers, each of whom had his own ideas of how to separate customers from their wallets. The managers knew their local customers and built marketing campaigns around this knowledge.

But when Gary Loveman took over as Harrah's chief executive officer in January 2003 and tried to start running the company as a unified enterprise, he was obstructed by what were, in effect, several different companies, each with different information technology systems, business processes and ways of measuring performance.

So Loveman decided to implement a new management discipline--Business Performance Management, or BPM. A former marketing professor at Harvard Business School, Loveman had the academic know-how to guide the strategy. He also had consulted to Harrah's over the years and later served as its chief operating officer and president, His goal was to rebuild Harrah's organizational and IT structure to give him to tools to measure key indicators for the whole company. "My ability to manage our performance was undermined by my inability to measure it," Loveman says. The Las Vegas-based company had $4.1 billion in 2002 revenues.

BPM is touted as the next hot management discipline. Ironically, despite its emphasis on a common language and common definitions to describe performance, BPM also is known as Enterprise Performance Management, or EPM, and Corporate Performance Management, or CPM. Blame the alphabet soup on consultants and technology analysts who put different spins on the same concept.

International Data Corp., for example, prefers the term BPM, while Gartner coined CPM. Suffice it to say that BPM is EPM is CPM.

The simple definition of BPM (let's agree to use that acronym) is that it's a methodology for understanding what an organization is, where it wants to go, how it will arrive there and, most importantly, how it can measure its progress along the way (see table, below). While CEOs always have sought to understand their companies' performance, what's new are the analytics tools to collect, collate, measure and report performance statistics. Among the leading providers of these tools ate Hyperion Solutions, Cognos. BusinessObjects and Informatica. Moreover, large enterprise resource planning software vendors, such as SAP and PeopleSoft, have added analytics functions to their offerings.

Leading-edge companies such as Cisco Systems, Dell and General Electric have long used reporting systems that enable top executives to view a "dashboard" of performance indicators. Now those BPM techniques appear to be gaining much broader acceptance. A survey of 500 large organizations by Stamford, Conn.-based researcher Meta Group indicates that most companies are "fully dedicated to it," with the remainder "seriously pondering it."

A simple reason for the increased interest is stricter corporate governance. CEOs are now personally liable for financial statements. In the United States, the Sarbanes-Oxley Act, and in Europe and parts of Asia, mandated adoption of the International Accounting Standards by 2005, require more detailed disclosure of enterprise-wide information. Meeting these dictates will not be easy. Many CEOs grumble about their inability to cull raw data to assess spending and performance from separate stovepipes of business information.

CEOs also complain about the shortcomings of enterprise IT software and supply-chain and customer-relationship-management systems. While these software programs produce data, it is difficult to integrate, collate and analyze the data on an enterprise-wide basis. "They're great for collecting data, not so great for analyzing it into meaningful information," explains David Folger, a rice president of enterprise analytics strategy at Meta.

Although BPM is touted as the solution, it is not a panacea, it requires tough decisions to obtain a level of visibility" into financial and operational in formation across the enterprise, including management reorganization (risk: cultural upheaval), process change (risk: resistance) and new technology (risk: cost). The technology must be able to pull relevant data from transactional systems, data warehouses and business unit applications, gauge this data against key performance metrics and then deliver all this information to managers for examination and action.

The goal: customer loyalty

The first phase of BPM involves organizational and business process changes. After defining Harrah's core strategy of creating ah extraordinary customer experience, Loveman reined in the autonomous management practices that had made measuring customer data virtually impossible. "We had all this great customer data, but it was locked up in our separate casino systems," he says. "If a high roller from our Chicago casino came to our casino in Las Vegas, we had no way of identifying this person to understand his or her spending preferences and, thereby, cater the best gaming experience to them. The goal is to maximize our revenue by taking profitable customers and turning them into more loyal customers."