CPM Information Bedrock, Part 4 – Pulling the Pieces Together

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“Know thyself”

- Socrates

“I have but one lamp by which my feet are guided, and that is the lamp of experience”

- Patrick Henry

At last, we attack the root question to which the prior three installments in this series have been leading: how do you assemble a total performance management solution? We have thus far defined what corporate performance management (CPM) is, decomposed it into discrete functional units that can be organized according to the human needs they fulfill (see Figure 1), and set forth criteria by which to evaluate the implementation path (namely, assessment of each component’s risks, return and dependencies). Now let’s consider where to start and how to proceed with implementation. To guide us, let’s return to Figure 1 and move around it, considering what risks, return and dependencies exist depending on where we are on the diagram.

Figure 1: CPM Information and Functional Requirements: A Humand Need Based Framework.

First Observation: Risk generally increases as you move out all three axes at once. One would be ill-advised to entrust a system to interpret external events over which the enterprise has no control, determine in predictive fashion how those events will affect performance and automatically enact operating changes absent any intervening human review or approval. Call me a techno heretic, but ceding that level of operational control to a machine just strikes me as dumb – even a little spooky. Perhaps, there are situations in which this level of automated, predictive operational control is warranted, but only where the parameters are tightly defined and agreed upon in advance by human stakeholders. For example, a contract between trading partners by which a firm’s products or services are automatically repriced over time corresponding to changes in the consumer price index (CPI). Such an arrangement might be reasonably subject to complete automation, even though it involves acting upon external, leading performance indicators. Generally speaking, however, in our fascination with the power and potential of technology, we ought not relinquish or diminish the importance of human judgment in managing business performance.

Second Observation: Much of the market focus in the CPM space is around productivity and process automation (using systems to address the needs down the Degree of Assistance axis), i.e., improving the workflow and time-consuming, error-prone “spreadsheet march” that characterizes many corporate planning and budgeting cycles, along with the monitoring of actual performance against those plans. What is the risk in attacking CPM from this angle? Probably none from the perspective of business disruption, and potentially moderate from the perspective of achieving ROI (and the ROI risk is more likely related to poor and undisciplined implementation than poor tools). Assuming a skillful and disciplined implementation, how large a return should be expected? The answer, of course, is the ubiquitous qualifier – “it depends.” It depends on how cumbersome and costly the current process is, and how repeatable, if a discernible current process even exists. For some companies, a CPM productivity suite is called for. For others, homegrown spreadsheet templates and email are probably sufficient. The size and complexity of the business and the volatility of the external environment against which that business must plan and continually adjust largely contribute to the complexity of the planning process and therefore the attractiveness of an off-the-shelf CPM productivity tool.

Third Observation: There is currently considerable interest within the data warehousing (DW)/ business intelligence (BI) space, as well as within CPM, to incorporate more external data and better leverage predictive analytics to help companies more quickly and optimally respond to performance impacting trends or events (both internal and external) as they occur. That is to say, there is momentum to push back the walls of traditional DW/BI along the axes labeled as Level of Control and Time Scope.