Whatever the level of cynicism, the focus on the use of technology to tune and manage business performance is real. Perform-ance management is a grouping of specific analytical applications such as those for planning, budgeting and forecasting with BI tools for monitoring, analysing and reporting the state of an organisation. These include scorecards for measuring how well groups of individuals, departments or the business as a whole is meeting key performance indicators (KPIs); dashboards to present those indicators to relevant users and alert them when targets go beyond expectations; analytical tools to allow them to drill into exceptions; and reporting tools for keeping relevant groups informed.
That differs from the previous application of BI to run the business in two clear ways. First, the measurements are typically much more current rather than a retrospective look at the health of the business; and second, they are expected to be applied throughout the organisation, so performance is fine-tuned at a granular level.
Godfrey Sullivan, CEO of Hyperion Solutions, argues that performance management has become the driving force of the analytics market. "I wouldn't want to be in the BI market without business performance management: if you're just selling reporting, you'll get run over."
Analysts with less of a stake in ensuring the take up of the performance management technology package beg to differ. Forrester Research's Keith Gile makes it clear that, "BPM has not replaced BI. In fact, BPM is nothing without BI."
CPM simply trains all the analytics on the business of doing business. As one analyst put it, BI answers the questions, CPM analyses the answers. For example, dashboards can be set up to indicate atypical variances within the data they present - so if sales of a certain product or in a certain region are below expectations, the manager is alerted and can find out the specifics of what is going wrong by drilling down into the data.
As that suggests, CPM is not just for financial planners. If it is to deliver on its potential, the objectives must be defined throughout the business hierarchy, and performance metrics and reporting linked to them. In turn, performance data at lower levels is rolled up to provide a higher-level view of how the business is doing.
As such, performance management is a democratising process, in that for it to work properly, everyone within the business must be aware of the KPIs that define their performance and how that relates directly to the company's success.
Chris Knighton from CPM consultancy Aspiren, describes this as a 'line of sight'. "If I walk into a bank and ask the teller what he or she is doing to increase the bank's market capitalisation, they'll probably think I've gone mad. If, on the other hand, I ask them what they're doing to increase the branch's sales, I have a lot better chance of receiving an answer. The trick is to translate what is important strategically for the organisation, into what is achievable by the individual."
If an organisation has 25 key objectives, these should be cascaded down the ranks so that every person retains four or five aligned to the corporate objectives, says Knighton. "Strategy should be everyone's day job."
But the application of analytics to the measure and orchestration of business performance is only in its infancy. Many of the required tools and applications are only now being integrated in a coordinated fashion. And many organisations have yet to put the business processes in place - let alone educate the user base - to ensure the effective application of CPM technologies.
Nonetheless, research firm Gartner predicts that by 2008, over 80% of publicly traded companies will have a formalised CPM strategy - and for good reason.
The pressure on organisations to implement solid corporate governance is a major driver, says Forrester's Gile. "Performance management requires performance to be defined, and performance is easily defined when there is the incentive of compliance. A regulation like Sarbanes-Oxley requires fully auditable methods and highly defined rules of engagement. This environment is conducive to CPM."
As Sullivan concludes: "The hardest thing for a business to do is to set goals and then link them to day-to-day performance." And, hype-aside, CPM helps bridge that gap.
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|Publication:||Information Age (London, UK)|
|Date:||Jun 10, 2005|
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