Thursday, 20 April 2017

Measuring Performance - An Alternative Systems & Technological Approach

MEASURING PERFORMANCE

Performance and its measurement is, at the best of times, one of the most complex tasks a modern organization can engage in; capturing all the small and big, vital and not-so-vital indices in the “chart” without rubbing too many people the wrong way and without causing heartburn is an impossible task. This is a task at which the best minds in this business have either failed, or had partial success at. Thus, let me at the outset clarify that this article is mindful of the above reality, and the enormity and the impact of the task I am analyzing.

ARE CURRENT SYSTEM ADEQUATE?

However, after a rather deep study and considerable mental mathematics that go along with it, I have come to the conclusion that while the current systems that I have seen are adequate, and do as reasonable a job as it is feasible to do under the given constraints and market realities – there remains tremendous scope for improvement. This scope covers topics that are increasingly relevant to the ever-changing ground reality,  and are now increasingly becoming vital to not just great & continued business performance – but in some cases, the very survival of organisations.

REAL EXAMPLES

I approach this matter from the perspective of my function – Sales, to drive home my points. All examples used herein are real, only names and precise details have been withheld for obvious reasons. First, let me establish a few examples from 2 industries that are critical to the further points being made :
1.  Company 1 had a sales loss of between 50-60% {estimated} in the space of just one year. That same company was saddled with huge inventories of finished products that had to be liquidated. Thus, new product introduction was slow in a market changing at a blinding speed.
2.  Companies 2 & 3 lost the confidence of its entire distribution in several states {5-6 that I am personally aware of}.
3.  Company 4 lost its marketshare by 14% over a period of time, as the two main competitors clicked in the market thanks to a series of successful new product launches, smarter distribution and accounting policies and a robust marketing plan
4.  Company 5 had inventories amounting to several months of finished products
5.  Company 6 came in with a revolutionary Sales Strategy – everyone laughed in the trade- Retail, Distribution, etc. 4 years later, it is a major player without compromising. This same company also had excellent but premium priced products in its portfolio
6.  Companies 1,  5 and 7, 8 and 9 lost their marketshares, which were eroded by huge margins as they failed to anticipate the trend.

MISSED WARNINGS

Look at the above examples; most of the people in the trade would probably put it down to the business cycle; but look again. It so happens, there were enough hints present on the ground in each and every example that should have given Managements a hint that something was changing, and that they need to adapt – and adapt as fast as possible. And yet, in each case, the warning signs were missed. I don’t blame them – the teams were too busy meeting targets, firefighting, ensuring continued market presence in retail and distribution to worry too much regarding overall macro trends, and mid-range threats.

Why should this be so? This is a complicated question to answer- and yet, this is the one question which needs to be answered. Quite a few people in my personal circle were aware of some of the parameters; we do discuss. One person I know very accurately noted the rise of a new competitor and a new trend in the market in one example above; another one – one of my reportees – noted a trend-shift, and bluntly said, what difference does it make? I am not going to worry. If things get hot, I will simply move on. We noted the shift in consumer preferences in another example, which grew into a tidal wave very shortly.

LEAD INDICATORS OF CHANGE

The point I am making is that in each of the above examples, there was knowledge, there were hints available in the staff and in the business partners and the channel that either the strategy is not working – or that the realities are changing. The first hints almost always become evident much before actual change; and yet – in each case, disaster struck as listed in the bullet points above. This clearly represents a straightforward gap in the overall Market Intelligence System of the organisations. Not only that, given that Managers were rewarded, {I myself have been awarded large  variable payouts} – and despite this, the company/s lost big-time. Now that, I respectfully submit – needs an explanation.

IS THE PMS REALLY TO BLAME?

Prima Facie, it would seem that the PMS is to blame. Now what if I make a paradoxical claim – that the PMS was not at strictly fault – and neither was anyone else? And no, it is not an issue of the Business Cycle either. Each cog in the system was doing the Job it was perceived as being designed to do. In such a scenario, you cannot apportion blame to any one function or person. What actually happened is the External Environment changed so much that it put the internal processes that run the organization out of sync with the market and the prevalent trends. The perception that the organizational processes achieved in the eyes of everyone was a direct result of this delicate imbalance : people forget that the market is dynamic; and thus, the processes have to be updated regularly!

Vital data points were not reaching the decision makers; the middle management and junior management was in fire-fighting mode; there was lack of connect between companies and the staff; finances were increasingly strained as it cost more and more to get the same sales and even lessening sales; in some cases it was an issue of survival for employees… this is par for the course when the external environment changes at too rapid a pace – or changes too much. This increases overall system stress, leading to the issues and results pointed out above.

A VICIOUS CYCLE

This created a vicious circle, as employees, instead of changing with the times, had no option but to keep on doing the same tasks in the same way, when the situation demanded a radically different approach. At this point the key question should have been – how to change this behaviour? In at least one firm, this question was asked; but the chosen answers taken were wrong. This again points to insufficiency of data in the system, leading to incorrect assumptions. Instead, the taken strategy paradoxically refurbished cynicism within the ranks, that the old methods are the ones that Management is looking for as the new strategy lacked depth and was not in consonance with the coming market changes on the field!

A POSSIBLE ANSWER

What is the source of the requisite data for decision making within an organization? One is the Market Intelligence Network, and the other is the Performance Measurement System. The first is amorphous in nature, not defined at the first 3-4 levels of the structure, and the second, which gives periodic status reports to Management on the company direction – clearly did not capture the trends, else the damage would obviously not have been so severe and so debilitating. You have to have a method in place to identify, capture and escalate these trends and events that can have serious import.

Unless the relevant market inputs are properly captured within the system & reach the decision levels in any organization in a clear logical format, change cannot happen. This isn’t easy to do; but such changes always have lead indicators, the precise nature of which depend on the industry. Identifying and tracing these lead indicators can generate actionable Market Intelligence. And that is the point on which, using Big Data, Analytics can be successfully used in the Sales Function…  Details in next part…

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