Business Performance – How Do You Improve it?

In our previous article, we covered how the finance function can contribute to driving business transformation and we established that this is achieved through effective business performance management.

This article will explain how to improve business performance management and how each element, when effectively implemented, will help to drive business transformation. So, let’s get started.

Strategy & Planning

The first question to ask is: “how does planning help to drive performance?”

Whether in life or in business, planning is everything. If you fail to plan, you plan to fail. A strategic plan is a well-articulated course of action that helps you achieve a set of objectives or goals. Developing a strategic plan starts by defining the problem and/or the objectives to be achieved, determining the available resources or what will be required to achieve them or solve the problem and mapping out the alternative lines of action to get it done.

To improve the process of strategic planning, first, you need to determine what “good” looks like for your business, that is, a clear idea of what a good end result is. Once this is clear, you can decide on how the business will measure up, that is, the Key Performance Indicators (KPIs) and what needs to be done to improve the process. What makes for good strategic planning is the quality of the process, which involves analysis of the business and its operating environment, customer and competitor analyses, price sensitivity analysis, etc., and the quality of the output (the strategic plan). The business goal must be clear, achievable and stretching/motivational; and the action plan must be clearly understood by all the teams, not overly complex and a good balance of risk, cost and benefit.

 

Execution & Delivery

Execution is doing what you planned to do, and delivery is carrying out the “mission” of the business. Quality execution and delivery is as important as strategy and planning. A good plan without effective execution undermines the all the work done at planning.

How well does the business do what it does? What is the quality of delivery and how efficient are the operations? Does it select the right change projects and how successful is the implementation? Are project post implementation reviews done in your business? Do the lessons learnt feed back into future projects? Quality execution and delivery ensures that the strategic plan is matched with appropriate actions to achieve the overall objective.

 

Measurement & Reporting

“Whatever gets measured gets done, if you do not measure it, you cannot manage it”. Measurement helps to manage and improve performance, but it is important to measure what matters and is critical to the business growth. Measurement helps to know whether you are on track to meeting the goals and objectives; check the quality of delivery, check the quality of management (employee engagement) and whether the agreed strategies are delivering the desired results. The key performance indicators (KPIs) set at planning should be measured and reported regularly, both financial and non-financial KPIs are relevant and should be measured.

 

Analysis & Feedback

When you have planned, executed, measured and reported, it is possible that there are variances to the expected/planned results or you could have exceeded expectations. What do you do next if the result is below expectation?

Detailed analysis will show where things went wrong. You need to drill down, extrapolate, disaggregate, plot trends, find correlations and drivers, etc., and the Finance function should drive this process, ensuring that data quality is not compromised as decisions will be taken based on available information. To do proper analysis, you must be asking the right questions, ensuring that you apply logic in getting the right answers. The findings from the analysis process become the input that are fed back to the performance management process and the cycle continues.

Our next article will look at other supporting elements in the business environment that help to improve business performance management.

Watch this space…