Business and IS Performance(IS 6010)

MBS BIS 2010 / 2011

30th September 2010

Fergal Carton (f.carton@ucc.ie)Accounting Finance and Information Systems

Last week• Course objective

– Organisational goals, goal setting, driving performance

– Using information systems for performance control

• Study of organisational performance not new

– How to co-ordinate activities across different functions

– What information to provide managers about those activities

– Standardisation, centralisation and specialisation of skills

– Uncertainty and information processing

• Managers not concerned with technical constraints (seen as IS problem)

• Assessments

– In class assessment based on case studied in class

– Cases suggested by class (eg. Google, Unilever, EMC, ...)

This week

• Organisational goals

• Soft versus hard goals

• Types of data

• Example of organisational metrics – UCC

• An integration framework

• Class exercise

Breakdown between terms

• Term 2 objectives (Derry Cotter)

– Reading financial statements

– Understanding financial performance

• Assessments

– Breakdown between two terms to be decided

– Exam divided between terms 1 and 2 (eg. 3 questions each)

Business and IS performance• Definition of organisational goals and conflict across functions

• The influence of shareholder priorities on goal setting

• How are organisational goals translated into reality?

• Use of Key Performance Indicators (KPI’s) and constraints

• Setting budgets for expenditure and targets for income

• Understanding the different types of performance information

• Data collection constraints influence performance measures

• Integration and the challenge for real-time reporting

• The role of business intelligence tools in reporting

• Understanding the limitations of control systems

Organisational goals• Sales and marketing

• Order processing

• Production planning

• Warehouse management

• Manufacturing

• Distribution / logistics

• Customer Service

• Accounting and Finance

• Information Systems

• Human resources

Goals constrained by time and cost• Sales Revenue target achievement within budget

• Order processing Booked orders within sales period

• Production planning Minimise inventory levels but avoid stock outs

• Warehouse mgt Right product available at right time and right place

• Manufacturing Fulfil production schedule with available resources

• Distribution / logistics Deliver on time / complete with available resources

• Customer Service Customer repairs, and on site service within budget

• Accounting /Finance Revenue targets within expenditure limits

• Information Systems Application and server uptime with resources

• Human resources Adequate resources available with right skills

Soft versus hard goals

• Performance goals are soft (flexible)– “Stretch” goals– Eg. revenue to increase by 5% (target)– Unpredictability of demand creates uncertainty – Target gets “harder” when promised to markets

• Control systems requires hard data– Sales orders drive revenue reporting – If actual orders recorded have increased by 4.5%

• Is the goal missed or achieved?

Bail out of Anglo Irish

• How much is required?– 4 billion– 29 billion– 34 billion

• Uncertainty arises from demand– Value of commercial property plummeting

• Is this information hard or soft?– What is hard data based on?– What is the agenda behind the reporting?

Types of data 1

• Volume data (production)• consumption data (raw material, packaging…)• personnel data• maintenance data• time related measurements• productivity data• …

• All form the basis of the calculations used to monitor manufacturing activities

Type of data 2• Primary data:

– taken straight from the floor (input and output)– e.g. production, consumption, labour, maintenance– ad-hoc reports - e.g. accidents, defects

• Secondary data or calculated data:– allocated costs– productivity– pay bonuses– variances

• High level data:– investigations of variances– soft information about staff morale etc...

Type of data: soft information

• Data collection - – Grapevine– factory tours (talking and observing)

• Data storage -– managers’ minds– special reports

• Data usage:– ad-hoc basis– decision making

Student Dashboard

An integration framework

Execute Schedule

Measure

Performance control

Supply Demand

Resourcevisibility

Physical

VirtualPlan

Plan

Plan

MES

ERP DRP

ERP

Execute Schedule

Measure

Performance control

Supply Demand

Resourcevisibility

Physical

VirtualPlan

Plan

Plan

MES

ERP DRP

ERP

In class exercise

• Pick a business idea

• Describe customer requirements

• How can these requirements be met?

• What performance criteria will be applied– Financial– Operational

• What type of control system will be used?