Views on performance management software are currently at both extremes. Some hail the use of business intelligence (BI) tools and financial applications to gauge and react to the business's performance as the beginning of a new era of technology fostered efficiency; others say that business or corporate performance management (CPM (1) (Critical Path Method) A project management planning and control technique implemented on computers. The critical path is the series of activities and tasks in the project that have no built-in slack time. ) is an over-hyped application of existing technology to what many business managers have been doing all alone - looking closely at performance at all levels and adjusting the business levers accordingly.
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 Key Performance Indicators (KPI) are financial and non-financial metrics used to quantify objectives to reflect strategic performance of an organization. KPIs are used in Business Intelligence to assess the present state of the business and to prescribe a course of action. (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 granular /gran·u·lar/ (gran´u-lar) made up of or marked by presence of granules or grains.
1. Composed or appearing to be composed of granules or grains.
Godfrey Sullivan, CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. of Hyperion Solutions Hyperion Solutions Corporation is a business performance management software company, located in Santa Clara, California, USA. Many of its products are targeted at the Business Intelligence and Business performance management market. , 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 atypical /atyp·i·cal/ (-i-k'l) irregular; not conformable to the type; in microbiology, applied specifically to strains of unusual type.
adj. 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 Financial Planner
A qualified investment professional who assists individuals and corporations meet their long-term financial objectives by analyzing the client's status and setting a program to achieve these goals. . If it is to deliver on its potential, the objectives must be defined throughout the business hierarchy, and performance metrics Performance metrics are measures of an organizations activities and performance. Performance metrics should support a range of stakeholder needs from customers, shareholders to employees . 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 Noun 1. market capitalisation - an estimation of the value of a business that is obtained by multiplying the number of shares outstanding by the current price of a share
market capitalization , 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 orchestration
Art of choosing which instruments to use for a given piece of music. The sections of the orchestra historically were separate ensembles: the stringed instruments for indoors, the woodwind instruments for outdoors, the horns for hunting, and trumpets and drums 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 publicly traded company
A company whose shares of common stock are held by the public and are available for purchase by investors. The shares of publicly traded firms are bought and sold on the organized exchanges or in the over-the-counter market. will have a formalised Adj. 1. formalised - concerned with or characterized by rigorous adherence to recognized forms (especially in religion or art); "highly formalized plays like `Waiting for Godot'"
formalistic, formalized CPM strategy - and for good reason.
The pressure on organisations to implement solid corporate governance Corporate Governance
The relationship between all the stakeholders in a company. This includes the shareholders, directors, and management of a company, as defined by the corporate charter, bylaws, formal policy, and rule of law. 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.