Archive for April, 2011

Cut Through the Confusion to Unleash the Full Power of Performance Management

Saturday, April 16th, 2011

 This is a post by Mr.Gary Cokins. Gary Cokins is a Product Marketing Manager with SAS, the leader in business analytics software and services. He is an internationally recognized expert, speaker, and author in advanced cost management and performance improvement systems. Gary also blogs regularly at http://blogs.sas.com/cokins

I keep coming across evidence that there are still serious misunderstandings about the potential scope and power of performance management initiatives.

Here’s an example: blogger Ann All recently posted this article titled “BPM + CRM = Improved (not Perfect) Customer Service.” In it, she advocates integrating a company’s customer relationship management (CRM) system with business process management (BPM) tools.

The article is a solid piece. However, when it comes to integration, why stop with just those two components? Why limit what information and solutions can be combined and integrated?

One reason for this myopia is because there’s still some confusion in the marketplace about the meaning of the term “performance management.” Just Google it and you’ll see what I mean.

The confusion begins with the alphabet soup of acronyms. We often see in the press and media the acronyms BPM for business performance management, CPM for corporate performance management, and EPM for enterprise performance management. But just as, in their various languages, the words merci, gracias, and danke all mean the same thing, so do these acronyms. Fortunately, IT research firms like IDC and Gartner are accepting the short version, and simply calling it PM — performance management.

In All’s article, the P in BPM refers to “process,” not “performance,” and indeed this acronym is in common usage with two distinct meanings. The former is a subset of the latter. Performance management should not be confused with the more mechanical business process management tools that automate the tasks of creating, revising, and managing workflow processes, such as customer order entry and accounts receivable.

A much more serious confusion is that many people give performance management a meaning that’s far too narrow. It’s often regarded as a CFO initiative that provides a bunch of measurement dashboards for feedback and better financial reporting. In fact, though, the scope of a performance management initiative is, or should be, much broader than that, as I’ll explain in a moment.

A similar, but more recent, confusion arises from the term being narrowly applied to a single function or department, as in marketing performance management or IT performance management.

Then there’s the historical baggage that the term carries. In the past, performance management most commonly referred to the job performance of individual employees and the methods used by the personnel and human resources functions for processes such as employee appraisals. But today, the term is widely accepted as covering enterprisewide performance — the performance of an organization as a whole. Clearly, employees’ performance is an important element in an organization’s success, but in the broad framework of performance management, human capital management is just one component.

Let me try to clear up the confusion.

The good news is that performance management is not a new methodology that everyone now has to learn; rather, it tightly integrates business improvement and analytic methodologies that executives and employee teams are already familiar with.

Think of it as an umbrella concept: It integrates operational and financial information into a single decision-support and planning framework. Its capabilities include strategy mapping, a strategic balanced scorecard, operational dashboards, costing (including activity-based cost management), budgeting, forecasting, and resource capacity requirements planning.

These methodologies fuel other core solutions such as CRM, supply chain management (SCM), risk management, business process management, and human capital management systems, as well as Lean management and Six Sigma quality initiatives. It’s quite a stew, but they all blend together.

Performance management increases in power the better these managerial methodologies are integrated, unified, and spiced with all flavors of analytics, such as segmentation and correlation analysis. But its ultimate power comes from including predictive analytics. Predictive analytics are important because organizations are shifting away from managing by control and reacting to after-the-fact data; they’re moving toward managing with anticipatory planning. The goal is to be proactive and make adjustments before problems occur.

Unfortunately, at most organizations performance management’s methodologies are typically implemented in a silo-like sequence and operate in isolation from each other. It’s as if the project teams and managers responsible for each methodology live in parallel universes. But we all know that there are linkages and inter-dependencies, so we know that they should all somehow be integrated. It’s like a jigsaw puzzle — everyone knows that the pieces should fit together. But, too often, the picture on the puzzle’s box is missing!

Performance management provides that missing picture of integration, both technologically and socially. It makes executing the strategy everyone’s Number 1 job; it makes employees behave as if they are the business owners.

Many organizations jump from one improvement program to the next, hoping that each new effort will be the magic pill that provides that elusive competitive edge. However, most managers acknowledge that pulling just one lever for improvement rarely results in substantial change — particularly long-term, sustained change. The key is to integrate and balance multiple improvement methodologies while blending them with analytics of all kinds, particularly predictive analytics.

In the end, organizations need top-down guidance with bottom-up execution. The way to get there is through integrating methodologies and applying analytics to complete the full vision of the analytics-based performance management framework.

Hidden Assumptions in Option Pricing

Thursday, April 7th, 2011

This is a post by Robert Murphy. Robert Murphy is an adjunct scholar of the Mises Institute, where he teaches at the Mises Academy. He runs the blog Free Advice and is the author of The Politically Incorrect Guide to Capitalism, the Study Guide to Man, Economy, and State with Power and Market, the Human Action Study Guide, The Politically Incorrect Guide to the Great Depression and the New Deal, and his newest book, Lessons for the Young Economist.

Steve Landsburg is an economics professor at the University of Rochester, and author of some great books on free-market thinking. However, in a recent blog post he gave a misleading explanation of option pricing. It’s worth going over the episode because it beautifully illustrates the tendency of economists to overlook the assumptions they sneak into their arguments, particularly when it comes to discussions of the financial markets.

Landsburg, Jeter, and Option Pricing

A call option on a stock is a derivative contract that gives the owner the right, but not the obligation, to buy the stock at a certain price (the “strike price”). Some call options can only be exercised on a particular date in the future, whereas others can be exercised anytime up to and including the date. Call options are an important part of a modern market economy and serve a definite social function, as I explain here.

There is a whole literature in the field of mathematical finance on various methods of pricing options. The most famous is the Black-Scholes formula. In his recent post, Landsburg gave the intuition behind these common formulas.

Because he’s a clear writer — and because my overall point is that Landsburg doesn’t show us how the rabbit got into his option-pricing-formula hat — it’s worthwhile to quote him extensively. Keep in mind that for brevity’s sake, I’m editing out all of his caveats. The problem (as we’ll see) with Landsburg’s argument isn’t that it’s unrealistic; the main problem is that he unintentionally misleads the reader:

Imagine a stock that sells for $10 today. A year from now it will be worth either $20 or $5. … What would you pay for an option that allows you to buy the stock next year at today’s $10 price?

You might think you’d need a whole lot more information to answer that question. You might expect, for example, that the answer depends on the probability that the stock price will go up to $20 rather than down to $5. You might expect the answer to depend on how much traders are willing to pay for a given dollop of risk avoidance.

But the amazing fact is that none of that matters. The only extra bit of information you need is the interest rate.

Let’s assume, for example, that the interest rate happens to be 25%. …

Now let’s price the option. The key is to focus on my imaginary cousin Jeter, who never buys stock options. Jeter happened to wake up with $12 in his pocket today. Then he went out, borrowed $8, and used his $20 to buy 2 shares of stock.

A year from now, one of two things will happen. Either Jeter will get lucky, sell his 2 shares for $40, use $10 to repay his debt ($8 plus $2 interest), and pocket $30. Or he’ll get unlucky, sell his 2 shares for $10, use that $10 to repay his debt, and pocket $0.

I, on the other hand, bought 3 stock options today. A year from now, one of two things will happen. Either I will get lucky and use my 3 options to buy 3 shares of $20 stock at a price of $10 each, pocketing a $30 profit. Or I will get unlucky and the stock price will [plummet], in which case I will throw my option away and pocket $0.

In other words, Jeter and I are guaranteed exactly the same outcome next year. Either the stock price goes up, and we each pocket $30, or it goes down and we each pocket $0. In that strong sense, Jeter’s strategy and mine are perfectly interchangeable.

Jeter’s strategy costs him $12 out of pocket. Therefore my strategy must also cost $12 out of pocket — otherwise, nobody would ever pursue the pricier strategy. Since buying 3 stock options costs $12, the price of a single option must be $4. Problem solved

As I said above, Landsburg’s thought experiment is a simplified version of the general approach to option pricing used in mathematical finance. Newcomers to this field are often stunned to learn that the price of a call option apparently has nothing to do with the likelihood (or “probability” if we are using a formal model) that the underlying asset will attain a very high price by the time the option expires. (Instead, the price of the call option — according to the standard formulas — varies according to the volatility of the underlying stock price.) This is so counterintuitive that option theory is the quantum mechanics of finance.

Before continuing with my critique of Landsburg’s demonstration, I should be clear: I am not rejecting the conventional approach to option pricing as useless. It is an important baseline result, and every batch of MBAs (let alone people with PhDs in finance) should understand the formulas and the logic behind their derivation.

What I am saying is that Landsburg is simply wrong when he claims the “amazing fact” that the probabilities of the stock price’s future values, and the risk tolerance of the investors, don’t matter. They do matter, just as our intuition suggests.[1] The reason Landsburg apparently gets the “correct” price for the stock option using just the interest rate is that he relies on other assumptions about the efficiency of the stock market.

Tweaking the Numbers

The easiest way for me to illustrate the problem with Landsburg’s magic trick is to change just one of the original numbers. What would Landsburg think about the following argument?

Imagine a stock that sells for $10 today. A year from now it will be worth either $5 or $9. What would you pay for an option that allows you to buy the stock next year at today’s $10 price?

You might think that the “correct” price of the option is $0. Even though you don’t know the probability of the stock being $5 or $9 next year, you are certain that it will be less than $10. Under no circumstances, therefore, will the option have any value to you. What good is it to own the right to buy a stock for $10, when at best it will be worth $9 at the time of exercise?

But the amazing fact is that this reasoning is wrong, as I can prove to you once you tell me the interest rate.

Let’s assume, for example, that the interest rate happens to be 25%. …

I hope the reader will agree that it would be fruitless to go down this path. Using our “intuition” about pricing options works just fine in an extreme case where the strike price is higher than we think the stock can possibly go.

Now in fairness to Landsburg, I actually can’t replicate the remainder of his argument using my tweaked number. The reason is that cousin Jeter will lose different amounts of money depending on the stock price, but you (the option buyer) will lose the same amount in either case, namely what you paid for the option. So there’s no way to make your strategy equivalent to Jeter’s, and so Landsburg could understandably argue that my scenario doesn’t really affect the validity of his demonstration.

After this warm-up, let’s really go to the heart of the problem with Landsburg’s discussion.

Landsburg Assumes “Correct Price” Is the Same as “Arbitrage-Free Price”

Let’s return to Landsburg’s original numbers. Recall that there is a stock that will be worth either $5 or $20 in one year, and that the interest rate is 25 percent. Landsburg asked, “What would you pay” for a call option on that stock?

Just for the sake of argument, suppose we do have the extra information about probabilities and risk tolerance. Specifically, assume that the probability of the stock being $5 is 100 percent, and the probability of it being $20 is 0 percent. (If you think that’s cheating, set the probability of the stock being $5 to 99.999 percent, and the probability of it being $20 at 0.0001 percent, and further assume the investor is risk-neutral.) Clearly, I shouldn’t pay anything for that option.

However, unlike our previous tweaking, in this case Landsburg’s argument still “works.” He never said anything about the respective probabilities of the two outcomes — remember, that was the “amazing fact,” that his answer didn’t depend on it. So there’s no reason it breaks down when the probabilities are 100 percent and 0 percent (or just shy of 100 percent and just above 0 percent, if you prefer).

Specifically, what’s going on is that the stock is clearly overvalued right now in the market, when it’s selling for $10 even though it is guaranteed to be $5 next year. Cousin Jeter (using the strategy Landsburg outlined) is guaranteed to lose his $12. Therefore, because your buying 3 call options is an equivalent strategy, it must be the case that the options cost $4 each. If they only cost, say, $3, then it would be cheaper to use that route — you’d only be throwing away $9 for sure, instead of throwing away $12 for sure.

Since Landsburg is assuming that arbitrage has eliminated such discrepancies, the only way the current stock price can be held up at the (overvalued) price of $10, is if call options (with a strike price of $10) are held up at the overvalued price of $4. But by no means can we conclude that “you would pay” $4 for an option that you are certain will expire worthless.

We now see how much power was tucked into Landsburg’s innocent statements: “Jeter’s strategy costs him $12 out of pocket. Therefore my strategy must also cost $12 out of pocket — otherwise, nobody would ever pursue the pricier strategy.”

What Landsburg has really shown is that if the stock price is “correct,” given investors’ beliefs about the probabilities of the future stock price and investor appetite for risk, then we don’t need to know those probabilities, or risk appetite, to calculate how much “you would be willing to pay” for a call option.

Conclusion

Landsburg’s discussion of option pricing is fine, interpreted correctly. But whether he realizes it or not, his “lesson” is very misleading. All he has done is show that certain prices must bear a particular relationship to each other, lest arbitrageurs exploit a pure-profit opportunity.

The problem arises when people read too deeply into the significance of these results. For example, one could use an analogous argument to show that “all we need” to price stocks is to look up the interest rate and the price of a call option. We might erroneously conclude that no investor ever needs to worry about what the stock will actually do in the future.

Yet that is absurd; of course investors and speculators in the real world need to form expectations about the future levels of stock prices. It is the seductive elegance of the entire “Efficient Markets” approach that led Landsburg to suggest otherwise.

For those readers who are still unconvinced, let me try the following approach. Landsburg’s argument for the pricing of call options is equivalent to this one: “Suppose there is a stock currently selling for $10. You know that next year, it will either be $5 or $20. How much should you pay right now for the stock? You might think the probabilities of the outcomes matter, but they don’t. If your cousin Jeter wants to buy the stock, he has to pay $10 for it. That would give him the same outcome as if you bought the stock, and so you should pay $10 too. Problem solved.”

If Landsburg had offered the above analysis, the fallacy involved would have been crystal clear. But because of the complicated steps in the linkage to a call option, the fallacy was buried. The whole episode is another illustration of the dangers in reasoning from equilibrium.

Fair Competition and Economic Development

Tuesday, April 5th, 2011

 This is a post by CMA Ananda Mohapatra

ANALYTICAL NOTES ON FAIR COMPETITION AND ECONOMIC DEVELOPMENT

 

References

1.                  Announcement dated 8th March-11 of CCI for a National level Essay Competition.

2.                  Historical Supreme Court verdict dated 3rd March-2011 overruling GOI (Govt of India) and its holy Opinion on the qualification criteria for appointment /selection of CVC.

3.                  Historical 2G Spectrum Scam of Indian Republic and arrest of Mr. A Raja, Ex-Union Minister IT and his judicial custody.

4.                  The Statement of Srj. Navin Patnaik, Hon’ble Chief Minister of Odisha of date 5th Mar-2011 on the formulae of economic development in the occasion of 95th birth celebration of his beloved Father, Legendry Man of Odisha and Ex-Union Minister & Ex- Chief Minister of Odisha Late Srj. Bijayananda Patnaik.

5.                  Division and equal of UPA Govt in the matter of dis-interest shown by Srj. Karunanidhi, Hon’ble Chief Minister of Tamilnadu and with the Statement of Srj. Pyari Mohapatra, Hon’ble Rajya Sabha MP and the day after dated 7th March-11 statement of Srj. Navin Patnaik, Hon’ble CM Odisha on the issue.

6.                  Admission of Commission of mistakes in words of statement of Dr. Manmohan Singh in both the august houses of Parliament against the demands of Opposition.

7.                  The widely circulation of the Publication of “NIAKHUNTA”, an oldest pre-independence Odiya News Magazine, the founder of which legend- renowned freedom fighter, economist, Journalist, writer, poet, critics, analysts etc Srj. Godabarisha Mohapatra where question of integrity has arisen in case of an IAS Officer who is leading the State Power Sector Srj. Pradeep Kumar Jena.

8.                  Constitutional Provisions on term and continuance of august House of Assembly and Parliament and terms and conditions of appointment to Civil Service of UPSC (Union Public Service Commission).

9.                  Different Theories of Economic Development and its Formulae of Sustainable Development I.E., “Professionalism-Competition-Financial Viability-Customer Service” vrs “Energy-Environment-Employment-Economics” communicated previously.

10.              Development of ODISHA so also Nation and the role of Media, the Fourth Pillar of Indian Democracy after showing due regards to Indian Culture and religion, the culture of his Lord ShreeJagannatha and his Mausi and Mausi’s sister Maa Samaleswari and the teachings of Thakur Anukulchandra  on Economics, Politics etc.

11.              (I)Registered Grievance in e Abhijoga web portal of CM vide registration No. CMOFF/E/2010/01181 dated 4th Sep-10 & II) Registered Grievance in web portal of President of India vide Registration no. PRSEC/E/2011/00243 dated 6th Jan-2011.

 

In continuation of our previous notes, submissions and communications on the referred subjects, the following note is submitted herewith for kind information and necessary actions of all concerned for attaining a common goal of sustainable development. Competition Commission of India (CCI) has been set up under the Act of Parliament in an environment of further liberalisation of economic activities by repealing the MRTP Act-1969, became operational since Nov-2009, the aims and objectives of which are sustainable economic development in taking into consideration citizen’s constitutional rights and duties to prevent practices having adverse effect on Competition and to promote and sustain fair and transparent Competition in order to protect the interest of the consumers so also people of the Nation.

 

CCI in the meantime has taken another important step after its expression on the National Television on dated 25th Feb-2011 vide its announcement yesterday dated 8th March-2011 for organising a National level essay competition, the Cash Rewards of which Rs. 10000/- for winner and many other prizes for participants, the details of which are attached herewith for information.

 

Competition is a common term used by human beings in the socio economic life at different suitable degrees. Competition is concerned with Work force or labour force. The degrees of competition depends on the quality of labour force available in the market. Competition is related with sustainable growth and in the other hand if productivity signs fall back, then we say that there is no competition but we can not say negative competition. Competition does not stand with the theory of “Divide and Rule” rather it is self reliant and grows by himself abiding by the law of the land. The good competition prevails only in democracy. While we take up competition at corporate level, the quality of work force of the entities are required to be considered in determining the feasibility, level, rate and prevalence of competition in the market.

 

Competition is very easy and prevails automatically but is not noticeable or understood by commons. So it is only noticeable by experts of development Suo motto. These are the traditional theories of competition. While we take up competition for economic development or in other words for generation of Income without Investment, then the Authority concerned is required to work for creation of an environment/platform and in this case we may apply the doctrine of Law “Expression precludes implication”. In ancient Indian economics, Guru Chanakya alias Kautilya divided the total workforce of the State into Four categories, such as   1) BRAHMANA  2) KHETRIYA  3) VAISYA and 4) SUDRA without any caste-ism  and administered the work force productively for sustainable development by applying the principle of Inter and Intra work force competition. This theory is then called as “Division of Labour” of Arthasatra and this period of History is called as Golden period. People were very happy at that time, RAMA RAJYA was prevailing during that time. But subsequently after Chanakya, the theory of State was wrongly interpreted and Caste-ism or corruption entered into society due to adoption of wrong theory of economic development i.e., Human wants are unlimited. But actually this sentence is wrong so far as the economics of Chanakya is concerned. As per our theory “Human wants can not be unlimited”. This can not be unlimited human wants is applicable in the competition we mean above.

 

Competition undermines the following socio-culture-economic activities like corruption, illegal favouritism, arrogance approach, collusive activities both individually and collectively, rigging and ragging, dictatorship and monopolistic attitude in the part of the individuals so also groups which are detrimental to the interest of the millions or masses. However, Fair Competition advocates in favour of mutual help and cooperation between individuals and groups within the boundary of law of limitation and laws of the land and it is very much suited in democracy and socialistic pattern of society. It also advocates in favour of natural justice and human rights which is very much essential for inclusive growth of the individual, groups, States and so also Nation. It maintains globe brotherhood and approves the theory of “BASUDEVA KUTUMBAKAM” OF Indian Culture and religion. It is pro-environment and tries to upkeep the interest of the Opponent.    

 

Liberalisation of economic activities of the State was the call of the day then inducted by Dr. Manmohan Singh, the then Hon’ble Union Finance Minister brought new thoughts of economic development with exclusion of inclusive growth and sustainability, then it was added with the advocacy in favour of competition. In the age of liberalisation and information technology with unlimited necessary growth plea, most applicable to developing nations where competition is considered impartial, we have divided the total workforce into SEVEN category of Professions, such as 1) Agriculture2) Accountancy/Finance 3) Engineering  4) Law  5) Doctor 6) Journalism and 7) Business. We have stated previously about the controlling authorities of the aforesaid profession where Indian culture and religions are associated with. We can not go with the FOUR Professions of Kautilya in Arthasastra as stated above in the present age of globalisation where Planning and Strategy of the nations speaks always about growth and development. So time has come now to monitor closely in letter and spirit to the above seven professions for prevalence of Competition we mean above. CCI has announced cash rewards for students with acknowledgement for participation in the National level essay competition. So I would like to request you for circulation again for a common goal.

 

As India seeks to maintain investor confidence and ensure that its current high growth is sustainable in the long term, our organisations need to greatly improve their standards of professionalism. So what is professionalism in an organisation? It is when its members continuously uphold a uniform set of standards and behaviours aligned to the core values of the organisation. For instance, professional organisations that believe in transparency as a core value do not surprise customers with hidden fees or cover up deficiencies in their products. Others that state their concern for integrity work not only to create a culture among staff that nurtures honesty but also to implement appropriate institutional checks and balances to prevent dishonesty. Some other common characteristics associated with professionalism include objective decision-making, accountability, transparency, ethical behaviour, sufficient technical knowledge, team work, high quality of work, effective communication and non-discriminatory behaviour.
Customers and business partners generally have greater trust for professional organisations that continuously follow uniform and high standards of behaviour because they know what to expect from them. They believe that the organisation will fulfil its promises of client-service delivery.

 

Organisations also benefit internally from professional standards. The trust, transparency and understanding it creates between staff enables greater productivity and innovation. Yet organisations should not let our economy’s high growth lull them into forsaking professional standards. Although India came through strongly, the 2008 global financial crisis and the lack of professionalism in the financial services industry remains a telling warning. The crisis exposed the way financial managers ignored ethical behaviour and risk management practices as they became increasingly obsessed with short term gains. In the end, many organisations posted serious losses and even went bankrupt.

 

The crisis triggered renewed calls in several countries for an introduction of professional standards. These included requiring organisations to abide by a code of ethics, have suitable qualifications, understand risk management and demonstrate the attitudes and behaviours their profession requires. India should heed these calls as well. One of the biggest gaps in professional standards in this country exists at the Board Directors and senior management level.

 

To instil the professionalism needed to differentiate themselves, these organisations must have senior executives who set the example. As the most visible members, the way they behave has the greatest impact on the overall professionalism of the organisation they lead. Ultimately, they can help create effective organisations that set standards of professionalism, which give a good name to the industry they work in. Or, as in the recent cases of corruption, bring a bad name to not only their own organisations and industries, but to the country itself. Let’s hope it is the former. Because as India becomes more important to rest of the world, it will be our professionalism – or lack of – that determines our success in encouraging future inclusive economic growth and visits by other cashed up heads of state.

 

In its historical rulings, Hon’ble Supreme Court of India rejected the Candidature of Srj. P J Thomas, IAS for appointment to the post of Chief Vigilance Commissioner shortly on dated 3rd March-11. CVC is an important post to protect constitution and it is the authority who works for lessening disease of Corruption from society, a fence/hurdle on the way of inclusive growth and sustainable development. Considering the situation of Indian economy and corruption in the part of the constitutional authorities, Hon’ble Court lost confidence on IAS Officer and expressed opinion that Professionals of high integrity and honesty can be selected for the post. Hon’ble Court has expressly stated in favour of Professionalism and in favour of decentralisation of powers.  This order of the court is a warning to the IAS Officers of the nation, now time has come so also the situation has  enforced the IAS Officers to rethink what they are doing and what is their duties and responsibilities towards the nation.  

 

The 2G Spectrum Scam is now subjudice under Supreme Court and in the meantime Mr. A Raja, a Member of DMK Political Party and Ex-Union Minister IT has been arrested by CBI and undergoing in judicial custody. Joint Parliamentary Committee (JPC) has been constituted for probing the Scam and this decision of UPA is a victory to the Indian democracy. The ruling party felt the demands of Opposition. Dr. Manmohan Singh, Hon’ble Prime Minister of India expressly admitted his mistakes in both houses of Parliament, properly and suitably supported by Madam Susama Swaraj, Hon’ble leader of Opposition in Loksabha. These events indicate the atmosphere of healthy and true democracy. While one individual commits mistakes, he should expressly admit the same before the concerned stake holders, so that he discourages himself to commit the mistake once again.

 

In this juncture, we can not forget to note the express statement Mr. Suresh Pujari, one young and energetic man of Sambalpur and Ex- President of BJP, State of Odisha of date 5th Mar-2011 in KANAK TV 9.00 PM News Bulletin that “whoever he may be,  be the Leaders of BJP, Leaders of INC or Leaders of BJD. who commits or involve in Corruption, then immediate stringent disciplinary action is required to be initiated without any fear or favour.” This is absolutely a good express statement and was required from BJP in this crucial period, the Opposition Party of Indian Parliament.      

 

Dr. Manmohan Singh has set an exemplary for the nation and calls for Competition. The leaders (Public Representative) are elected or selected, directly or indirectly to the august house of Parliament or Assembly and have stipulated periods of tenure of rulings. If the representatives Political party do not perform to the expectation of we the people, then after completion of tenure of rulings of 5 years, we the people do reject and punish the party and choose the next best alternative Party. So the work, efficiency and performance of the Leaders are assessed by Masses and there is reward and punishment in every 5 years but in case of Civil service holders, the same is neither assessed nor punished nor rewards even after completion of the tenure of service, say may be 30 years or 40 years. In the last 60 years of Indian democracy this side has not been properly taken up for any reason in the cost of the motherland. In the governance of the State, the Leaders and Administrators are directly related and complementary to each other. They are also Head and Tail of the same coin. This nexus of India democracy is required to be redressed properly and suitably keeping in view the objective of the State for up keeping sustainable growth of the nation.  Or else, we can not step up one more step further on the path of development. This is the high time now to implement in letter and spirit our theory of development “Professionalism-Competition-Financial Viability-Customer Service, where all the work force/labour force or Women/Man hours of the Nation is associated. If one analyses 110 crore of population of nation, then each member has a place in the definition of our Professionalism.

 

Srj. Navin Patnaik, Hon’ble Chief Minister of Odisha expressly stated on dated 5th Mar-11 in the occasion of celebration of 95th Birth Anniversary of his beloved Father, the legendry man of Odisha, Ex-Chief Minister of Odisha and Ex-Union Minister at a Public meeting at BBSR that Information and Technology is playing vital role in sustainable economic development and warns the consequences of backwardness in case its non-implementation. He further stressed on development of Agriculture and Industry side by side for up keeping the pace of sustainable development. In his message so also in the message of Hon’ble Governor of Odisha which find place in the Souvenir (Odisha Power Sector at a Glance-2010) released by OERC on dated 5th Jan-11, the heads of the State expressly stated about the role of power sector in economic development along with protection of environment and implementation of Competition. The aforesaid orders and directions in the part of Leaders are very important to carry in the part of administrators.  Here we would like to reiterate the express statement of Srj. Bijay Kumar Patnaik, Senior IAS and Hon’ble Chief Secretary of Odisha of date 31st Aug-2010 while he took over the charge from retiring CS Srj T K Mishra that he is a civil servant and has no separate plan and strategy, he will work as per the desire of Government. So this is the appropriate time in the part of Hon’ble Chief Secretary of Odisha to act accordingly for the sustainable development of motherland Odisha and then his good statement of the same day i.e., “I want to see such Odisha where everybody would say I am an Odiya” will be true to the best of the knowledge of the “we the people of Odisha”.

 

In the political scene of India , an IT (Information Technology) cyclone arrived instantly and disappeared then without causing any harm to anybody. Mr. Karunanidhi, President of  DMK Political Party of Tamilnadu disagreed with INC in the matter of allocation of Assembly Seats and sent message of separation from UPA to Chairperson UPA Govt, Madam Sonia Gandhi and directed his Members to do needful by resigning from Union ministry, meant by loss of majority of UPA Govt in Parliament. This news was breaking news so also an opportunity for State of Odisha to be seen in the national picture and Govt. of Odisha played finely to the bouncer ball of UPA. It was also an blessing opportunity for Srj. Pyari Mohan Mohapatra, Hon’ble MP Rajya Sabha  to come forward and expressly stated his personal will (n) of extension of cooperation to UPA Govt but the decision on the subject matter left on President of BJD, Srj. Navin Patnaik. Hon’ble Chief Minister of Odisha, who  read the ball very well and played very well by stating the day after the former’s statement on 7th Mar-11 that “in case DMK withdraws his support to UPA, then BJD of Odisha  will not support UPA Govt. This statement of Srj. Navin Patnaik made and enforced the national leaders to review the file of Odisha where its backwardness is related. This was a very good IT (Information & Technology) politics of the nation and we the people have passed the exam.

 

In this crucial period we the people felt very sorry for being an Odiya by reading the news publication of “NIAKHUNTA”, one oldest Pre-independence Cartoon News Magazine weekly, the founder of which was an eminent Politician, Cartoonist, Writer, Thinker, National Poet, etc Srj. Godabarisha Mohapatra, to whom good National Poetries we the people have read during our High schooling  period where the nuisance of the Head of Authority (HOA) of Odisha Power Sector is presented in a cartooning way. The PDF file of above publication reached us vide email ID of under named Author, i.e., anandamohapatra05@yahoo.co.in , energyeconomics@yahoo.com . In the said news the question of integrity of discharging civil service duties in the part of Srj. Pradeep Kumar Jena, IAS, HOA of Odisha Power Sector & Commissioner-Cum-Secretary, Department of Energy (DOE), Government of Odisha (GOO) along with his colleague one retired Additional Secretary Srj. Binod Bihari Mohanty.  Further the question of disobedience to the rules and regulations of civil service has arisen in the said publication. In the said publication, it has also been stated with records of up keeping illegal and objectionable relations with the Head of Authority of the 3/4th Power distribution Sector of Odisha, the Managing Director of Reliance controlled DISCOMs  Srj. V K Sood, a technocrat who is a loss party to the major Stakeholders of Odisha Power Sector. The details of publication of the said news are attached herewith for kind information.

 

In our last communications and submissions we have stated on the poor scenario of Odisha Power Sector by analysing its different aspects and further state that the Loss of Odisha Power Sector is highest in India . Loss of the Sector is now beyond control. The HOA of the Odisha Power Sector along with his colleagues have proved themselves failure and have imposed huge irrevocable, irrecoverable and irreparable cost on Motherland, requires kind attention of all concerned. After the disinvestment of Power distribution sector of Odisha, the State of Odisha have lost income/Investment worth Rs. 10000/- crores in its minima side along with huge damages to environment and loss of economy of other Sectors which can not be forecasted due to the cascading effect of accountancy. 

 

I am very much thankful to Mr. Om Prakash, one renowned eminent Journalist of Odisha whose writings is being published weekly in DHARITRI, one leading circulated odiya daily newspaper in Odisha and who is closely associated with a Web News Magazine, i.e., www.ptic.co.in Public Trust of India, Hungers for Truth approved by Govt. of Odisha for his extensive support to our theory of sustainable development and allowed adequate space in his good web page magazine for publication of one of our theory of development, i.e., “Humane wants can not be Unlimited” on dated 28th Day of Dec-2010 along with the Passport size Photograph of the Author. Public Trust of India, Hunger for Truth web page News Magazine has designed to author Expert in Applied Economics and Analyst, Power Sector. We express our thankfulness to Mr. Om Prakash by this communication for his kind support to our theory of development.We also express our thankful to Cma Debarajan of Mumbai, Fellow Member of ICWAI for his express support to the writings of the Author and publishing/posting  the same in the web portal of cmaindia.informe.com from time to time, where around 2000 CMA Members have registered themselves in the said web portal.

 

In the above backdrop, this analytical notes on sustainable development of Power Sector is submitted herewith in support to the thesis of development submitted previously before Hon’ble Chief Minister of Odisha from time to time for kind perusal and would like to pray again to review my last prayers and do needful for attaining a common goal and to find out solution of my case. The copies of this note is sent herewith vide email ID to all concerned for kind information with request to circulation of the announcement of National Essay Competition on the subject matter of “Fair Competition: The Engine of Economic Development & “Attaining Competitiveness through Competition” organised by Competition Commission of India for the necessary information of the participants.  

ABM and EPM

Saturday, April 2nd, 2011

 This is a post by CMA Rajendra Patil. He also blogs at http://activitybasedmgmt.blogspot.com/2011/04/activity-based-management-abm-and.html

Now a day one can hear about the term Enterprise Performance Management (EPM) a lot of times in different ways. It also termed in different ways like CPM, EPM, PM etc. Sometimes it is also used interchangeably with the individual performance and organizational performance. There are various definitions also for EPM. I personally like the definition by Gary Cokins, which mentions that Performance Management is the process of managing the execution of an organization’s strategy. It integrates the business improvement methodologies with technology. So it is neither the methodologies only nor the technology in isolation.

As I have mentioned in my earlier posts, Activity Based Management (ABM) is the way to manage your business by managing the activities to provide improved value to the customer or organizational performance. After these definitions, we will try to see how these two things go together in different ways as concepts, execution and technology.

I personally believe that the EPM starts with the definition of the strategy. This is because if you do not know where you want to go, any way is a good way. Let us have a look at the following figure:

Defining the strategy for your organization, preparing business plan according to the strategy and then measuring the performance and analyzing the variances with reasons to modify the internal processes or strategy is a cyclic process. ABM fits into the ‘Measure and Analyze’ part of the cycle. Here the ABM model based on the business plan can provide the information on the resource requirement in the future as well measure the actual performance. Once you analyze the actual performance against the planned one, the same can be analyzed using various techniques like root cause analysis, continuous improvement etc. The analysis will tell whether one has to manage the processes to improve the customer value or organizational performance.

The performance management is also seen as the operational performance management or strategic performance management, as it is mentioned in the earlier part.


Operational performance management is looking at the processes to improve organizational performance and strategic performance management is looking at the processes to improve the value to the customer. The ABM model can be designed to manage the performance at both the levels. It can also be used for some tactical purposes as managing a customer segment or a product group etc.

Looking at all those things the tool vendors have combined their software solutions into one group as Enterprise Performance Management (EPM) suite. This suite generally includes the solutions for Strategy Management, Business Planning and Profitability & Cost Management. They project and try to sell these solutions as a suite. I have got the following figure from some document that I am not able remember, so please acknowledge the efforts of the person who has created it.

In a very simple way, we will try to understand this diagram. It shows three differnet parts. Analytical toos as in the technological part that help us to alanyze the results. One may argue as to reporting is not exactly same as analytics. The second part is the analytical appliactions which are actually the software solutions based on the various business improvement methodologies. The third part is supporting tools ahich ehlp us to integrate the data and perform the administrative part for those solutions. All these solutions work on the same data mart or warehouse so as to provide one view of the data and these solutions use and provide data to the othersolutions through this data mart or warehouse.

If we see the Strategy Management methodology creates a strategy map, the Key Performance Indicators (KPIs) and corresponding action plans. Based on the strategic plan the budgeting and planning solution can create the business plan. It can also use the Profitability management solution (ABM) to create a driver based planning. ABM can also provide the actual values for various KPIs defined. The Activity analysis using the cost drivers and performance measures can provide information the performance of the organization vis-à-vis the planned one.

As we saw ABM fits into Enterprise Performance Management (EPM), conceptually as well as technologically and helps the organization to manage the performance at the strategic level as well as operational level (including the tactical one).