TO: SANTA CLAUS, The North Pole
I have been a good boy this past year. I believe that qualifies me for 100 percent order fulfillment of my following Christmas present requests. (And I promise there will be no returns and exchanges like I did last year.)
My top Christmas gift choice is that the marketplace will begin to view performance management as being much broader than a narrow chief financial officer (CFO)-driven approach to only financial reporting, budgeting, and unconnected dashboard dials. Those are important, but performance management includes so many more integrated methodologies.
If you can't deliver on that top choice, I beg of you to deliver this next request. I ask that the marketplace understand that the focus of performance management has shifted from historical reporting to forecasting and predictive analytics. This does not mean that there is valuable information that can be gleaned from historical data; there are tons (kilograms, Santa, if you use European standards) of information. There is even an entire software industry of business intelligence (BI) based on this need for decision support. But BI is a subset of performance management. Decisions must anticipate expectations of the future, including efforts to reduce uncertainty and mitigate risk.
My last request involves how companies interact with their customers and potential prospects on behalf of their shareholders. My Christmas gift wish is that you will make companies realize that how much they spend on customers -- to retain, grow, acquire, or win back -- is an optimization problem. That is, when it comes to serving customers, tailor the level of services in an optimal way. A company should not want to underspend on marginally loyal customers and risk their defection to competitors. Conversely, a company should also not want to unnecessarily overspend on already highly loyal customers with deals, offers, and price breaks where the incrementally higher service level won't really change anything â€“ except waste spending to the detriment of shareholders.
Santa … you have been a pretty good guy these past years. Keep up the good work. I realize you have an emerging and huge problem related to protecting our planet Earth. So if giving out “green and sustainability” presents to others is a higher priority for you this year, I won't mind waiting until next year to receive my requests above.
Very truly yours,
Reprinted from Gary Cokins's book, Performance Management: Integrating Strategy Execution, Methodologies, Risk, and Analytics, chapter 32, pages 215-216, (ISBN 978-0-470-44998-1) ,John Wiley & Sons Inc., 2009.