How Complex Does Your Performance Measurement System Need To Be?

Performance Measurement is a critical component to any successful Corporate Performance Management initiative. Over the years, there has been a lot of talk about the complexity of models developed to support these initiatives. Traditional Activity-Based Costing (ABC) implementers may argue quite persuasively that a client should keep it simple and that a high level is generally the best solution - it matches the level of information with the level of the key decision makers, in this case very senior level executives. The author, however, believes that this position is primarily due to the inability of traditional ABC systems to handle the business complexity that would be required to accurately model and support larger businesses. In fact, with traditional ABC, companies must either compromise accuracy for ease of maintenance and/or live with complexity in order to service the information needs of the company. But there is another approach which can handle this complexity within the model (as opposed to externally), and still achieves a high degree of accuracy (no accuracy / simplicity trade-off). In this paper, implementers of the new Time Driven approach describe four types of complexity that can exist in model implementations, how to minimize them and what an optimal solution looks like.

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