Gary Cokins
Gary Cokins

Gary Cokins, CPIM
(gcokins@garycokins.com; phone 919 720 2718)
Gary Cokins (Cornell University BS industrial engineering/operations research) 1971; Northwestern University Kellogg MBA 1974) is an internationally recognized expert, speaker, and author in enterprise and corporate performance management (EPM/CPM) systems. He is the founder of Analytics-Based Performance Management LLC www.garycokins.com . He began his career in industry with a Fortune 100 company in CFO and operations roles. Then 15 years in consulting with Deloitte, KPMG, and EDS (now part of HP). From 1997 until 2013 Gary was a Principal Consultant with SAS, a business analytics software vendor. His most recent books are Performance Management: Integrating Strategy Execution, Methodologies, Risk, and Analytics and Predictive Business Analytics.
All of my books are at:
https://www.goodreads.com/author/list/47692.Gary_Cokins
Linkedin.com contact:
https://www.linkedin.com/in/garycokins
http://www.linkedin.com/pub/gary-cokins/0/15a/949
https://garycokins.academia.edu/
Twitter:
@GaryCokins
Contents
24. Historians versus Futurists – Who is More Valuable?
23. Interview of Gary Cokins describing EPM
22. Who Are the Animals of Corporate Performance Management (CPM)?
21. The Many FP&A Rooms of the Organization Mansion
20. The Long Arc Bends Toward Justice
19. A Primer Lecture on Activity-Based Costing (ABC)
18. CFOs – Are They Vanguards or Villains?
17. Profitability Analytics as a 'West Side Story'
16. Beethoven’s ‘Eroica Effect’ and Corporate Performance Management (CPM)
15. The Strategic Cost of Quality
14. Measuring and managing patient profitability
13. Are Accountants Homo Accounticus?
12. Management Accounting 101, 102 and 103 Courses
11. Identifying and Measuring the Cost of Error and Waste
10. Why Use ABC
9. Movie Sequel – “Accountant Pirates of the Caribbean”
8. Some Accountants are the Blind Leading the Blind
7. The CFO’s Expanding Role – Reality or Delusion?
6. How Many Types of Key Performance Indicators (KPIs) are There?
5. Does Accounting Undermine Managers' Ability to Make Good Decisions?
4. A Passionate Appeal for Activity-Based Costing (ABC)
3. Put Your Money Where Your Strategy Is
2. How Marketing and Finance Think differently
1. Measuring and managing customer profitability
24. Historians versus Futurists - Who is More Valuable?
Some analysts dig deep into historical information to glean insights once hidden. Other analysts are obsessed with predictive analytics and Big Data to foresee the future. Are these in actuality the same person or are they two different rivals with their own ideology?
Crystal ball versus a rear-view mirror
Futurists enjoy taking out their crystal ball and projecting future innovations. They are typically wrong. George Orwell’s book 1984 that was published in 1949 did not come close with its projections. In the 1960s I recall a Walt Disney television show describing automobiles that required no driver and were guided by some form of magnet-like strip imbedded in the street’s or highway’s roadbed. Nice try.
In contrast, historians research the past to determine what lessons might be learned that can be applied today. For example, historians examine the judgments, policies, and actions of past USA Presidents and international government leaders to assess what actions may best serve citizens today.
Do futurists or do historians provide relatively more valuable information? Futurists make us think by being provocative. Historians through their rear-view mirror allow us to reflect on what worked or did not work in the past.
Why is this “more valuable” question relevant for today’s organizations? It is because many organizations fail to successfully execute their executive team’s plans and allocate an appropriate mix and level of resources to complete those plans. This involves strategy and budgeting – two disciplines that are widely criticized today.
Historical lessons applicable to strategy execution and budgets
In the author Stephen Bungay’s book, The Art of Action, he reflects on lessons from war and military campaigns that apply to leadership skills and planning. He specifically addresses how an organization can implement and achieve the formulated strategy and plans of its executive team. In his book he draws on battle tactics of the 19th century Prussian army.
Bungay’s premise is that the leaders of almost all organizations can define reasonably good strategies. Where executives often fall down is leading their organization to implement their strategy. Bungay describes this problem as gaps and advises how to close the gaps.
His assertion is that similar to military campaigns in war when a strategy encounters the real world then three types of gaps appear. He describes gaps in terms of expected results and reality: outcomes, actions, and plans. Gaps result from complex and difficult to predict environments that all organizations deal with and are made more severe with globalization – the reduction of international borders for commerce and information. The three gaps are:
1. The knowledge gap - the difference between what we would like to know and what we actually know.
2. The Alignment Gap - the difference between what we want people to do and what they actually do.
3. The Effects Gap - the difference between what we expect our actions to achieve and what they actually achieve.
Based on Bungay’s deep knowledge as a historian of military practices, he observes that a key to successful strategy execution is delegating more decision-making authority to managers and employee teams.
Empowering managers and employee teams
Bungay describes lessons from the 19th century Prussian army in this way. Following an unexpected military defeat the Prussian military’s tactics were reformed. Lower-level officers were given more flexible command to make decisions. What mattered is that they fully understood the battle mission. By providing more decision rights to the officer corps, this resolved a problem that the higher the military leaders are from the battlefield, then the less they are aware of the current situation. Officers could pursue local actions as they saw fit.
The Prussian army solution following its prior defeat was the institutionalization of military genius with centralized and elite generals and increased accountability of the field officers with rewards based on their performance and outcomes. This reform was successful, and the army conquered other countries.
In today’s terms of managerial methods, the parallels of the Prussian army reforms are applying the balanced scorecard methodology and adopting the participative budgeting concepts.
The balanced scorecard’s primary feature is the development of a strategy map that visually displays on a single page a dozen or more cause-and-effect linked strategic objectives. Using four sequenced components (referred to as “perspectives”) the linkages move from employee learning, growth and innovation to process improvement initiatives to customer loyalty objectives which result in the financial objectives’ outcomes. The key performance indicators (KPIs) reported in the balanced scorecard are derived from the strategy map. The KPIs monitor the progress toward accomplishing the strategic objectives, and by each KPI having targets assigned, the foundation for accountability is established and alignment of managers’ actions with the executive team’s mission and strategy are achieved.
The participative budgeting concept views the annual budget as a fiscal exercise done by accountants that is disconnected from the executive team’s strategy and is usually insensitive to forecasted demand of volume and mix. It acknowledges that budgeting annual line-item expense limits are more like shackling handcuffs for managers who may need to justifiably spend more than was planned and approved many months ago in the past in order to capture benefits from newly emerged opportunities. The participative budgeting method advocates abandoning the annual budget that quickly becomes obsolete. It proposes replacing the budget’s controls by giving managers the freedom of decision rights. This includes hiring and spending decisions without requiring approvals from superiors. It invokes controls by monitoring non-financial key performance indicators (KPIs) against the targets defined by the executives in the balanced scorecard’s strategy map. Managers do not escape the need to be held accountable with consequences. The time frame is not annual but rather dynamic.
Historians versus Futurists
The message here does not mean organizations should not be researching emerging and imminent new technologies and methods, like analytics and Big Data. The message is that granting decision rights to managers but holding them accountable with consequences is effective at closing the three gaps. And this a lesson learned from historians.
The takeaway from this message is germane to understanding PACE’s Profitability Framework. While some seek a step-by-step instructional manual, the problem with these is that they take a one-size-fits-all approach, and the real world is more complex than that. In contrast, the Profitability Analytics Framework gives you a methodology to find the answers and knowledge you seek. It helps you investigate your company through several lenses including formulation, validation and execution of your strategy focusing on costs, revenues, and investments. It enables clear thinking to systematically investigate answers to critical questions and provide the wisdom you need to move forward in a profitable way.
If you are a seeking to close the three gaps, isn’t it time you looked more into the Profitability Analytics Framework and what it can do for your organization?
Gary … Gary Cokins
gcokins@garycokins.com
"This content may be found also on https://www.profitability-analytics.org/"
23. Interview of Gary Cokins describing EPM
“Enterprise and Performance Management (EPM) methods include: Profitability reporting (using activity-based costing [ABC] ); Strategy maps and balanced scorecards with KPIs; Lean management with lean accounting; Quality management with the cost of quality (COQ); Driver-based budgeting and rolling financial forecasts; Enterprise risk management (ERM); and data science and analytics.”
The full video interview is available here:
22. Who Are the Animals of Corporate Performance Management (CPM)?
Ever notice how the personalities and dispositions of animals often resemble humans? An organization’s pursuit of adopting corporate performance management (CPM) methods involve personalities of all types. How are they like the creatures that populate our planet? Here is a zoology of analogous types of employees that you might recognize.
Lions – These are the managers whom co-workers respect. They are bold and lead their pride. With analytics-based enterprise performance management, their boldness enables them to have the will to try emerging managerial concepts. These include strategy maps and their companion, the balanced scorecard; activity-based costing to measure product and customer profitability; and driver-based budgeting with rolling financial forecast updates. In the wild, males seldom live long due to injuries sustained from continuous fighting with rivals. In business, lion-like managers will encounter conflicts in their pursuit and support of these managerial concepts.
Peacocks – These are those employees who like to look good to everyone. Peacocks cannot fly; this type of employee’s contribution to implementing corporate performance management (CPM) methods is limited. They like to take credit and display their plumage, but they have not earned the credit they presume to claim.
Owls – These are those wise sages who truly understand what corporate performance management (CPM) methods are all about. They tend to be quiet and are careful observers. An owl’s survival strategy depends on stealth and surprise. It would be nice if the owl-like employee would speak up more and tell the lions what is really happening. Who is on board, and who are the naysayer obstacles to applying progressive methods that can result in better decisions – like applying business analytics?
Rabbits – These are those ready-fire-aim project managers who are impatient with slow progress. Sometimes their sense of urgency is needed to quickly move things along. They endorse techniques like rapid prototyping with iterative remodeling to get sufficient results with speed so that others understand what benefits the methodology can bring. But sometimes, their haste can land the project in a ditch.
Tortoises – Like the owls, these are very smart workers. They move slowly, but they know where the project should go. Most everyone knows the tortoise and the hare fable. The tortoise won the race because it figured out that having perseverance and a sense of direction is best in the long term.
Skunks – These employees are bad news for corporate performance management (CPM) methods projects. Just when there is some traction with getting organizational buy-in from others, they stink up the project with unsubstantiated fears that the project has little or no payoff. They need to be kept distant from the project.
Armadillos – These are thick-skinned employees whose egos are near impenetrable, just like an armadillo’s armor. They can handle attacks from naysayers who fear change. Armadillos are prolific diggers with sharp claws. Similarly, their analogous employees are heads-down hard workers who want to see the job done.
Crocodiles – These employees wait ever so quietly until they see an opportunity. Then, when the moment is right, they snap into a debate about whether the project is valid and will lead to improvements. They believe in the project and rarely lose.
Horses –Workhorses are invaluable. They work long hours making sure that correct and clean data is ready for input to drive the corporate performance management (CPM) methods projects to yield the insights and actions the projects are designed to deliver. Horses can sleep standing on their legs. This is good for late-hour efforts. Thoroughbred racehorse-type employees are a special breed. They not only work hard but also fast.
Ostriches – Everyone immediately thinks the analogy for an ostrich might be employees who stick their head in the ground to hide and avoid confrontations. But that is a misconception. Ostriches can run 70 miles per hour and can viciously kick with their legs in conflict. They are nomadic. Ostrich-like managers are strong and also nomadic because they like to move from one functional area to another after they have made their mark. They make an impact at a crucial time in the corporate performance management (CPM) methods project and then secure a new job elsewhere.
Snakes – Beware of these types of managers. Snakes can swallow prey much larger than their heads due to the flexibility of their jaws. Some have deathly venom to poison their prey. Analogous managers have similar traits but use office politics in place of venom. They are not interested in the success of the project and are self-centered with no hesitancy to derail a co-worker’s career.
Beavers – We like beavers. They love to construct dams. Corporate performance management (CPM) methods are all about model building. For example, a managerial accounting system using activity-based costing principles is a model for measuring how an organization consumes resource expenses into calculated costs of outputs, products, services, channels and customers. A strategy map is a model of the executive team’s strategic objectives and how they causally link the behavior of employees with measures aligned with the strategy. You get what you measure. And beavers are busy workers.
Eagles – These are the true leaders. Eagles have extremely keen eyesight. Unlike managers who cope with complexity, eagle-like leaders cope with change and must exhibit vision and inspiration. The best leaders for corporate performance management (CPM) methods have that vision to inform their organization with knowing the direction they want to go. The other managers and employees then determine the best ways to get there.
Lemmings – The myth of lemmings is that they commit mass suicide when they migrate and mindlessly fall off cliffs. You might think my metaphor of them is the type of employee who goes along unquestionably with their co-workers’ opinions. But the truth is that lemmings are solitary animals who are good at focusing on primary tasks, like burrowing for food. Corporate performance management (CPM) methods projects need this type of intensity in lemming-like employees.
Sheep – These are employees who are too timid to speak up when the project really needs their help. They are smart enough to differentiate good from bad, but when the project team really needs their support, they are unreliable. Sheep have good hearing. Sheep-like employees are sensitive to noise from the naysayers. Sheep have poor eyesight and tend move from darkness to lighted areas. If sheep-like employees cannot see the value in corporate performance management (CPM) methods, they move to a comfortable area – the status quo.
Elephants – Elephants are a symbol of wisdom and are famed for their memory and intelligence. Adult elephants have no natural predators (except humans). Elephant-like employees are important for analytics-based projects because their sharp memories can recall what works and what does not. They are typically veteran workers whose opinions are widely valued. If they buy in, the project has a good chance to succeed.
So, what animal-like types of employees do you work with? Probably all of the types above. The promise for the continued adoption of corporate performance management (CPM) methods is that animals have prospered for thousands of centuries. They survive because there is some balance to how they coexist.
The same prosperity will apply to the increasing adoption rate of corporate performance management (CPM) methods and the software systems that support the methodologies. Hundreds of types of animals coexist in the wild (mankind willing). Their generations continue. Organizations that maintain balanced and rational thinking will continuously learn and improve the same way that animal offspring learn from their elders.
"This content may be found also on https://www.decisionsystems.com"