Introduction 

Business monitoring is an essential ally of business plan development. It will assist continuously in helping the organisation or enterprise answer the three basic planning questions:

Where are we?
Where do we want to be (and when)?
How are we going to get there?

This is because there is no point in developing the perfect plan without incorporating continuous best of breed monitoring systems, for the most minor changes will require a changed response to the plan somewhere within the enterprise.

A useful analogy is the drive out of the showroom with the new car. There is an immediate traffic jam, unexpected rain starts, and one of the overjoyed children in the back seat is sick. Each of these changes will need to be identified and appropriate action taken to allow the journey to continue. They may also have an different impacts over different timescales. For example the effect of rain is likely to be purely short term or immediate involving the use of windscreen wipers on this one occasion. A traffic jam while immediate may also involve changes in behaviour in the medium and long term with the choice of other routes. Similarly a sick child may lead to decisions concerning the quantity of ice cream and burgers that should be provided in the future, and so on. This shows that the same information can be used for different types of action in the short medium and long term.

So it is with business monitoring and the plan, with changes in the environment (external, competitive, resource) each leading to changes in implementation. These alterations then mean that the plan is changed (in however minor a way) meaning that a new base level has been created for measurement and future execution. The business monitoring system must identify this new base and feed back information for future decisions.

It will also mean that the information system must remain dynamic in reacting to the environment in the type and frequency of data that it collects. Reviewing the effectiveness of business monitoring should be an integral part of both the plan and the information system itself.

By reviewing business monitoring systems as an integral part of business plan development the enterprise is able to create best practice bottom up planning approaches, combining the plan and the monitoring system in a seamless whole.

Look before you leap

Not only should the enterprise or organisation look backwards at the effectiveness of business monitoring, it should also attempt to look forward in identifying required changes in the information system before a particular part of the plan is implemented. This will ensure that both opportunities and problems are identified early and suitable action taken.

Major changes to strategy should require that the enterprise re-evaluates its monitoring system to ensure that it is fit for purpose. This will be especially important in:

Major changes to market development strategies (particularly new markets/ and or regions);
Major changes to product development strategies (particularly a new emphasis within the innovation matrix);
Any type of diversification.

Certain types of implementation policy will also require attention, notably:

Licencing;
Franchising;
Joint ventures;
Mergers and acquisitions.

The need for business monitoring flexibility underlines the requirement that each operational unit within the organisation/ enterprise should determine their specific functional demands identifying data components from what may be a centralised data collection system. Unless this is achieved, the unit will suffer from information overload as the centralised system provides increasingly vast quantities of data.

SATURNS

The next question is how should the operational unit assess its monitoring requirements from the universe that its available. The mnemonic Saturns is useful (referring to the rings of Saturn which have been organised in a coherent fashion). The components are:

Simple to understand
Accurate
Timely
Usable
Record keeping is comprehensive
Network enables continuous access
Secure

The human mind finds complex data difficult to use; however complex the underlying material the aim of the business monitoring system should be to provide the material in the simplest possible format.

The exact level of accuracy within the business monitoring system requires judgement, though obviously the better the accuracy the better the data. Often there will be trade off requirements – the more accurate the data the more expensive, and so the accuracy requirements need to be measured against the usefulness of the accuracy. Secondly much data that is collected relies on assumptions – even costing information is subject to these biases. Assumption based data processed by a computer and delivered to three or four decimal places may gain the perception of holy writ – but all it is a guesstimate and managers should treat it as such. Finally where data is subjective direct correlations can be dangerous. For example a company with a customer satisfaction score of 96 will not automatically be four times better than the company with a score of 24.

Timely information refers to the fact that information is only of value when it is there when required. If it isn't it cannot be used in decision making. The monitoring system therefore needs to be established to deliver the three different types of data – control (immediate), review (intermittent) and planning when they are required to prevent information overload.

Usable data is also a feature of information overload and the temptation to collect all data because it may be of value at some future point. The result of a lack of focus in information collection will create an inability to separate the wood from the trees.

Record keeping should be considered a fundamentally important part of business monitoring as not only are audit functions within the enterprise are becoming more and more important and record keeping provides the necessary data trail, but also to provide staff with the ability to analyse the underlying data where and when necessary to identify new underlying relationships.

Network accessibility is essential for effective business monitoring as the relevant staff must be able to find and use the relevant data.

Security of data conflicts with network accessibility in part, requiring the enterprise/ organisation to clearly set limits on what data can be accessed by which staff, but remains a vital part of creating a viable monitoring system, as more and more data is stored electronically.

Competitive advantage and business monitoring

Better business monitoring will create competitive advantage through improved quality, inclusiveness and speed. The main effects will be:

By dealing with customer demands more quickly and effectively the enterprise will gain stakeholder loyalty and drive repeat purchase;
By identifying problems and opportunities in the market more quickly than the competition the enterprise will be able to lower cost and drive growth;
By improving the data flow and the way it is used the enterprise will drive improved quality of decision making;
By improving the flexibility and focus of the enterprise onto key performance indicators;
By improving the security of data;
By increasing the inclusiveness of the data flow the enterprise will improve skills, understanding and motivation.

Building the business monitoring system

It is useful to separate the development and maintenance of the business monitoring system into a series of building blocks. These for convenience can be defined as:

Structure
Targets
Control systems
Data collection
Risk management

Exactly where each of the components should be placed is open to discussion, but the list below provides the methodology that Ibis uses in its approach to the development of the business monitoring system.

Structure

Form follows function. Creating a structure which will potentially deliver quality business monitoring and implementation should be the first priority in creating the business monitoring system.

SBU. At the base of business monitoring should be the creation of strategic business units with responsibility and authority for specific areas of operation and information management. These focus the enterprise on defining operational information necessary for superior performance, managing it and implementing action based upon it.
Special units. Reducing (or eliminating) special units will significantly enhance information and monitoring management as special units act as gatekeepers, slowing information or denying access to it.
Authority/ responsibility. Defining responsibility and authority within the enterprise should include definitions of information management and reporting.
Standard operating procedures. Identifying areas within the business where standard procedures will enhance information collection and management will significantly enhance overall business monitoring as it will also provide an audit function for review.
Premises review. The built environment has a substantial impact on the efficiency of business monitoring. Best practice suggests that the SBU should all located in a single complex; that they should not be separated on separate floors in an office block (vertical tribes); that the physical space should be as stress free as possible; that employees are encouraged to mix at break times in a single canteen or eating area. 
Knowledge centers. Collecting all individuals responsible for a specific operational area together and focusing their management and reporting systems will greatly improve overall business monitoring.
Team building. Within the knowledge center, the development of a team approach will significantly improve overall business monitoring and implementation levels as groups rather than individuals will be aware of enterprise demands.
Mentoring. Mentoring will significantly improve business monitoring in several important ways. It will enhance the productivity of new recruits; it will improve the management of projects; it will enhance decision making and group interaction.
Bonus systems. The way in which the enterprise rewards behaviour will have wide ranging implications for business management. Best practice suggests that the design of bonus systems should ensure that they are widely spread, involve the achievement of a basket of objectives rather than one or two, and involve the recipient in a long term rather than short term return (equity rather than cash). 
Quality circles. The existence of quality circles will further improve group cohesion and identification of problems and opportunities.
Recruitment. Supporting the knowledge centre with appropriate recruitment policies will improve the ability of the enterprise to handle data and use it effectively.
Diversity index. The greater the diversity of staff as part of recruitment policy the greater the potential of the enterprise to extract the maximum possible value from the data that is available.
Skills profile. The higher the level of skills the greater the potential of the enterprise to extract the maximum possible value from the data that is available.
Training. Incorporating business monitoring as part of the three training components (induction, maintenance and development) will improve understanding and application.
Information flow map. An essential part of the structure of business monitoring will be the initial assessment and then regular monitoring of how information flows within the enterprise – where it comes from, how it is stored, how it is accessed, and how it is used. In general terms the greater the transparency, the better the decision making.
Software alignment. The structure of the information system will increasingly depend on the ability of individuals within the enterprise being able to access information from the range of available software systems. Ensuring that the enterprise is supported by the best technology and that the right individuals or teams have access to the information will be an important structural decision. 
Security plan. Allied with software alignment and the information flow map will be the security plan which defines access controls, balancing transparency requirements against data protection requirements. Best practice suggests that the enterprise should always err on the side of open access in most non mission critical areas.
Communication plan. The creation and maintenance of a communication plan should be considered as part of business monitoring as it generates feedback from stakeholders, providing for a closer integration of internal and external relationships.

Targets

Any business monitoring system must measure against something, or it is pointless. Developing and maintaining achievement targets will provide this essential framework.

Balanced scorecard. The balanced scorecard for the enterprise and for the constituent SBU's should provide the over-riding strategic focus of the enterprise.
Key performance indicators. The choice of key performance indicators within the knowledge centers creates focused operational targets
Benchmarks. Associated with the development of key performance indicators will be need to identify the relevant benchmarks to define positive or negative achievements against the external universe.
Investment appraisal. Target levels of return on investment will be central to monitoring systems.
Budgeting. Cost management will need to be part of target creation; ranging from loose budgeting (with an emphasis on FCF) or tighter controls.
Legal review. Legal demands on the business – health and safety, employment, environmental, planning, corporate all involve the creation of targets.
Certification. Certification of products and services will create a range of targets.
Management accounting. Cost variance control will be a vital target for any business monitoring system so that variances and be explored and procedures improved.
TPM. There are a range of targets generated by management software. Total productive maintenance will be one of the most important.
TQM. There are a range of targets generated by management software. Total quality management will be one of the most important.
SCM. There are a range of targets generated by management software. Supply chain management will be one of the most important.
MRP. There are a range of targets generated by management software. Material requirements planning will be one of the most important.
E – enablement. There are a range of targets generated by management software. The degree of e-enablement (both suppliers and customers) will be one of the most important.

Control

The third step in the development and maintenance of the business monitoring system is to review the way in which the enterprise or organisation controls the way it manages information.

Comprehensive plan development. A structured bottom up business plan will be central in re-assessing monitoring needs.
Comprehensive plan review. Regular reviews and updates of progress will be a vital part of business monitoring management. 
Joint planning. The inclusion of major stakeholders (Pareto's Law) in the planning process will provide a wider range of information on overall trends within the environment, while assisting in implementation.
MBO. An emphasis on management by objectives will ensure that most of the enterprise costly investments will be subject to more detailed control.
Recruitment appraisal. The use of recruitment appraisal techniques will review operational structures for each recruitment decision.
Appraisal. Regular reviews of performance, ideally based on project performance will be important for enterprise control.
Meeting management. Creating a formal programme by which the necessity of meetings is controlled and a standard operating procedure to ensure that meeting productivity is maximised will significantly improve monitoring performance.
Exit interview. Reviewing the effectiveness of the monitoring systems in the exit interview will also improve overall control of information management.
PDP. Establishing personal development plans for key staff will be central to manpower and succession planning within the enterprise.
Audit. Systems review (financial, operational) by internal and external should be designed to both meet legal requirements but also to focus on performance enhancement.
Testing. A testing programme for key changes in operational direction will reduce risk and increase effectiveness of monitoring systems as it will identify what elements of the new policy will need enhanced data collection and analysis.

Corporate governance. The creation and maintenance of effective corporate governance will be an important element in the control and dissemination of information.
Health and safety. A health and safety plan will be a legal requirement, but will also set controls over specific areas of business operations.
Disciplinary code and grievance procedure. A disciplinary code will be a legal requirement, but will also set controls over specific areas of business operations 
Code of conduct. A formal code of conduct will set controls over specific areas of business operations.
Complaints policy. Creating and maintaining a formal complaints policy will greatly improve the identification and correction of poor performance.
Industrial relations. Creating and maintaining an industrial relations policy will significantly improve the identification and correction of potential conflict within the enterprise.
Decision making systems. Reviewing the way in which the enterprise handles information and moving towards best practice will significantly improve the effectiveness of business monitoring
Meeting management. Clear policies on meeting management (based around the rule of eight) will enhance the effectiveness of business monitoring.

Data collection

Once the business monitoring structure is in place, with established targets and controls, data choices can be made.

Frequent data choices. To prevent information overload, the enterprise will need to specify what information it must have for continuous or frequent review.
Intermittent data choices. To prevent information overload, the enterprise will need to specify what information it must have for intermittent (normally monthly) review. 
Planning data choices. To prevent information overload, the enterprise will need to specify what information it must have for planning (normally quarterly) review. 
Primary. To prevent information overload, the enterprise will need to specify what information it must gain from primary sources. 
Secondary. To prevent information overload, the enterprise will need to specify what information it can gain from secondary sources. 
Internal. To prevent information overload, the enterprise will need to specify what information it will generate internally. 
External. To prevent information overload, the enterprise will need to specify what information it must derive externally. 
Networking. The type and importance of networking will often be a crucial element in data collection.
MBWA. The type and importance of management by walking about will often be a crucial element in data collection.
Random inspection. The type and importance of random inspection will often be a crucial element in data collection.
Ideas day. Analysing and presenting new approaches to problems and opportunities will enhance the power of the business monitoring system.
Creativity. Training in creativity techniques will enhance the ability of individuals and groups to extract and organise information in more powerful ways.

Risk management

Though risk management is part of overall control, it is useful to consider it separately to focus the enterprise/ organisation on its risk environment and how it should be controlled.

Assumptions. Incorporating assumptions into the monitoring system will be an essential part of the planning process. 
Devil's Disciple. Introducing an individual formally responsible for a critical review of planning assumptions and implementation should greatly improve the understanding of risk. 
Sensitivity analysis. The review of how changes in assumptions will effect overall performance should be a central part of plan development.
Barrier conditions. Associated with assumptions will be the requirement to establish boundary conditions – how far a trend can move above and below the assumed value for it to require action.
Portfolio analysis. Every enterprise/ organisation has a range of risks associated with implementation. The use of portfolio analysis techniques within the business monitoring system will provide an overall measure of total risk.
Project risk management. Creating separate monitoring systems for major projects with the identification, review and management of risk will be an important component of overall risk management.
Contingency plan. The creation, maintenance and review of the contingency plan should be a central part of the development of the plan.

Risk profile. Regular analysis of the risk profile should be a standard component of any business plan review. 
Due diligence. A critical analysis of the risks associated with major investments (including important recruitment choices) should involve a component of due diligence as part of any standard operating procedure.

Impact analysis. Changes in the environment should be rigorously reviewed.
Forecast grid. The understanding of risk will require the use of a mixture of tools, either quantitative or qualitative.
Forecast case. A crucial part of the control of risk will be choice of forecast case, and this will often need to be regularly reviewed.

The on-line quiz

In common with other Ibis analysis frameworks, this system does not provide an assessment of the overall importance of a particular question, but to give the user some indication of how close the current system is to “best of breed”. The quiz is also useful off-line to provide a picture of where the enterprise/ organisation should focus its attention to improve overall business monitoring performance.

The question that should be answered in each case is: “Are we best of breed?”

This document is part of the 150 page business plan manual which accompanies the Ibis three day training programme

 

IBIS Business Monitoring

Question Agree Partially Agree Neutral Partially Disagree Disagree

Structure

SBU
Special units
Authority/ responsibility
SOP
Premises
Knowledge centers
Team building
Mentoring
Bonus systems
Quality circles
Recruitment
Diversity
Skills
Training
Information flow map
Software alignment
Security plan
Communication plan

Targets

Balanced scorecard
KPI
Benchmarks
Investment appraisal
Budgeting
Legal review
Certification
Management accounting
TPM
TQM
SCM
MRP
E- enablement

Control

Plan development
Plan review
Joint planning
MBO
Recruitment appraisal
Recruitment
PDP
Audit
Testing
Corporate governance
Health and safety
Disciplinary code
Code of conduct
Complaints policy
Industrial relations
Decision making systems
Exit Interview
Meeting management
Data
Frequent
Intermittent
Planning
Primary
Secondary
Internal
External
Networking
MBWA
Random inspection
Ideas day
Creativity
Risk
Assumptions
Devil's Disciple
Sensitivity analysis
Barrier conditions
Portfolio analysis
Project risk management
Impact analysis
Contingency plan
Rick Profile
Due Diligence
Forecast grid
Forecast case
 
Your total is:        

Your score:

600+ Wonderful, wonderful. You either know everything that is going on, or some small inaccuracies in reporting have crept in.

450-600. Many of the elements of a comprehensive business monitoring system are in place. Additions and refinements will add value to the enterprise.

300-450. There are gaps in the business monitoring system that need to be addressed as a matter of some urgency

150- 300. There are serious gaps in the business monitoring system that must be addressed as a matter of urgency.

Less than 150. The enterprise neither knows where it is, where it wants to be or how it is going to get there.

More information on the way in which Ibis can contribute to your business plan development is provided at Advantage Ibis 

More information on the Ibis approach is also available on the FAQ page.