Business performance reporting

"What cannot be measured, cannot be managed." Carly Fiorina, CEO of HP

Measurement of business performance is a critical part of a high performing organisation, as it informs baseline understanding of an "as-is" state and greatly assists the development of a "to-be" state when we have something to compare performance against. The key is working out what is important to measure. Calculating the value of Intangibles is inherently tricky, and largely dependent on context (to understand why, read this Value Management article from Intellectual Asset magazine) with at least 85 different recognised approaches to measuring intangibles. There are well recognised limitations within the Generally Accepted Accounting Principles (GAAP) protocol, and no consensus on measurement approaches to apply is evident. The following list of performance measures have been selected from a series of suggested performance benchmarking measures from the American Productivity and Quality Centre (APQC) as useful measures.

Information Technology Performance

Candidate measures of IT performance for use in developing business cases, sourced from APQC-IT Baseline measures have been identified based on the following assumptions:

• Effectiveness of agile processes is best demonstrated in improved cycle times;
• Only measures that provide the highest insight-to-effort ratio are selected;
• Measures used are normalised (i.e. do not require adjustment for organisational scale)
• Measures that require financial differentiation between arbitrary business functions are excluded

Cost Effectiveness:

1. Total IT budget as a % of revenue (though Total IT budget as a % of operational expenses is emerging as a better measure - here's why)
2. Total IT budget per employee
3. IT expense per employee

Cycle time

1. Time in months to break even for new or enhanced IT services (investment<$100k)
2. Time in months to break even for new or enhanced IT services (investment range $100-250k)
3. Time in months to break even for new or enhanced IT services (investment range $250-500k)
4. Time in months to break even for new or enhanced IT services (investment range $500k-1m)
5. Time in months to Business Release for new or enhanced IT services (investment<$100k)
6. Time in months to Business Release for new or enhanced IT services (investment range $100-250k)
7. Time in months to Business Release for new or enhanced IT services (investment range $250-500k)
8. Time in months to Business Release for new or enhanced IT services (investment range $500k-1m)
9. Time in months to respond to major business shifts
10. Time in weeks to complete projects that address an identified business exposure or opportunity (<20% of total annual revenue)
11. Time in weeks to complete projects that address an identified business exposure or opportunity (20-40% of total annual revenue)
12. Time in weeks to close an identified IT skill or capability gap
13. Time in months to fulfill a business need with relevant IT solutions for investments <$100k
14. Time in months to fulfill a business need with relevant IT solutions for investments $100-250k
15. Time in months to fulfill a business need with relevant IT solutions for investments $250-500k
16. Time in months to fulfill a business need with relevant IT solutions for investments $500k-1m
17. Average time in hours to respond to highest priority problem (prior year)
18. Average time in hours to resolve highest priority problems (prior year)
19. Average time in hours to respond to highest priority problem (current year)
20. Average time in hours to resolve highest priority problems (current year)

Process Efficiency

1. % of IT budget for Services Oriented Architecture (SOA)
2. Length in years of Information Architecture planning horizon

Staff productivity

1. Number of IT customers serviced per IT FTE

Knowledge Management

Candidate measures of KM performance have been identified based on the following assumptions:

• Only measures that provide the highest insight-to-effort ratio are selected.

Cost performance

1. Total cost of communities of practice per revenue
2. Total cost of best practice transfer processes per revenue
3. Total cost of lessons learned processes per revenue
4. Total cost of expertise locator systems per revenue
5. Total cost of content management systems per revenue
6. Total cost of virtual collaboration per revenue
7. Percentage of participation costs per total cost
8. Percentage of travel and meeting costs per total cost
9. Percentage of financial impact that is cost savings
10. Percentage of financial impact that is revenue gain
11. Percentage of financial impact that is quality improvement
12. Percentage of financial impact that is cost avoidance
13. Percentage of financial impact that is productivity increase

Process Efficiency

1. No. of FTEs for knowledge management program per revenue
2. No. of formal communities of practice
3. Total number of community participants
4. No. of informal communities of practice
5. Total number of informal participants
6. Percentage of financial impact attributed to communities of practice

Innovation

1. Average time in days to market for new product/service
2. Average time in months to profitability/payback for new product/service
3. Percentage of current reporting period revenue from new products
4. Revenue per employee (current reporting period)
5. Average days in inventory

Human Resources

An extensive set of candidate performance measures is available at http://www.apqc.org/PDF/osbc/hr/rewardretain/metrics.pdf A sample set from review of this larger group of metrics is set out below.

Create and Manage measures

Process efficiency

1. Percentage of executives with formal succession planning process in place.
2. Percentage of subject matter experts with formal succession planning process in place.
3. Percentage of operations/office staff with formal succession planning process in place.

Source, Recruit and Select measures

Process efficiency

1. No. of accepted job offers for executives as a percentage of job offers made for executives
2. No. of accepted job offers for subject matter experts as a percentage of job offers made for subject matter experts
3. No. of accepted job offers for operations/office staff as a percentage of job offers made for operations/office staff
4. No. of new hires for executives as a percentage of job offers made for executives
5. No. of new hires for subject matter experts as a percentage of job offers made for subject matter experts
6. No. of new hires for operations/office staff as a percentage of job offers made for operations/office staff

^{Cycle time}

1. Cycle time in days from identification of need to hire to job requisition
2. Cycle time in days from job acceptance to beginning of new hire in agreed position

Business Impact Reporting

An emergent reporting approach takes a wider view of business impacts through a sustainability reporting framework, assessing baselines for business operations in a range of non-traditional areas, many of which have a contingent cost/risk exposure. With Government increasingly moving towards a greenhouse emissions reporting approach (shown in the recent National Greenhouse and Energy Reporting Act 2007 - Fact sheet - Legislative Act), agencies need to consider if any of the measures available from frameworks such as the Global Reporting Initiative are worthwhile for tracking business operational performance, as these may contribute substantially to providing early exposure to building a carbon trading reporting capacity.