Performance Management: Theory to Practice

If researchers or analysts were asked to define “performance management,” they most certainly would give varying, even conflicting, responses. Yet most would agree on a few common concepts: a focus on the objectives of service management; the idea that success depends on strategy, planning and financial management; and a system that facilitates analysis and continuous improvement through integration.

Focus on KPIs
A few analysts view performance management as a modern version of an executive information system (EIS), while others see it as a natural extension of business intelligence. In fact, the processes most commonly associated with performance management relate to budgeting, planning and forecasting, whereas the best known methodologies include the balanced scorecard and activity-based management. When considering such a broad and complex subject, one can readily assume that the various definitions of performance management will continue to evolve yet remain focused on key performance indicators (KPIs), or summary indicators, which measure the comprehensive services provided by a company’s system. Measuring and managing the system – namely combining medium-term and long-term strategies and objectives with tactics for aligning the business – represent the core functions of corporate performance management systems.

Containing risks inherent in large projects
In complex, risky sectors such as credit or financing, corporate performance management systems typically use a variety of techniques: establishing a performance culture, understanding and controlling the causes and effects of changes in strategies and tactics, improving communication within the corporate structure, or speeding up major corporate projects.

Franco Arzuffi, Head of Management and Control Applications for Società Gestione Servizi (SGS) of Banco Popolare di Verona e Novara (BPVN) observes, “The bank’s processing operations can be classified into four areas: commercial/client, risk, finance and auditing, and resources/operations. In this context, the corporate performance management system is primarily designed to evaluate areas and activities methodically and pragmatically, limiting risks in large and innovative projects. In addition to extracting process and performance indicators from each area and activity, we also identify a common control method to manage the entire system in an integrated and consistent manner.”

Indispensable for managing banks
Technology that can detect and measure the performance of internal and external services provides managers with an indispensable solution for controlling the many levers of the banking business. To satisfy requirements for control at both the business and operational levels, SGS - BPVN has been using SAS to create performance management components.

“The presence of SAS in the information system of the SGS - BPVN Group is gradually increasing,” adds Arzuffi. “Its roots sink into the various banks that make up the group today and enter into numerous environments that are crucial to the management of all activities: from the client to risk, from financing to operations, from human resources to the commercial network’s performance. For this reason, our choice to use SAS in the performance management system seemed logical as we progressed from a service management system to a complete and uniform vision of strategic management and business processes.”

A holistic vision of business processes
Performance management interventions were conducted to improve operational efficiency so that the system could evaluate processes with a focus on specific activities or structures. “We chose a bottom-up approach,” explains Arzuffi, “meaning a system for identifying, collecting and analyzing performance indicators which can gradually be applied to all business areas based on product and service life cycles (in terms of the company and the market), together with a progressive alignment of indicators for profitability, risk, yield and efficiency.” While broad performance indicators are universally recognized, they are often difficult to evaluate in a thorough, integrated way. SAS’ performance management systems start with the familiar areas of strategic activity, planning, and financing, then extend to all of the company’s operations, including the management of clients, suppliers, and operations, providing in-depth, focused, and predictive analyses for each business area.

“The system’s future development,” concludes Arzuffi, “will involve implementing the balanced scorecard in the realm of finance and extending the strategic performance management system, currently being used at the central offices, to the commercial network in order to evaluate specific operations. Efficiency problems linked to measurements of central operations and the refinement of budgets for personnel will be addressed in training sessions at these divisions. Yet, as the system takes shape and covers the entire business, the biggest challenge will be to identify and map cause-effect relationships between the KPIs and the holistic vision of the business processes, which is the true essence of a corporate performance management system.”

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