As issues such as corporate governance and accountability impact the decision-making process in large corporations, the ability to plan, monitor and control the organisation from a central point is becoming more important than ever. But caveat to the executive emptor: no matter what you may hear, corporate management is not a quick fix that some kind vendor has stored on a CD-ROM. It`s a process requiring commitment, planning and hard work.
Contrary to many management ideas today, financial goals are only one set of measurements of a company`s health.
David McWilliam, MD, Cognos South Africa
Gartner was the first to call this process corporate performance management (CPM). The analyst house described CPM as an umbrella term to describe the "methodologies, metrics, processes and systems used to monitor and manage an enterprise`s business performance".
CPM accomplishes this by focusing on a single premise: you can`t manage what you can`t measure. Therefore, the starting point for CPM is planning what needs to be measured to achieve a certain outcome.
The best a software vendor can do to assist in CPM is to provide enabling solutions that, when properly deployed, will assist management and the rest of the company in driving and managing performance. This is accomplished by assigning accountability for defined goals - a simplistic statement perhaps, but accountability in terms of measurable targets instead of a vague revenue projection can deliver dramatic returns.
Contrary to many management ideas today, financial goals are only one set of measurements of a company`s health. A CPM toolset will assist in defining, setting and managing financial and non-financial targets for the executive and middle management layer - even down to the manufacturing floor, if necessary.
In the process, even a broad goal such as "a 15% increase in revenue" is acceptable as a goal that will be broken down into smaller goals that apply to various managers and divisions in the organisation, which together should deliver the growth. These metrics are measured and monitored through CPM software drawing information from other business applications - be they customer relationship management, enterprise resource planning or others. To ensure cooperation from these different applications, more specifically from their owners, often requires an executive prod.
CPM therefore needs complete buy-in from management, not only in the form of a royal wave of approval, but in the planning, implementing and monitoring phases. And these phases do not only happen once. The results of these stages only serve to highlight changes that need to be made to the CPM process as well as the structure of the business and its processes - so it`s pretty much an ongoing circle of performance improvement everyone needs to buy into.
Should management attempt to leave CPM projects to IT departments or the corporate accountants, they will soon find there are four primary areas of CPM failure:
- . Accountability: Without commitment or buy-in from the masses as well as a sense of accountability for specific tasks and targets, you`re going nowhere.
- . Alignment: It is not enough to develop corporate goals and expect everyone to fall into place. Individual goals of people and divisions need to be aligned with the overall targets of the organisation.
- . Visibility: Just as an effective executive needs to have access to all relevant information to make decisions, CPM only works when data from the entire organisation is made available for monitoring and analysis to provide an all-encompassing insight into performance.
- . Reliability: Last month`s financial data is irrelevant. CPM systems work when up-to-date data that is relevant, accurate and timeous is made available on a continual basis.
These simple points highlight the complexity of the CPM process. They also make it clear that installing an application, or even a set of integrated applications, will not lead to a successful CPM project. The software is merely the enabler, taking the cycle of modelling, planning, budgeting, monitoring, analysing, reporting and re-forecasting that executives have developed, and streamlining and automating it as much as possible.
At the end of the day, CPM is not a matter of better business intelligence or improved analysis of business structures or processes; it is a matter of survival and improved market performance. As Gartner notes: "Enterprises that successfully deploy CPM will outperform their industry peers." And that is an advantage you don`t find in a box.
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