How EPM can facilitate business planning and performance management
How EPM can facilitate business planning and performance management:
Enterprise Performance Management is basically a set of management processes, often supported by technology, that help to improve the strategic decisions people in organisations make every day. In the end it is the quality of those decisions that will separate successful companies from the rest. Performance Management is therefore a modern umbrella term for a set of management approaches that enable organisations to define and execute their strategy, and to measure and monitor performance in order to inform strategic decision making and learning.
In the first step to Enterprise performance management model, organisations start with defining their strategy, then move on to measuring performance, then use these indicators to analyse performance in order to extract insights and make better informed decisions which lead to actions and performance improvements. Let’s briefly look at each of these steps:
Strategic Planning – This step involves creating a business model and strategy (either corporately or for a business unit). State of the art tools that are commonly used here include Balanced Scorecard Strategy Maps and value-driver mapping. Informed by strategic analyses organisations identify what strategic objectives they plan to accomplish and how they plan to accomplish them.
Performance Measurement and Monitoring – Here organisations design key performance indicators (KPIs) to measure and monitor how well they are delivering on their strategic objectives. Most important is to ensure the metrics are relevant and meaningful. Many fall into the trap of measuring what is easy to measure instead of what will provide the best insights.
Business Intelligence (BI), Analytics and Modelling – In this step organisations use their performance data and metrics to analyse performance. This step is all about creating a solid evidence-base to inform decision making. Examples of analytics, BI and modelling approaches include marketing and sales analytics, customer analysis or click stream analysis.
Decision Making – In this step organisations translate the insights gained from their performance information into management decisions. It is all about evidence-based decision making facilitated by the performance review processes. Leading edge organisations put in place performance improvement meetings to create a dialogue about performance leading to joint decision making.
Upon the initial steps of Enterprise performance management approach it integrates with other key management processes. Here we briefly look at some of those processes in turn and explore the need for alignment.
Financial Budgeting, Planning & Consolidation – By integrating your budgeting and financial planning with your corporate objectives and priorities you ensure that the financial resources are spent on the things that actually matter the most. Some of the leading organisations are now able to update their budgets and forecasts on the fly, based on a continuous inflow of both financial and non-financial data.
Project and Programme Management – The delivery of projects and programmes needs to be aligned with the corporate objectives and priorities in order to ensure efforts are focused on what matters the most. The activities (projects and programmes) need to be prioritised based on strategic needs and therefore have to be aligned with the strategic performance framework of an organisation.
Risk Management – The management of risk is too often narrowly focused on just financial risks or the disaster risks to buildings and infrastructure. While these are important, they are not enough. The performance framework has identified the key drivers of future performance (e.g. staff with the right competencies, corporate reputation or key partnerships) and it is therefore important to assess and monitor any risks in relation to all your performance drivers in order to achieve alignment between your risk management and what matters the most for future performance.
Performance Reporting – Relevant performance information is not only crucial for better decision making and performance improvement, it is also a requirement for most organisations to demonstrate to external stakeholders and regulators that they have delivered desired levels of performance and that they have complied with rules and regulations. Integrated EPM solutions allow organisations to use any of their data to produce and deliver r eports for their stakeholders – internally or externally.
Full analytical integration – By aligning and integrating the above processes with the performance framework organisations create an invaluable set of data which they can use, in an integrated way, to inform decision making. For example, the information on value driver analysis, customer relationship management, financial forecasting, and risk logs can be used to challenge, test and revise corporate strategies.
Executive decision makers need access to integrated information to truly focus on profitability and performance. This requires a performance management platform that provides historical information, current results, and predictive analytics. Today’s performance managers need to know what’s happened and why it happened, align this knowledge with objectives, and articulate a plan to establish a forward-looking view of the business.