Implementing corporate performance management to gain competitive advantage
TECHNOLOGY BULLETIN |
The concept of corporate performance management (CPM) was first introduced by Gartner Research in 2001 to describe "all processes, methodologies, metrics and systems needed to measure and manage the performance of an organization." In a volatile economy with increased competition and greater demands on reporting and cash management, timely information and accurate analysis is vital to an organization's competitive advantage or its survival. According to a recent "Performance Management Benchmark Report" conducted by the Aberdeen Group, companies that have adopted an effective CPM strategy realized immediate improvements, substantially outperformed their competition, and increased gross profits by up to ten percent. CPM allows timely access to the business information and analysis needed to make critical decisions.
In many respects, this is not a revolutionary theme. Businesses have always looked to manage their performance and information. CPM, however, is as much a philosophy as it is a process or technology. It has many connotations, but at its core, requires the business to re-examine how it wants to manage its information, what indicators are vital to its performance, and at what level in the organization is the information managed and measured. The framework for successful CPM initiatives must incorporate and translate the corporate strategy with key activities and metrics, as well as allow visibility at the right levels to track performance and behavior.
CPM is really the ability for organizations to manage the entire cycle from strategy to execution. From strategic planners, to individual budget holders, from senior executives to line managers, CPM is a way to create, analyze, react and execute the strategic plan.
Many benefits can be derived from a corporate performance management initiative:
- Improve decision making. Business executives are provided with in-depth analysis of their business functions as it pertains to their business strategy, enabling them to make smarter decisions, faster.
- Raise accountability. Whether your organization is small to mid-sized or at the enterprise level, CPM holds business functions accountable for achieving their long and short term objectives. By tying objectives to key performance indicators, behavior and performance can be measured as well as linked to compensation (as desired).
- Operate more efficiently. Organizations that have adopted a CPM strategy are able to streamline business processes like planning, budgeting, and forecasting. As a result, they are able to reduce the time and costs associated with running those processes.
CPM leverages both business process and technology to allow management to continually analyze and assess where the organization is today, as well as how to manage and react to changing conditions. CPM applications allow finance and operations to spend less time collecting data and more time analyzing it – creating a cohesive connection between budgeting and measuring results. Members of the organization can focus on key issues and critical information. A well designed program allows for the entire process to be streamlined, information to be disseminated, and collaboration between key stakeholders.
The right application and strategy will support the assessment of key metrics and allow flexibility to analyze alternatives, so that timely decisions can be made. In short, a well articulated CPM strategy in conjunction with a properly designed system has the ability to deliver the right information to the right people at the right time.