Striking a balance

There is confusion in the local market surrounding business intelligence and business performance management between dashboards and scorecards. With vendors making claims about the superiority of their products, it is up to the CIOs to make sure they pick the right solution for their organisations.

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By  Shankar Sharma Published  April 25, 2005

|~|Balanced1.jpg|~|Balanced scorecards are important for linking business strategies, points out KFH’s Mohammed Al-Waseef.|~|As enterprises grow, readily available data and analysis becomes increasingly important. Balanced scorecards and dashboards are among the tools these organisations can utilise to help them plan and implement business strategies. Like most aspects of the IT industry, balanced scorecards and dashboards are evolving rapidly.

They are products that present measured views and operational perspectives, in addition to examining key indicators in financials, customers and business and learning growths. In essence, they enable enterprises to measure and manage business performance, which in turn helps companies to accelerate their management processes.

End users are beginning to realise the potential worth of both balanced scorecards and dashboards in the overall running of their business. The starting point, however, is proving to be a common problem among enterprises.

Kuwait Finance House (KFH) is one enterprise in the Middle East region currently exploring the benefits of balanced scorecards and dashboards. The company is in the process of selecting and implementing a new performance management system, acknowledging the need for embracing the new technology. However, with vendors claiming the benefits of their respective products and solutions, the organisation has had to undergo a protracted, ongoing evaluation study.

At present, the company has deployed Oracle ‘self-service’ business intelligence module (BIM) within its human resources (HR) department, with a view to implementing a complete balanced scorecard network throughout the entire company. Presentations by various vendors and solutions are currently under evaluation due to the complex nature of such a broad-scale implementation.

However, KFH is clear about its end goal, as HR consultant Mohammed Al-Waseef states: “The main idea is to link and focus all resources to achieve the target of the company.” Every individual enterprise has its own unique business strategy. KFH is no exception; it understands the need to have a strategy that can be translated into clear business strategies.

In turn, these business plans should be translated into performance indicators, which can be clearly read. That is where balanced scorecards and, to a lesser extent, dashboards enter the equation. “The main reason why we are keen to implement balance scorecards is because it links individual performance to overall business plans,” explains Al-Waseef.

Balanced scorecards and dashboards provide a map for company strategy. Using ‘red’ areas to highlight where an individual or a department is failing to reach its target and ‘yellow’ areas for individuals or departments that are only marginally hitting their targets, allows enterprises to see which areas need to be improved and when.

The system readily highlights problem areas, enabling organisations to quickly put in place a coherent action plan or other remedial procedures: Development or coaching for instance. “So balanced scorecards are very important to link strategy,” deduces Al-Waseef.

The plan for KFH is to eventually link all departments together, but the initial ‘dummy run’ within the HR department is already producing dividends. The 30-member department is already witnessing the advantages of using the system for charting information about payroll, recruitment, leave application, compensation, individual performance and a myriad of other functions.

Due to the user-friendly nature of the products, there was not much need for re-training. Now, each employee is able to work according to his or her own singular needs. The HR department has been operating the new system for over two months and if the success continues, the company hopes to implement a universally integrated system within a year.

However, it still needs time to accumulate all the requisite knowledge, as this is still a relatively new concept for end users in the region and one that can take considerable time to put into practice. Al-Waseef also raises the fact that respective departments need time to establish their own criteria and systems for measurement in order to integrate into the new system.

“Each department has its own plan and measurements, but they are not yet computerised or automated,” he says. “So we need time to gather information and statistics and to come up with final measurements.” Al-Waseef nevertheless understands the overall value of balanced scorecards, and is keen for enterprises —especially ones that are seeking to expand globally— to seriously consider their value.

He says banks in particular are able to assimilate data from any source within any system. Although KFH is reluctant to divest details governing the cost of implementing scorecards, Al-Waseef is convinced of the value and believes that end users should not be put off by the short-term logistics.

“As a manager you know exactly what is going on about the status of your business in more than one dimension, which is unique for balanced scorecards,” he explains. “Enterprises are not focusing only on the financial part, but also have the learning and the growth and the internal processes.”||**|||~|Balanced2.jpg|~|It is very important for businesses to identify their requirements prior to selecting the product, says Oracle's Ayman Abousief|~|Enterprises with global ambitions need to assess all their resources from a multi-dimensional viewpoint because it gives balanced scorecards a distinct advantage over dashboards. Balanced scorecards can transfer data into graphs and indicators and thus provide instant presentable analytics, whereas dashboards are often confined to mere reporting roles.

With information captured from the database directly, the potential for human error is minimized, although the drawback is that if the data fed in from the beginning is inaccurate, the whole system becomes faulty. It is important therefore to have highly secure disaster recovery plans for both products.

That is not to say that dashboards and balanced scorecards fail to complement each other. In fact, the reverse is the case. Dashboards often form part of an overall suite package, and it is often advisable to have an integrated family of software so bridges do not need to be put in place between the two.

Individual business requirements, however, need to be fully analysed prior to embarking on any such implementation project. It can be sufficient for one company to use dashboards to run its operations, whereas another may need a more complete package.

“Some customers are happy with dashboards. It is very important for businesses to identify their requirements prior to selecting the product,” says Ayman Abousief, marketing director for Oracle Middle East and Africa.

However, Abousief points out that this is mainly to do with the maturity of an organisation in terms of its need for sophisticated tools like balanced scorecards. The company has to be ready for such solutions. A scorecard, in his view, is ‘almost useless’ without the existence of a robust mechanism to update it on a frequent, automatic basis.

“So you are looking at mature customers with solid enterprise resource planning (ERP) and other operational systems,” he says. “We tend to spend more time with customers who are ready for a scorecard and less time trying to convince a customer who is not ready.”

He understands the benefits that a scorecard or a cascade of scorecards can bring to an enterprise — fundamentally the ability to link strategy with execution; plus being ‘probably the most effective’ method of monitoring and measuring to what extent an organisation is progressing towards its strategic objectives. This not only means margins and revenues, but broader issues such as customer satisfaction and employee morale.

Abousief nevertheless has a ‘bad workman always blames his tools’ philosophy about balanced scorecards and dashboards. “I think any strategy has to have an implementation plan,” he notes. “The scorecard only helps you see where you are on the strategy section scale.” He also underlines the necessity to have complete integration with the data source, without which balanced scorecards and dashboards may fail.

Organisations therefore need to comprehend the leading indicators before reacting. This is done by carefully examining and evaluating the indicators displayed by the dashboard or balanced scorecard. Training and guidance are the only ways to ensure that end users possess the skill to expand and maximise on these products and leverage upon them. Abousief concedes that this can be very time consuming, especially with balanced scorecards.

However he asserts that the end gains outweigh the initial difficulties. “It is very time consuming on the strategy side, defining what it is that one is after, how to measure it and how to relate it to other factors,” he admits. “Once that is done the systems work is much simpler, assuming enterprises have the right integration with their data sources.”

Dashboards are not necessarily lacking in comprehensiveness when compared to balanced scorecards because they look at different aspects of business. It is also inappropriate to contrast the two in monetary terms. Abousief believes that customers should not concern themselves too much by the superiority of one type of product over another, but focus instead on their own particular requirements.

“Customers need to start by understanding their own data sources, what solutions are available in the market, then go back and think which bits and pieces they need and at what timeframes,” he states. “Following that, they should pick the short list of vendors that meet their needs.”

He concludes that it is a straight-forward case of not being seduced by vendor claims, but by ensuring that one acquires the right products and are at the right point in terms of business readiness and fundamentally, with the backing of the highest echelons of the business. “These projects often fail due to lack of executive commitment or difficulties in data integration,” he says.

||**|||~|Balanced3.jpg|~|It is all about where one gets the information from, says SAS' Basel Tutunji.|~|Basel Tutunji, who is the regional manager for SAS Middle East, echoes that view. Tutunji believes that end users should not concern themselves too greatly with whether dashboards are superior to balanced scorecards or vice-versa, pointing out that both are merely ready-made indicators. What is crucial is how the end user utilises them.

“It is where enterprises get the information from. Also, it is how these organisations operate the information into a scorecard or dashboard and how they analyse it.” Measuring indicators is only partially beneficial. The issue is about integration, not whether one tool is better than the other, explains Tutunji.

However, he says that dashboards do offer a certain individual functionality. An enterprise can run one dashboard for one department and one for another. Once again though, integration is the key to success. “The objective is to run the whole thing as one piece,” he adds.

One company that is assessing the viability of a fully integrated system using both balanced scorecards and dashboards is Saline Water Conversion Corporation (SWCC) in the Kingdom of Saudi Arabia (KSA). SWCC boasts 27 desalination plants and three separate IT sites, and with plans to move from the government sector into a commercial, and ultimately fully privatised enterprise, are underway.

Boasting over 10,000 employees, the need for business intelligence is crucial. “We are undergoing a transformation process. We need the ability to know and control things,” says business development project director and privatisation committee member Abdullah M. Alkhedher.

The company deployed Oracle e-business suite in 2004 to streamline and integrate its business processes into a single, online environment. SWCC has been examining the potential benefits of balanced scorecards for over two months, but has yet to reach a decision. Datastream dashboards form a component in the overall managing of the organisation, which provide key indicators for the benefit of the company’s maintenance managers.

Alkhedher believes that once the entire management system is fully automated and database analysis is in place, balanced scorecards would prove a useful addition. The ability scorecards have to link and integrate knowledge, and the availability of real time information are features that would benefit SWCC.

“If something goes wrong in a plant, you can act quickly, take decisions, see the problem and [find] immediate solutions,” he adds. At present, balanced scorecards remain only an idea for the company. With such a huge overhaul, it is unwise for the organisation to embark upon further long-term and expensive projects without the initial establishing of the new management system.

The re-structuring the company began 18 months ago is scheduled to take three to five years. Meanwhile, SAS has to fulfill its daily duties of producing water and electricity. Alkhedher nevertheless envisages a bright future, with the company putting in place a system to adapt to its needs and make it more efficient.

“A lot of things will change. Balanced scorecards will increase the performance, ability, awareness and morale of the company,” he enthuses. However, the primary need is to have sound databases for analysis before moving towards business intelligence — regardless of the products vendors are trying to entice end users with.

Datastream is one vendor that SWCC is working with the possibility of purchasing more dashboards and probably balanced scorecards as well at a later stage. The company offers a wide range of products and it believes that these tools, although being met with a degree of caution from end users, can enhance company performance.

Claude-Henri Weiller, vice-president of business development for the region with Datastream Systems, believes the demand for both balanced scorecards and dashboards looks set to rise. He highlights the fact that his company invests close to 30% of its annual turnover into research and development (R&D) and stresses that end users should not consider whether one product is superior to another, but focus on how either or both can help their business. “There are lots of products,” he says. “Flexibility is key.”

Joining Datastream in this competitive market is Business Objects. Although the Middle East presently comprises just 5% of the company’s overall business, it is an emerging region. The company is witnessing growing interest from end users about putting in place both dashboards and balanced scorecards.

“Between 10%-20% of our customers are interested in putting in place an application based on dashboards or balanced scorecards,” explains Thierry Nicault, regional director of Business Objects. He believes that they both represent good value for money in the long term, with high levels of return-on-investment (ROI).

Edwin Willems, the company’s vice-president for the region, says dashboards will allow customers to create analytics and integrate existing reports or queries. A scorecard, however, possesses metrics at a much higher level and enables end users to create goal settings and decide strategies. In other words, they are more than a reporting tool— they are a methodology.

He acknowledges that this is perhaps why global interest in dashboards is rising at a higher rate than for balanced scorecards as a whole. However, Willems believes that customer wariness will diminish once end users start deploying the systems en masse and witness the benefits. “I receive comments here [Middle East] about the integration of different products. Customers who already have production reporting in place can now move beyond that,” he adds.

||**|||~|Balanced4.jpg|~|There is an increasing demand for such solutions in the Middle East, beleives Business Objects’ Edwin Williams.|~|Willems says a growth of a company can make IT and end user training unmanageable without appropriate integrated reporting. He believes that a complete solution with balanced scorecards and dashboards working together on a single IT infrastructure is a fecund approach for large corporations.

On the thorny issue of data security, Business Objects offers granular level access to data so customers can access only the particular feature they need. As the end user matures, solutions packages are flexible enough to cope.

Cognos is probably one of the most active vendors in the balanced scorecard market. The company is aware that end users are at present reticent, but stresses the fact that it uses balanced scorecards itself and has witnessed the benefits first hand. An enterprise scorecard solution scales to thousands of users and allows highly automated access to timely data from multiple sources.

Cognos also advises companies against building their own scorecard solution, which it believes to be a path strewn with numerous pitfalls. Like Business Objects, the company understands that dashboards are useful reporting tools, but scorecards offer a methodology. The two products complement each other well, so end users should not have a ‘one or another’ mentality.

“Balanced scorecards are not the end goal. It is about understanding what to measure, what to manage,” says David Brierley, regional manager, Middle East, Greece and Turkey. “Enterprises must understand that balanced scorecard is a methodology. It is about having strategic objectives. The technology is just the vehicle,” adds Brierley.

It is evident that balanced scorecards and dashboards offer enhanced reporting ability. End users can measure and manage business performance and accelerate efficiency. They can also utilise these products to spot and analyse problem areas of an entreprise that need addressing. They are user-friendly, multi-dimensional and complement each other well as part of an integrated business intelligence platform.

It is clear that scorecards offer methodologies, but require extensive strategies to implement than dashboards. However, it is important for enterprises to not become embroiled in the debate over which is superior. Enterprises should ensure sound data foundations, and thoroughly plan their business strategies prior to selecting a solution that will best meet their business requirements. ||**||

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