Business Ideas

Empirically, most strategy research studies employ the construct of business performance to examine a variety of strategy content and process issues (Ginsberg and Venkatraman, 1985). This second article in the series concerns the use of financial and operational performance; through the summarization of two seminal papers written by Venkatraman and Ramanujam (1986) and Kaplan and Norton (1992).

Venkatraman and Ramanujam (1986) study consider as an important document for the theoretical discussion regarding the evaluation of the measurement of business performance. One of the key issues addressed by this study is the attempt to delineate the performance concept. More specifically, whether business performance should be differentiated from the overall discussion on organizational effectiveness. The view taken by Venkatraman and Ramanujam (1986) was that business performance, which reflects the perspective of strategic management, is a subset of the overall concept of organizational effectiveness. The narrowest conception of business performance centers on the use of simple outcome based financial indicators that are assumed to reflect the fulfillment of the economic goals of the firm. Venkatraman and Ramanujam (1986) refer to this concept as financial performance. Financial performance measurement is a multi-dimensional one. Sample of financial measures, group into dimensions can be presented as follow: Profitability – return on investment (ROI), earning before interest and tax (EBIT), gross profit margins. Growth – market share growth, Sales Growth. Efficiency – return on sales (ROS), return on equity (ROE). Analyses made by using single financial measure or several measures relating to only one dimension may lead to misleading conclusions. According to Venkatraman and Ramanujam (1986) a border conceptualization of business performance would include emphasis on measures of operational performance, which consists of those key parameters which may lead to an improvement in financial performance. Venkatraman and Ramanujam (1986) note that it would be logical to treat operational performance measures such as market-share, new product introduction, product quality, marketing effectiveness, manufacturing value-added, within the domain of business performance.

Kaplan and Norton (1992) have presented another seminal paper regarding the measurement of business performance. Its name, “The Balanced Scorecard – measures that drive performance” could suggest for the way they approach the issue. According to the writers, since there is increasing need, both for large and small businesses, to master a variety of capabilities in different fields, the traditional measures of financial performance gives inadequate, or in some cases inaccurate, perspective for the status of the business and its ability to keep improving. The balanced scorecard tries to overcome these difficulties through the completion of financial measures, which reflect for actions that already have been taken, with those of operational performance measures, which consists of parameters that may drive the forthcoming financial performance. Operational measures according to the balanced scorecard constructed from three dimensions – How do customers see us? (Customer perspective), What must we excel at? (Internal perspective), Can we continue to improve and create value? (Innovation and learning perspective).

Smaller companies are often unaware of simple tools that can be used to improve business performance. They are relatively cheap and easy to use. So what are they and what exactly do they do?

Some smaller businesses believe that business tools are only for larger companies. This could not be further from the truth. Proper use of a number of simple business tools can seriously affect business performance by increasing both operational efficiency and profitability. I would recommend 4 different tools, which collectively cost about $500. They are intuitive and easy to use. So what are they?

Mind Maps

Business Health Check

Business Planning Tools

Microsoft Visio

Mind maps are computer based programs that you can purchase and download over the internet. They are a terrific management tool in that they allow you to summarize an enormous amount of detail on a single page. Consider all of the tasks you need to undertake in a week or a month and you will find that there is no way to keep on top of everything if you list them in a traditional linear fashion in a notebook or on several sheets of paper. Mind maps allow you to keep track of all of the important issues including key assignments for staff, performance measurement, key account management, strategic development, milestone management, to mention just a few. They also allow you to record details of meetings in a coherent and ordered way which facilitates excellent follow up. You may also use them to brainstorm ideas with your team.

A business health check tool allows you to step back from your business and to analyze it in detail using several hundred well targeted questions. A good one will focus on every aspect of your business including leadership, management style and capability, operational competence, financial management, management and use of information, IT infrastructure, quality and effectiveness of staff, business planning and many more key measures. It is similar to getting a management consultant to come into your business and look underneath the hood, except you can do the diagnosis yourself and it is much more cost effective. The advantage is that it gives you a deep insight into the here and now so that you can then plan your business’s future more coherently.

Business planning is often overlooked in small businesses. This can be a costly mistake. It makes little sense to allow your business to drift on a day-to-day basis and for you to be simply reacting to situations rather than anticipating and actively managing them. Every business needs a road map to keep it on track. A business plan allows you to build a strong team culture with a shared vision of the future. If the whole team has clarity of purpose and is pulling well together, then the business is going to perform substantially better. There are many business planning tools available on the internet and some are even free. The ones you pay for tend to offer you more.

Microsoft Visio is a simple drawing tool that anyone can learn with as little as half an hour on the computer. There are a multitude of uses it can be put to in your business from building marketing brochures and flyers to designing standard forms and stationery. My personal favourite use of Visio is for drawing business process workflows. It is amazing to see with clarity how we go about doing things in our businesses when it is shown in a visual way on a piece of paper. All of a sudden you notice the redundancy in the way that even the most simple activities are carried out. This facilitates changing your business processes and streamlining them to be more efficient. It also allows you to coherently document your processes so that is no ambiguity about the way in which your staff executes them. This can save you a lot of wasted time and money.

Performance management software is a software application that you use to keep track of how your organization is doing. This type of software replaces relying on printed or static reports or even trying to manage a home-made performance management system using spreadsheets. The software automatically takes in new actuals and results from your enterprise databases and compares them to budgets, targets, goals and/or forecasts. So charts, diagrams and graphs are created automatically and and are free from human error, guaranteeing maximum accuracy. Also, since the process is completely automated, your daily, weekly, or monthly analysis of your enterprise performance becomes much more streamlined and the time savings leads to greater productivity.

Performance management solutions are mainly aimed at medium to large companies that have to keep track of the performance of various lines of business and departmental functions. This might include, but is not limited to inventory tracking, sales performance, geographical tracking of actuals and a lot of other key metrics that keep the business performing well. The main aim is to provide a easy way for business managers and executives to keep track of how the business is faring at any given time. So there are various aspects to be looked into while you go about selecting performance management software.

The first thing to do is not to get confused by the lingo. You will read terms like Corporate Performance Management (CMP), Business Performance Management (BPM) or Strategic Performance Management (SPM). In actuality, they are one and the same, and at the most they are only slightly varied. All of them aim to give you the necessary tools to track your organization. So when you are looking for a performance management solution, look for the capabilities that you would want the software to have. These can include everything that you have been doing manually so far and a lot of it depends on the kind of organization that you run.

For organizations selling products, you are measuring how much of each SKU is stored in inventory and how in-stock and turnover rates of specific SKU’s are performing in comparison to each other. Any organization also needs to keep track of sales performance on many different levels, daily, weekly, monthly, or annually. For multi-national corporations, every aspect of business comes in to play, including manufacturing efficiency, market mechanics, individual performance tracking and other things. The application that you purchase should allow you to track any type of data, such as these, rather than being dedicated only to one functional area. This also means the application needs to access unlimited disparate data sources in one interface. The application should be flexible enough to allow comparisons of any historical and current data, to slice and dice by various drivers, and include visualization features to permit the discovery of patterns or trends in the data.

Flexibility for date selection and date grouping are other features that should be supported in the software that you are evaluating. This means that the software should have to ability to easily expand and contract the timeline of any displayed data that is date based. For example, take daily and monthly sales numbers. By looking at a larger time frame you will be easily able to locate patterns, such as seasonal ones, if any exist. There should also geo-tagging features, whereby large companies with a national and/or global presence can keep track of their performances by area.

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Companies that close their books fast will experience the interrelated benefits of faster access to financial information, better-informed decision making, more efficient processes, reduced man-hours, cost savings and a healthier image in the market. But as companies seek to achieve a fast close

, the poor performance of some consolidation applications is becoming an increasing significant barrier to their efforts.

“With our legacy in finance we are keenly aware of the pressure companies are under to achieve a fast close and create sustainable compliance processes,” says Crispin Read, chief marketing officer at Cartesis. “The benchmark results show how a powerful business performance management framework can support a high number of users with the speed and accuracy financial executives demand. At the end of the day this level of performance translates hours into minutes and has a tangible impact on close times.”

Fast Technology for a Fast Close

The tests, run on Microsoft SQL Server 2005 and HP Integrity hardware, demonstrate Cartesis Finance’s ability to:

Support 1,500 active concurrent users while performing financial consolidation
Support 12 simultaneous consolidations running with up to 500 active users in one application
Achieve average response times, on 100 user actions, of under three seconds
Scale the applications with new users while maintaining performance

The results also demonstrate the importance of a company scrutinizing its IT infrastructure to identify processes and technologies that impede a fast close as well as the value of implementing high-performance applications and strategies to achieve one. The expanding scope and increasingly large deployments of financial applications means what was once hundreds of users is now in the area of thousands. This makes it increasingly important for an IT infrastructure to support mission-critical applications with high availability, high scalability and high reliability to provide users with the flawless performance they demand.

The testing was conducted by Cartesis in a Microsoft Technology Center on Microsoft SQL Server 2005 and HP server hardware and leveraged Compuware’s QALoad solution to simulate, through real-life usage scenarios and user profiles, the equivalent of six months of actual reporting cycles involving more than 14,000 data submissions and 160,000 input schedules.

Get More on Getting Faster

During an online seminar on March 22, Cartesis will demonstrate the importance of high-performance applications, using real-world fast close success stories from leading global companies like Roche, Nissan, Barry Callebaut, Recticel, Sartorius and Société Générale, where close times have been reduced by as much as 75 percent. The event, co-hosted by Microsoft and HP, will also showcase highlights of the benchmark results.

By: James Fisher and Dean Lombardo

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