Enterprise Performance Management (EPM) for Santa Claus Inc.

by Gary Cokins
Dec 02, 2014

The Christmas operations for Santa Claus, his elves, and reindeer need to adopt 21st Century methods to improve service levels to children and improve productivity given the capacity constraints in Santa’s North Pole workshop. It is now time for Santa to apply enterprise performance management (EPM) methods.

No organization can escape the global pressures to better execute their executive team’s strategy and improve productivity. Not even Santa Claus Inc. Sadly, just like the typical resistance to change with most organizations poor Santa is dealing with the “We don’t do that here” rebellious behavior from his workforce. I have listed below some suggestions to bring Santa’s organization into the 21st Century to improve its performance. A warning: although I believe I am warm-hearted my university degree was in industrial engineering.

· Santa Claus – Before the world became more complex and volatile, Santa’s organization knew what work to do and how to do it. That is no longer the situation. The first action Santa needs to do is construct a strategy map from which to derive its companion balanced scorecard. It has been demonstrated that a key reason for poor execution of an organization’s formulated strategy is the C-suite has not effectively communicated it to its workforce in a way that they understand it. A strategy map accomplishes this. The identification of key performance indicators (KPIs) comes as a later step.

· Mrs. Claus – If Santa is the CEO, then Mrs. Claus’s role is that of the Chief Operations Officer (COO). Santa’s time for managing the operations is not available during December when he has children sitting on his lap. Someone has to get organized for the big night – December 24. Mrs. Claus should not make the usual mistake of first selecting KPIs with targets to monitor the workforce’s performance. She needs to elicit from Santa Claus Inc.’s various departments what projects and initiatives are needed or core processes to improve to fulfill each of the causally linked strategic objectives in Santa’s strategy map. After Santa’s strategic objectives are identified in the strategy map, then the departments should self-identify the KPIs to monitor how well they are doing. This will create the needed buy-in from them. After all, accountability must exist, and if they define the KPIs, then they need to live with them.

· The Elves – These are the workers who make the toys. Last year’s late deliveries cannot be blamed on inclement weather. It was much better than average. The problem was two-fold. The toy production system was clumsy. And the Elves were not working hard enough. Just in time (JIT) and lean management consultants have re-arranged the production lines. Six Sigma quality teams have removed waste. What is left to do for improved productivity is to establish the KPI run rates and output measures. This is a standard practice in industry. It is now time for this practice in the North Pole. I suggest that Mrs. Claus not start with excessively high stretch targets for the KPIs. Get the Elves accustomed to being measured. She can crank up the targets next year for more output with the same capacity resources.

· The Reindeer – This part of the workforce is a bit more challenging to secure performance improvement from. They are animals. But Santa is in the sleigh’s driver seat. He can demonstrate to the reindeer what effective executives should – provide vision and inspiration. Santa can guide them. Rudolph, who was not one of the original eight reindeer, is critical. There is much evidence that role model behavior of a lead worker, such as a manager in a fast food restaurant who does it all, will be matched by the workers. Rudolph must set the pace.

There are also some information technologies with advanced analytics that are important to improving performance.

· The North Pole workshop – As mentioned, consultants have streamlined the processes, but production measurements are essential. They are needed to manage the material flows to have the right parts in the right place at the right time. Think enterprise resource planning (ERP) and supply chain management systems.

· Christmas list order management – The goal is to accommodate every child’s Christmas gift wish list, but it is a “wish list” where there are limits to what a child should expect to receive. Improving customer service levels will also be an objective. Big Data is involved. There are billions of children where each must be uniquely served. After the children’s orders are processed, software should be deployed to optimally stage the toys in a sequence for efficient dispatching at each delivery location. Eventually children satisfaction surveys should be administered, but I suggest we wait a few years when a sufficient number of children have mobile tablets to reply to the survey.  

· Forecasts – Marketers in companies use predictive modeling to anticipate the preference and subsequent demand volume of its customers. Santa Claus Inc. should too. The data is available as well as advanced analytics to forecast demand. The demographics exist for where all the children on the planet are.  

· Route optimization – The best plans are typically impacted by unanticipated factors. What is needed is real-time information including weather conditions and feedback of last minute naughty children where their “order” needs to be modified by cutting back on delivering some requested toys. Santa needs to be a party to parents attempting to discipline their children.

· Management accounting – I have saved the important technology for last. Santa may have enough money to pay his elves to do anything – but not everything! There are capacity limits. Making some toys obviously costs more than others. A good product costing system, ideally with activity-based costing (ABC) principles, is needed to rationalize the optimal mix of products to make. Since the best supply made will not match the children’s Christmas list of requested toys, demand-shaping will be required. This can be accomplished through Twitter and Facebook by influencing media (and directly to tech savvy kids) to promote the selected product mix manufactured by the elves.

Some will say that what Santa Claus does is not a business. I disagree. I grant Santa two things: (1) He cannot choose his customers (i.e., the children), and (2) his goal is not to make a profit. What else is different from a business? He must deploy his limited resources to meet acceptable service levels to children. (Governments. That is a lesson for you too.) By embracing the information technology-enabled enterprise performance management (EPM) methods suggest above, Santa Claus Inc. can improve children satisfaction levels with higher efficiency and productivity. There are lessons here for any organization.   

 

Santa photo by Andreas Rentz, Getty Images News

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