Aligning Execution with Corporate Strategies

Corporate Performance management (CPM) is a unified, holistic approach to managing performance, and it recognizes the interconnectivity of various parts, processes and plans in an organization’s business, and how the impact each part has on each other. Gartner defines CPM as not only the process used to manage corporate performance but also the methodologies that may drive some of the processes, the metrics used to measure performance against strategic and operational performance goals. Organizations are presented with views of the business in terms of performance, by way of sales, operations, and even resource utilisation, hence creating a strong link between the strategy and the execution of that strategy.

CPM combines effective and integrated consolidation, monitoring, abstraction and analysis, and intelligence tools critical to the success of corporate management, something which the ordinary spreadsheet or the primitive pen-and-paper driven approach cannot provide.

CPM delivers a total enterprise view of the organization’s performance which helps in the execution of strategic and tactical goals. CPM helps monitor and analyse performance against goals, producing the understanding necessary to continously recalibrate plans and budget. It is this closed-loop cycle of planning and heads-up visibility of performance that makes it possible to change course on a dime and thereby gain competitive advantage.

Performance management has come a long way since its beginnings. The new mantra of performance management is to go beyond traditional financial metrics (actual versus budget for example) for a broader, more holistic view of all the critical indicators that show how well a company is executing against strategy. That means joining goal-setting (planning and budgeting) with scorecarding (monitoring and measuring) and business intelligence (analysis and reporting on actual business performance). It also means providing information to three levels of information consumer in the organization, those who formulate strategy, those who execute against it, and those who carry out day-to-day transactional activities.

‘Next Big Thing’ or ‘Passing Fad’
Today the sharper focus on corporate governance based on ethical business standards, is one key reason to believe corporate performance management will not be merely a passing fad. Debacles like Enron, Worldcom and Andersen Consulting have changed the way businesses are managed. Boards and management teams have to take greater responsibility and show a level of transparency that was unheard of until now.

Most manufacturing companies already have an enterprise applications transaction engine, which is used to record detailed operational activities of the business such as sales orders, purchase orders, manufacturing plans, capacity, dispatches, receivables, payables, and so on. If the data held in that transaction engine can be harnessed and transformed into relevant, useful and manageable information, then the benefits from the enterprise applications investment can be delivered at last. And there will be a direct link between the way organizations measure and understand the business and the detailed transactions that are needed (and probably need to improve) to make it operate.

Let’s examine the global business landscape to get a better handle on whether CPM is here to stay. Businesses today, be it a small company in Chengdu, or a multinational corporation operating across 80 cities, are faced with pressures to be more competitive, agile and responsive to market changes. They are also under tremendous pressures to maintain high levels of corporate governance. So, on one hand, businesses need to empower their staff to make decisions but they also need to maintain a sound framework for control, accountability and security.

Legal and regulatory mandates, together with challenging economic conditions, demand performance that is consistent, repeatable, and auditable. In order to achieve such performance, organisations need to establish a high level of control over business practices and processes. Connected processes will help enforce control by enabling greater consistency and efficiency and easier monitoring. CPM also facilitates a larger percentage of time devoted to solving business problems instead of managing data.

With decision making occurring more frequently and at every levels of an organization or enterprise, companies are investing in tools that will provide their decision makers direct, accurate, and timely and correct information. These decision making managers will need such information to effectively carry the companies’ objectives and targets. Also, as organizations continue to expand, collaboration in an accurate and fast manner will be more important than ever to help managers of different departments or levels formulate strategies for growth and align their strategies with the operation plans of the company.

From the above discussion, it is safe to conclude that CPM is not just another passing fad. It’s here to stay as companies need technology to effectively facilitate the dispersal and use of accurate, timely information for each decision maker to contribute, to improve performance and be transparent in their actions for the company.

Key Drivers Forcing Companies to Look Towards CPM
There are several key drivers that are forcing companies to look towards CPM as the next big thing. These include:
1) Regulatory Requirements: Investors and stakeholders across the globe are demanding quality and transparency of disclosure of the highest order resulting in regulations such as SABOX in the US and IFRS in Europe. In many cases, these demands is driving an organization’s P/E ratio.Take the Sarbanes-Oxley compliance requirement for instance, this requirement is likely to drive increased adoption of business performance management solutions. Our interactions with customers indicates that a growing number of customers are leveraging their investment in financial reporting software to meet compliance requirements and also keep pace with a dynamic and highly complex business environment.

Because we integrate data from multiple sources and provide a common view across the enterprise, we enable an integrated financial and performance management process that aligns tactics with strategies. Such a comprehensive solution not only helps meet compliance requirements but also provides the capability to increase efficiency and profitability across the organization.

2) The CIO / CFO Convergence: The convergence between the CIOs and CFOs needs in organizations is yet another key driver . Recent studies have shown that the most forward looking and breakaway CIOs rank Business Intelligence in its broadest sense (that includes CPM) as their number one priority, much as they acknowledge security as a close second.

According to a key research finding from an CIO Insight article published in October last year, IT alignment is important for achieving corporate growth. In the article, the writer, Allan Alter, said, “80 percent of for-profit companies say increasing revenues rather than reducing costs is their primary strategy for improving earnings. That means that the never-ending task of aligning IT with the business is now focused on launching new products, improving speed and service, and supporting mergers and acquisitions.”

Alter’s article was based on the magazine’s survey of more than 1,000 business and IT executives.

3) The Effects of Globalization: The effects of globalization have clearly validated the notion that the world is indeed flat! Companies in Asia are no longer competing with themselves, they are truly competing with world-class organizations in every part of the world. Outsourcing has further flattened the world in a very phenomenal way.

The World Is Flat, written by Pulitzer prize winning author Thomas Friedman is a national best selling book in the US. What Friedman means by “flat” is that sometime in the late 1990s a whole set of technologies and political events converged. This included the fall of the Berlin Wall, the rise of the Internet, the diffusion of the Windows operating system, the creation of a global fiber-optic network, and the creation of interoperable software applications, which made it very easy for people all over the world to work together and that leveled the playing field.

The above 3 phenomena are clearly driving forces behind performance management.