Technology - Performance management - Carry on counting

The business world is preoccupied with measuring and minimising risk. Lesley Meall questions how meaningful the results are.

A combination of business scandals and the perceived threat from terrorism has led the western world to become preoccupied with risk, and the notion that it can somehow be eliminated. When something bad happens, those adversely affected try to pin down the reason, apportion blame, and extract their pound of flesh.

'It is better to minimise the risk of foreseeable events, rather than dealing with the aftermath,' says Liesel Annible, the UK chapter president of the Association of Certified Fraud Examiners, but she questions how far the authorities should be expected to go to pre-empt the activities of mavericks.

'Shareholders and other investors seem to want insurance against any risk,' she observes, but business is all about taking chances - or seizing opportunities. 'The basis of investment is that the investor takes a risk in the hope of a reward, and the potential quantum of the reward is usually proportionate to the level of risk,' comments Annible, adding: 'Many investors seem to have forgotten the risk side of the equation and simply concentrated upon the rewards.'

Corporate governance

High standards of corporate governance may improve the odds in the investor's favour, but they offer no guarantees. It's over 10 years since the Cadbury Report was published in the UK, and while it may have helped prevent some financial shenanigans, it didn't eradicate them. So, in 1999 we were blessed with the Turnbull Report, followed more recently by the Higgs and Smith reports, plus Basel II and Sarbanes-Oxley, as the call for greater comparability, propriety, transparency and visibility became so loud it's almost deafening.

In an attempt to quieten investors, and other members of the stakeholder community, many companies have not only introduced procedures and safeguards designed to minimise risk, they have also invested in computer systems designed to help control, measure and report on this activity.

Over the past few years, the ascent of the performance management system has, in many ways, mirrored the rise of its predecessor, the enterprise resource planning system. 'Business performance management is the ERP of business management,' says Nigel Youell, marketing director with performance management specialist Hyperion. 'It's all about continuous performance visibility,' he explains, 'providing fingertip access to a single version of the truth.' Performance management systems promise to help organisations grasp this holy grail, by linking disparate processes into a coherent system that facilitates collaboration and management.

They do not come cheap. According to Youell, a corporate performance management (CPM) system could cost anywhere between $50,000 (27,508) and $2.4m. This puts the big bang approach out of the reach of most organisations, so implementations typically start small in the area where the pain is greatest. Witness the activities of Great North Eastern Railways, where a CPM system from Cognos was implemented during 2003.

The system will be used by all members of senior and middle management to closely monitor key performance indicators (KPIs) such as reliability of train services, crew costs, fleet management, customer satisfaction and revenue performance. No shortage of pain there, then. But by integrating enterprise planning, score-carding and business intelligence software, managers hope to remove a great deal of it, and align the strategic objectives of the boardroom with execution, at every level of the business. 'The CPM solution will arm managers with the information required, both at a macro and micro-level, to steer the company on a successful course,' asserts Paul Thrustle, head of information systems at GNER (see box).

'In common with all other train operating companies, GNER is under intense pressure from both passengers and the Strategic Rail Authority to meet strict performance targets,' comments Thrustle. He adds: 'We have invested in the Cognos technology as the linchpin of a drive not only to meet, but also to exceed, these expectations.' Unfortunately for the East Coast main line operator, its ability to do so is also dependent on the performance of others, in areas where it has no direct control.

'The key challenge ahead, as always, is for Network Rail to deliver a more reliable infrastructure,' says GNER chief executive, Christopher Garnett, 'and for GNER and its staff to provide ever higher standards of service for passengers, building on progress to date.' It's not unusual for performance management and measurement tools to provide lots of lovely statistics about relatively small parts of a supply chain, so GNER is not alone in its dilemma. But unless you look at the 'whole picture' the information is relatively meaningless.

It helps GNER to justify claims that failing services are not its responsibility, but it doesn't help those at the front end when things go awry. As far as passengers are concerned, when the 8.15 from Stevenage is late arriving in London, it is a problem they share with GNER, even if the cause is Network Rail, the government, or an act of God. So the train operating company is striving to improve the travelling experiences for passengers in areas where it does have control.

'Information for passengers has improved,' says Garnett, 'following the opening of a new national control centre, delivery of new customer information points at stations, and the introduction of new hand-held computers, with real-time running information, for on-train staff to assist passengers.' With commuters in mind, during 2003 GNER also opened new car parks, added coaches to some of its rolling stock, and improved communications facilities for those who want to work as they travel. 'Towards the end of the year, we became the only train operator to offer wi-fi broadband internet access on the move,' says Garnett. GNER is also the first train operator to put quite so many of its eggs in the CPM basket.

It's too soon to even try to judge the effectiveness of any of these measures, but the counting is well under way, and the company is already reporting improved results. In the third quarter of 2003 it had operating profits of $28.8m, up 48% from the prior year due largely to increasing passenger volumes and cost reductions. At the beginning of 2004, the GNER gleefully announced an increase in passenger traffic of 21% (since 1996, when Railtrack was sold off), and a 3.4% rise on 2002, with passengers making more than 15m journeys during 2003. How you choose to interpret the numbers is up to you, and the context in which you consider them. Perspective is everything.

Lies, damned lies and statistics

You can make these numbers mean anything you like. Well, almost. It seems highly unlikely that any of the people who made those 15m journeys did so because they are fans of GNER. They used the train because it was the most convenient or economical means of getting from A to B; then tried not to think about the Hatfield crash, or the Kings Cross fire, or who would pick the kids up from the childminder if the 5.15 was late again.

It also seems highly unlikely that any computer system will be able to meaningfully quantify this.

Nonetheless, GNER and the rest of the business world seem determined to follow the lead of the 18th century physicist Lord Kelvin. 'When you can measure what you are speaking of and express it in terms of numbers, you know something about it,' he declared. 'When you cannot express it in terms of numbers your knowledge is of a meagre kind.' It's an attitude that helped Kelvin reject the aeroplane as impossible, radio as pointless, and x-rays as a hoax. Who know what we are missing or dismissing by following suit, or how ridiculous our preoccupation will seem in 100 years time.

But we keep on counting, even though every person, every thing, and every event is actually unique and unmeasurable. Go figure.


Cognos Metrics Manager, the score-carding component of the CPM solution, will enable GNER to monitor performance and drill down to address any issues that may cause targets to be missed. This will be tightly integrated with Cognos' Series 7 business intelligence software, so that managers can instantly run reports and drill down to analyse data via a web interface.

Cognos' DecisionStream ETL (Extraction, Transformation and Load) software will also be used to enable GNER to extract and unite data from 13 disparate sources, including multiple ERP systems, and train-running systems, to give managers a single view of the enterprise.

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