Operational Analysis & Performance Reporting

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Operational analysis is a method of examining the current performance of an operational (or steady-state) investment and measuring that performance against an established set of cost, schedule, and performance parameters.  An operational analysis is, by nature, less structured than performance reporting methods applied to developmental projects (such as Earned Value Analysis).  It is less structured in nature, and should trigger considerations of how the investment’s objectives could be better met, how costs could be saved, and whether, in fact, the organization should even be performing a particular function.

Beyond the typical developmental performance measures of “Are we on schedule?” and “Are we within budget?”, an operational analysis should seek to answer more subjective questions in the specific areas of:

  • Customer Results,
  • Strategic and Business Results,
  • Financial Performance, and
  • Innovation.

In addressing Customer Results, the analysis should focus on whether the investment is fully meeting the customer’s needs and whether the cost to the customer is as low as it could be for the results delivered.  The focus here is on how well the investment is delivering the goods or services that it is intended to deliver.  Discuss such issues as:

  • Is the investment delivering the agreed-upon products or services on schedule?
  • Does the quality delivered meet the customers’ expectations?
  • Have the customers requested additional features or services that are not being delivered?

Strategic and Business Results measure the effect of the investment on the performing organization itself, and should provide a measure of how well the investment is meeting business needs and contributing to the achievement of the organization’s strategic goals.  The operational analysis should address itself to questions such as:

  • “Does this investment help us get our job done?”
  • “What strategic goal does this investment address, and how does it help us achieve that goal?”
  • “Is there another organization that could be doing this work better, more efficiently or at lower cost?”

In measuring the Financial Performance of a steady-state investment, the operational analysis should compare current performance with a pre-established cost baseline.  While financial performance is typically expressed as a very quantitative measure, the investment should also be subjected to a periodic (annual?) review for reasonableness and cost efficiency.

Addressing Innovation in the operational analysis is an opportunity to conduct a qualitative analysis of the investment’s performance in terms of the three previous factors.  This aspect of the operational analysis should address questions such as:

  • “How could we better meet the customer’s needs?”
  • “Could we meet these same customer needs at lower cost?”
  • “How could this investment be combined with others to better meet our organization’s strategic goals?”
  • “How could we make better use of technology to provide a better level of service at lower cost?”

The following are some guidelines for conducting an operational analysis. They can be considered as a “checklist” of things that should be included. While they provide an outline of items that should always be included in an operational analysis, the exact format and detailed content are the choice of the organization doing the analysis:

Describe the baseline against which you measure the investment’s performance.  Is there an approved and up-to-date charter or program plan?  The baseline could be defined in documents such as an Annual Performance Plan, or the Strategic IT Plan.  The important point is that you discuss the continued need for the investment, along with performance metrics for measuring its performance.  The performance metrics should have a clear relationship to both the investment’s business need and your organization’s strategic direction.

Describe the method you are using to measure and track cost, schedule and performance metrics.   Describe the investment’s cost, schedule, and performance baseline, and describe the management technique you are using to monitor metrics against the baseline(monthly status review meetings, budget reviews, etc).  Also describe the quantitative metrics you are using to measure variances from the baseline, and the frequency with which you apply these measurements.  It could also be helpful in this section to describe any tools you are using to track performance metrics (Microsoft Project, Excel spreadsheets, etc).

Describe the investment’s management control process.  What are the operational, mid-management and senior management policies for review and intervention?  If the investment’s variances exceed defined boundaries, what action is taken to rectify the situation?  How, and how often, does management ensure the continued strategic fit of the investment with the organization’s strategic direction?

Discuss the current performance of the investment.  Is performance within limits of variance?  If not, what corrective actions are you taking to get back on track?  Has upper management concurred in the planned corrective actions?

Discuss the results of the most recent review of the investment.  Is the investment still considered viable?  Does it continue to be aligned with your organization’s strategic direction?  Discuss the most recent alternative analysis conducted.  How could the business need for the investment be met more efficiently, more effectively, or at lower cost?  Demonstrate that you have actually done a thorough analysis of the need for the investment, the performance being achieved by the investment, the advisability of continuing the investment, and alternative methods of achieving the same investment results.

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Last updated: 06/20/2017 - 13:33

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