After weeks of talking with customers, peers, and business leaders about their new reality with the current economic crisis, there is a 3-step journey they are all navigating: React, Recover, and Reimagine. One particularly fascinating challenge while companies are in the React phase is Business Performance Management. Most companies gather their executive suite into a room weekly, monthly, or quarterly to review their top measurements of performance and compare them to last week, last month or last year.
The value of performance management is to write the performance story such that executives can align and chart a course against. It provides signals of how the business is performing and what the future will bring, enabling businesses to swiftly respond to trends and accurately set and manage corporate initiatives.
Key to this process are analytics that forecast or predict future outcomes. Those predictions all look at historical data to inform the future. What happens when historical metrics’ relevance and application are wiped out due to a crisis?
Over the years, we’ve endured many crises, whether natural disasters, the housing market crash, and, most recently, the coronavirus pandemic. These moments in time make even the savviest business owners pause and evaluate their resilience and fortitude to overcome.
In this blog, I’ll walkthrough:
Performance management suggests strategy maps, balanced scorecards, performance measures, lean management, and, most importantly, data. I think of a process to which you manage and monitor the performance of your company by defining and sharing thresholds for good or bad. Week over week revenue growth, category performance across your new digital channel or customer retention are common KPI’s reviewed and discussed in board rooms across the globe. While reacting to a crisis, companies must re-evaluate which signals have meaning and whether the historical factors have relevance.
Many macro and micro factors influence performance management while in a time of crisis. Variables like the unemployment rate, quarantined workforce, regional shelter laws, and numbers of shortages in the supply chain are far more relevant than looking at STLY (same time last year) sales metrics. Cause and effect algorithms relative to things like marketing spend impact on demand or supply cost fluctuation on price, govern how businesses plan to grow. When a crisis hits, those variables that you once depended on to prescribe and predict have been heavily impacted.
Your business must no longer rely on history as a predictor and instead focus on reconfiguring your analytics to incorporate data sources outside of your own.
Crisis Performance Management (CPM) is built to take these relevant factors into consideration. CPM leverages third party data, forecasting models, and market research on top of your existing plan. It leverages intelligence to fill in gaps with market insights gathered from data outside your four walls. What-if scenario modeling, specifically, is a common technique for crisis performance management and crisis scenario planning.
In order to transition from the react mode into the recovery mode, you must take an entrepreneurial approach to your business. Gather the executives and external advisors and create a new way to view the business that leverages internal, external, and imputed data to find what truly matters to the business. This is the starting point for recovery, and your company will not only make informed decisions but will be able to manage and monitor the impact on the business. But that’s just the beginning; an intense focus comes next.
Mr. Myagi did not predict the pandemic, but his advice was fortuitous. The most common executive response I hear when asking, “How has this crisis impacted your 2020 strategy” is “We’ve had incredible focus and alignment. We’ve accomplished in weeks what normally takes us months.” Churchill famously quipped to never let a crisis go to waste. The good companies take that to heart and quickly shift from reaction to recovery mode, and the strongest companies use this opportunity to reimagine their business. With access to the right information, this intense focus creates an immediate sense of urgency and purpose across the team that drives results. But who is tasked to ensure that the operational and strategic excellence felt in the reaction phase can be maintained post-crisis? An entrepreneurial executive would say, if you don’t know the answer, it’s you!
Sustainability cannot be attained unless there is a conscious reinforcement of the key ingredients to performance management: people, process, and data.
We’ve touched on process and data, but what about people. Let’s assume our friends at Company X have closed the boardroom doors and created an incredible plan to overcome the crisis and transform the company! Meanwhile, most middle management and below are still doing the same job or waiting for guidance. Change is not solely driven from the boardroom. In order to make drive the results that your performance management plan desire, you must adjust fast and keep your communication channels open. A lack of alignment indicates a lack of leadership, which ultimately slows processes and results in distrust and failure.
When a crisis strikes, there is a knee-jerk reaction for executives to keep all decisions and communications closed off and on a need-to-know basis. “We’ll bring them in the loop when we have it figured out”. It’s understandable – it’s your job to lead. You want to make sure your teams don’t panic and have confidence that you are going to survive. What if that very team or that external advisor is the very source of information to help save your business.
Communication is always crucial, but during a crisis, it’s essential.
The team members in IT or analytics may be the last to be incorporated into the strategy, but they are likely the individuals closest to your data that you are evaluating. Furthermore, they may have insight into ways to look at the data that you have never imagined. Crisis creates uncertainty, and executives thirst for answers on what the future lies. The market place research, third-party sources, and your own data architecture are the main sources to quench that thirst, and it’s no time to be isolated.
Change Management is an often-overlooked area that few businesses try to perfect, and situations like these are a great use case of the damage that creates. By working with your leaders or teams on how to effectively draw together your team, manage expectations, deliverables, and communication, you are well on your way to driving success – together. Read more about effective change management through our blog here.
Companies find themselves in all phases of response to the crisis, but know more than ever, having easy access to the data that drives your business performance is critical. If you want to learn more about leveraging analytics to save your business or the importance of analytics during a crisis, try reading this blog, or contact an analytics consultant here to get started with a crisis performance management and scenario planning session.
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