Opal™ Performance Measurement System
The Opal™ Performance Measurement System aims to provide everybody in your enterprise with the quantitative information they need to do their jobs well.
The Opal™ Performance Measurement System is concerned with Managing Stakeholder Value.
It derives from 2 assumptions:
- There are several groups of stakeholders with a vested interest in the long-term success of your enterprise:
- the owners
- customer and prospective customers for your products and services
- your people, and people you’d like to have working in the enterprise
- your key partners and suppliers
- the wider community.
- You need to understand, in detail, what these stakeholders value, so that you can deliver superior value.
What are the elements of the Opal™ System?
- The Performance Measurement Framework (PMF™) comprising:
Principles
Alignment: The enterprise’s approach to measurement encourages alignment of people and systems with the organization’s mission, vision and goals.
Process and systems thinking: Measures should be linked appropriately with system and process monitoring, control and improvement.
Practicability: At any level in the enterprise, there is a straightforward procedure for identifying the sorts of measures that need to be collected, and what needs to be reported.
[See Analytics for Leaders §3.3 for a full discussion]
The Tribus Paradigm
- What products or services are produced and for whom?
- How will 'quality', or 'excellence' of the product or service be assessed and how can this be measured?
- Which processes produce these products and services?
- What has to be measured to forecast whether a satisfactory level of quality will be attained?
[See Analytics for Leaders §3.4 for a full discussion]
The Tribus Paradigm
The three Zones of Measurement, corresponding to Homer Sarasohn's Zones of Management.
In accordance with the Tribus Paradigm, the starting point for measurement is outside the enterprise: its success or otherwise is judged by its impact on the outside world.
The Strategic Zone comprises five groups of Stakeholders. Success Measures capture the value of the stakeholder's investment (resources, money, labour, …) in your enterprise, compared with an alternative investment.
The Tactical Zone comprises a set of Key Performance Indicators, which are enterprise-level measures used by the leadership to help manage the enterprise. They are lead indicators of Success Measures.
The Operational Zone contains all the measures relating to monitoring, controlling and improving the processes that deliver products and services to stakeholders.
[See Analytics for Leaders §3.5 for a full discussion]
- The enabling process, Stakeholder Value Management (SVM©), a continuous improvement cycle derived from the process of Customer Value Management.
The Stakeholder Value Management (SVM©), improvement cycle
- Understand what Value means to a stakeholder, and identify the key drivers of Value and their main attributes, and how to connect Value to higher level business drivers.
- Put measures and measurement processes in place to acquire data.
- Acquire and analyse Value survey data.
- Identify the improvement priorities that will have the greatest impact on Value, and hence on your business.
- Make the improvements and communicate the improvements to the stakeholder.
- Go to (3).
[See Analytics for Leaders §4 for a full discussion]
What are the benefits of the Opal™ System?
The Opal™ System offers a range of significant benefits for your organisation's stakeholders:
- Assists Boards and CEOs to align your enterprise’s activities with the Owner’s needs and to manage risk, using a concise set of indicators that capture current performance and predict likely future performance.
- Enables Executive teams to identify business improvements and to select the ones likely to have the most beneficial impact.
- Provides management with a means of aligning people’s work with the purpose and goals of the organisation.
- Facilitates improvement of relationships with Suppliers and Partners by identifying what is important to each party the relationship and value they derive from it.
- Helps engage communities by involving them in the development of an understanding of what they value or don’t value about your specific product, service, technology, scientific research, commercial development, infrastructure proposal, or other projects or plans.
Managing Stakeholder Value
8 ways the Opal™ System will help you deliver superior Stakeholder Value
What sorts of issues does Customer Value Management address?
- Why are you losing market share?
- Which competitors represent the biggest threats?
- Why are customers only purchasing once?
- Do you really understand the Value Proposition you are presenting to the market?
- What do you need to fix, and in what order?
- What sort of effort will it take?
[See Chapter 5 of Analytics for Leaders]
What sorts of issues does People Value Management address?
How much of your budget is spent on remunerating your people: salary, bonuses, provision for retirement … ? 10 million dollars? 100 million dollars? More?
Would you like to save yourself at least 0.5% to 1% of this annually?
There is a simple solution: cut your unplanned staff turnover by 1%.
It is very costly to lose someone you hadn’t wanted to lose. For lower-level staff, staff loss is generally reckoned to cost of the order of 50% of their total annual package, rising to 100% or more for senior people. And we haven’t even started to add in the cost of the knowledge and knowhow that walked out the door.
Improving how people feel about all aspects of their job is also likely to lead to improved customer service and to boost the discretionary effort people are prepared to make in improving business performance.
A process for managing People Value can facilitate an ongoing dialogue between you and your people about what needs to be done to help them do their best work.
[See Chapter 6 of Analytics for Leaders]
What sorts of issues does Partner Value Management address?
- You run a company manufacturing automobile components for retail, and your delivery company is becoming increasingly unreliable in terms of meeting delivery schedules, despite complaints from you and your customers (retail outlets) alike.
- You run a company that is part of an alliance developing the infrastructure to mine a metal deposit. The alliance partner operating the rail link to the nearest port is struggling with cash flow.
- You run a company that manufactures and sells proprietary solar cell-based products. You hold some of the key patents, the others being held by a software company, with whom you’ve been developing this market-leading technology. Their most important patent is now being breached by a competitor, but they cannot afford to defend it on their own.
These are all examples of troubled partnerships, but the implications of the trouble are very different, because the nature of the partnerships is very different. In fact, we can position the three situations in a graph:
There is a continuum of relationships that describe a partnership. However, it is helpful to distinguish three types of partnership, each with a characteristic concept of Value. The characters A, B and C relate to the three partnership scenarios.
A process for managing Partner Value can provide you with a means of identifying those aspects of your relationship with partners where most improvement is needed.
[See Chapter 7 of Analytics for Leaders]
What sorts of issues does Community Value Management address?
Is your enterprise regarded as a good corporate citizen?
Does it give your industry a good name or a bad name?
How do you know that the ‘good deeds’ you perform as part of discharging your responsibility as a good corporate citizen are having any impact on the success or otherwise of your business?
In fact, are you doing anything in this area that reflects your company’s concerns about its impact on the local community, or about preserving the environment, or efforts in pursuit of the betterment of humanity locally or globally?
AN ongoing dialogue with the community can be critical to the success or otherwise of an infrastructure project, or construction of a new factory, or use of a new source of food.
A process for managing Community Value can facilitate an ongoing dialogue between you and the community about the benefits you propose to bring, and how you propose to address their concerns.
[See Chapter 8 of Analytics for Leaders]
What sorts of issues does Owner Value Management address?
Who owns your business?
What Value are you creating for the owners that prevents them from investing their money elsewhere? In fact, what does Value mean to them? Are the activities of your enterprise really aligned with shareholder (and, more generally, stakeholder) needs. And what risks are they incurring in gaining whatever returns are being provided?
As Board Chair, do you know what your executive leadership expect from you by way of assistance? Or how well you are providing it?
As CEO, does your Board know what support you’d like? How well are you communicating your needs?
An Owner Value process provides the Board and senior leadership with a concise and comprehensive overview of where your enterprise is now, where it is heading, and where you need to focus attention. It can give you confidence that you are being duly diligent in the way you are running the enterprise.
[See Chapters 9 and 10 of Analytics for Leaders]
What sorts of issues does Reporting address?
What are your regular reports like?
Are they providing you with the quantitative information that enables you to run the enterprise? … in other words, information that is:
- timely
- actionable — in a format (graphical or tabular) that facilitates decision-making
- measures the right thing, the right way
- clearly interpretable in terms of its limitations — degree of uncertainty in the measurement, possible biases, …
And how do you know that your reports are covering all the most important aspects of the business, and that you are not overlooking something vital?
The Owner Value processes produces, as a key output, a description of what you should be monitoring on a regular basis, both in terms of lag indicators (where are we now?) and lead indicators (where are we heading?).
[See Chapters 9 and 10 of Analytics for Leaders]
What’s a Board assessment all about?
Who has a vested interest in the performance of the Board?
Two obvious groups are the shareholders, and the people who work for the enterprise. And there may be others.
And what does it mean for the Board to add Value for these different stakeholder groups?
A Board assessment involves developing an understanding of that these groups value, gathering information about the performance of the Board against these criteria, and then comparing it with their own perceptions of how they are performing.
[See Chapters 9 and 10 of Analytics for Leaders]
How to assess the measurement system of an enterprise
The Performance Measurement Framework provides a template against which your measurement system can be assessed. Eight criteria are used:
The assessment process makes only modest demands on management time and resources. Results are reported in an action-planning workshop that identifies strengths, opportunities and priorities.
[See Chapter 12 of Analytics for Leaders]