Here’s the final article in Allen Woods’ three-part series about Organisation Modelling. Allen is managing director of JIT Software Ltd and the author of a range of organisation modelling and management software.
In the second article I described how the business community could use the European Foundation for Quality Management (EFQM) model to derive a structured set of business objectives. I touched on the principle of measuring success in meeting those objectives through the medium of performance measures. I also stated that data supporting performance measures should be collected at the point where a measurable transaction could be identified in a process.
In this final article, I will describe the way the Balanced Scorecard can be brought into the equation to define how data are delivered as information. I’ll then discuss the kind of IS/IT architecture that will emerge.
The Balanced Scorecard
A Balanced Scorecard is simply a logical grouping of performance measures. It is, in my opinion, extremely unlikely that a single score card will be appropriate or relevant for all levels of an organisation hierarchy. Going back to our example in the first article, ‘gain an extra 10% of market share’ and ‘make 10 axles to this level of quality’, couldn’t be recorded in a single format. It follows, therefore, that there will be a need for a cascading set of scorecards through the management chain. That means we need to incorporate links between scorecards and their associated performance indicators into the design. Broadly, there are two ‘link groups’. These are:
- The Parent-to-Child link. For instance, the MD’s scorecard links to senior management cards in this way.
- Cross-perspective links. For example, the size of the training budget (Economic perspective) is related to staff qualifications (Learning and Growth perspective) and this, in turn, is associated with efficiency.
There is also a need, within the definition of a performance measure, to specify the following:
The purpose of the measure.
A method of calculating the target value (activity-based costing)
The primary data source.
A time-based reporting cycle.
Tolerances that can be used to define outstanding success or serious failure.
If the business user can define the attributes described above, then establishing the relationships between indicators ¾ parent-to-child and cross-perspective links ¾ becomes relatively straightforward. For example, the overall budget balance for an organisation can be derived from budget balances for departments, sub-departments and other organisation elements where appropriate.
The combination of the EFQM, performance measures and balanced scorecards concentrates people’s minds on answering three questions:
- What do we need to know in order to determine our success?
- Where is the data?
- Where and to whom will it be delivered?
In other words, an IS/IT strategy!
Perhaps the key benefits to be derived from the kind of systematic business analysis approach we advocate will be:
- An IS/IT strategy will evolve that will be driven by the needs of business but with the advantage that it is based on good solid business analysis best practice.
- It will be possible to identify what data cannot be collected using the current IS/IT infrastructure and therefore to allow effective enhancements to be specified.
- The resulting analysis documentation, because it is structured, can be mapped on to structured IS/IT design methods like UML, Yourdon and SSADM.
IS/IT Structure
So what sort of system structure will be derived from such an analysis?
First, Data Collection Systems will be based on the identification of measurable transactions to support performance indicators. Typically this would include EPOS, or payroll systems. Most of those systems are probably already in place with a whole raft of data available that, in our experience, is largely untapped because people do not know what they need to know.
Second, Management Information and Reporting Systems will be deployed on the desktop of every manager in an organisation, basically as his or her scorecard. There are various metaphors in use. One of the more common is the ‘Dashboard’. A dashboard is a screen with a series of visual indicators (dials or lights) that present the manager will the means to see whether his or her performance targets are being met. In addition, underneath the dashboard is the means to drill down into the data collection systems if required.
The two application types described above establish a structured reporting chain that mirrors the organisation hierarchy. A set of management information systems feed off data collection systems to provide support for day-to-day operational decision takers. The structure so far depends, to a considerable degree, on identifying the parent-to-child relationship between indicators and scorecards.
Cross-perspective predictive systems
At the top of the application chain are the kind of predictive, decision support tools that the establishment of cross-perspective relationships can bring about. In the earlier example, there should be a relationship between training spend, qualified staff and increased efficiency. If there is not, then money spent on training cannot be money that is spent effectively. There should be other cross-perspective relationships that can be identified too. Identifying cross-perspective links and relationships will provide IS/IT practitioners with the means to apply techniques such as OLAP and AI effectively. The third level of application will, of necessity, support ‘drill down’ to lower level applications.
Conclusion
Over the past three articles I have argued the case for IS/IT practitioners to apply current ‘best practice’ business analysis techniques in use by many in the business community. I have suggested that three techniques, the EFQM, ISO 9000 and the Balanced Score Card provide the kind of tool set, in common use, that can be adapted to provide a structured set of system requirements for us, as IS/IT practitioners, to develop and deliver.
The approach works, but it does take time. In my experience, the final definition of a key performance measure can take two years, with a similar concurrent period needed to get the data required to support a measure effectively. The important thing is, though, that users of all types end up with an IS/IT infrastructure that mirrors the organisation structure and meets reporting needs.
Useful URLS
The European Foundation for Quality Management is at www.efqm.org, For its UK arm, visit www.quality-foundation.co.uk.
The Balanced Scorecard Institute is at www.balancedscorecard.org. Arthur Schneiderman is an acknowledged expert in the field of Performance Management. His site is particularly useful for an e- Book on the trials and pitfalls of scorecarding. See www.schneiderman.com. 2GC is a leading UK based scorecard consultancy. Its download pages are particularly useful. See www.2gc.co.uk
You can contact Allen at Allenwoods@jit-software.com. Visit www.jit-software.com for more information about his company.
Interesting project or development? Let us know at eo@iap.org.uk!
