Page 83 - Performance Leadership

72 • Part II Operational and Analytical Dimensions

the number of subscriptions sold. A sales manager may want daily
overviews of sales from the point-of-sale system.

Economies of Scale
Increasingly, organizations are centralizing back-office operations
across more than one line of business. Sometimes these are outsourced,
or they form shared service centers. This can be seen in typical support
functions, such as HR, finance, and IT. Although a large part of the
work may be transactional of nature, the sheer size of such a combined
operation affects the whole business, particularly when the processes
do not run smoothly. A small problem may immediately have a large
cost consequence. It is vital to monitor centralized operations closely.
This must be done on an executive level, as these centralized opera-
tions transcend a single line of business.
Alignment, by building the pretzel model, is one of the most impor-
tant goals of performance management. If management has a shared
insight, it bridges the gap between the self and the self-perception of
the organization. But there is also an external side to alignment: under-
standing how external trends affect our business, so that we can align
external events with swift and adequate internal reaction.
Increased alignment and use of the pretzel model are driven by the
need for increased transparency and agility. Performance management
uses scenario analysis (top-down implementation of the pretzel model),
rolling forecasts (bottom-up implementation of the pretzel model), and
real-time information (speeding up the overall pretzel model).

Scenario Analysis
Scenario analysis is a way of exploring multiple potential future reali-
ties as part of a strategy formulation process. One practical way of cre-
ating a scenario analysis is by first listing the most important
assumptions in the business model, both internal and external. Exter-
nal assumptions can be economic in nature, such as the growth of the
economy, the cost of capital, and the cost of labor. There are also social
assumptions, around demographics or fashion trends, for instance, or
what constitutes attractive product design or effective messaging. There
may also be political or legal assumptions, around tax pressure, labor