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June 7, 2008
Let's talk EPM - Part 2 on Metrics Profiling
In my earlier post on Enterprise Performance Management (EPM), I had enumerated the six steps of a practical EPM strategy in an organization. They were:
1. Business Process Maps - Understand the business process
2. Metrics Identification - Get hold of the metrics
3. Metrics Profiling - Understand the metrics in depth
4. Metrics Maps - Understand the cause and effect relationships between metrics
5. Metrics Visualization - Implementation of Metric Maps on BI Tools
6. Watch and Improve - Monitor Metrics and Improve business process as required
It is important to realize that building a data warehouse (enterprise wide) or data mart (functional area wise) or simply an integrated, subject-oriented data repository (without getting lost in semantics!) is implicit in the set of steps outlined above.
Steps 1 and 2 (Business Process and Metrics identification) are self-explanatory. Though getting hold of the right metrics is easier said than done, it is fairly well understood that the measures/metrics selected for analysis should align itself with the organization's mission, business model and value creation aspects.
Step 3 - Metrics Profiling, in my opinion, is the step often missed out in EPM implementations and arguably is a major cause of failures in such programs. Metrics Profiling stated simply is a way of understanding your metrics in depth. Given below is a sample template for profiling your metrics and can be customized for each organization.
Profiling Parameters:
1) Metric Name - Name of the metric
2) Metric Definition - Brief definition of the metric
3) Business Area/Process - Identify the functional area of metric origination
4) Financial Impact - Indication of how the metric affects the Income Statement, Balance Sheet, Cash flow statement etc.
5) Metric Type - Is it a ratio, absolute number, Trended value, etc.
6) Sources of data – Identify the source of data for the metric and the owners of that data
7) Calculation Involved - Define the calculation involved in computing the metric
8) Application - Brief description of how the metric helps in managing the business better
9) Metric Periodicity - Indicate the relevant periodicity of metric measurement
10)Potentially Affected Metrics - Identify the other metrics that are impacted (positive or negative) by this metric.
11) Example - Provide an example of metrics usage. (For example: ABC Computers released three new product lines during the last 12 months, generating $15 million in new revenue out of total annual revenue of $125 million. New Products Index = 15/125 = 12%)
Metrics Profiling is a very important step in the implementation of enterprise wide performance management system.
Thanks for reading.
Posted by Karthikeyan Sankaran at June 7, 2008 1:15 AM
