First, can we get past all the initials? BPM, CPM and EPM are all acronyms for more or less the same thing. Usually "B" means business, "C" means corporate and "E" means enterprise. Real confusion sets in when you look at the use of "P" and "M" in these acronyms. "P" typically stands for either performance or process. "M" typically means management or measurement. Sometimes it means metrics. These six letters could refer to 18 potential combinations. And I just heard about BPS the other day!
I'm being a little facetious here - but not much. To be fair, the area of business process management is pretty separate from "x" performance management. Leading companies seek to connect performance management and process management; that integration is beyond the scope of this article.
While not quite the same, this reminds me of the business intelligence (BI) market 10 years ago. I remember explaining it to our senior management. "Um, well, we have data warehousing. We have extract, transform and load. Online analytical processing. Query and reporting. End-user reporting." It was hard to get a handle on the exact opportunity we faced. Somehow, as an industry, we came to call all of this BI. No one got any smarter, richer or better looking, but it did get simpler to look at the market, its trends and its participants.
I propose we do the same thing and simply call it xPM (performance management).
So, what is performance management?
Traditional BI tools give end users access to data and, hopefully, simple and intuitive ways to analyze that data. The traditional tools and even the more modern, visual tools focus on enhancing employees' ability to gain insight. You cannot make people more insightful than they already are. But you can make it vastly easier for them to evolve their hunches about the business into true insight about the business. Portals add collaboration and search features to BI and enable team insights.
Companies and organizations must take the insight process one step further to be competitive today. They need to act on insight by changing the plan of record. Using performance management software, we record the change to the plan. Specifically, performance management adds write-back to the BI stack or toolset. We know who made the change. We know why they made the change. And most importantly, we can come back tomorrow, next week or whenever and see if the change in plan yielded the expected results. If a sales manager reallocates resources, we'll know soon enough if her insight to do so was good. This makes the sales manager accountable for the quality and the results of her decisions. Should the company enjoy the results, it can find other places to apply the same insight and the same change to the plan of record. And it can reward that sales manager if it so chooses.
Performance management brings the idea of the "plan" to the party. All companies make and have plans — some more formally than others. In too many companies, planning has little influence on day-to-day decisions. We've had planning software for ages. But it seems most companies execute an annual planning exercise, which usually includes and is often limited to the annual budget. If the planning software and process are too arduous, managers rarely update the plan as circumstances change. Unless the BI tools that individuals and teams use to gain insight integrate with the planning tools, we lose the ability to record decisions and measure results. That's not to say we can't compare plan versus actual. We can. But we lose track of which decisions truly correlate to which results.
Let's take an example. I'm the manager of an office supply store that has floor salespeople and telephone salespeople. It's my hunch that I could increase the sales of my store by getting more salespeople on the floor. I grab my favorite BI tool and browse a cube thoughtfully provided by corporate IT. I compare sales per period for floor and telephone salespeople. I look at utilization of both populations, and I decide to move three telephone salespeople to the floor.
After I tell three people they better buy comfortable shoes, what should I do? In many companies, there is nothing to do. I wait to see if sales increase. In my own little world, I can correlate my allocation decision with results. My boss can't - at least not quickly. Later, he sees that sales went up and wonders why. He can do the same analysis I did and figure out the reallocation. If instead I update my plan in the case of my sales force allocation, I will leave an explicit record of my decision and the reasons for that decision. Later, when my boss notices the results, he can look across the region and implement the same decision in similar stores. (Of course, we're assuming I made a good decision! But then again, it is my column.)
The performance management system reflects corporate policies and processes. In the example given, the company many require one telesalesperson per n active customers. Consulting the performance management system while I am doing my analysis guides me in my reallocation decision. If my boss needs to approve headcount reallocation, the performance management system routes my request to him for approval. Performance management systems that allow business users to describe and even implement company policy, process and strategy provide more agility than systems that require extensive programming.
It's also important for the performance management system to provide corporate data to decision-makers. I may be fretting about allocating salespeople, but possibly the real problem is that my store is not profitable when I factor in allocated regional and corporate-wide costs. A performance management system should include a module to implement consolidation, allocation and intercompany elimination.
The performance management system should support the whole cycle of monitoring, analyzing and planning (and replanning) the business. The BI industry traditionally focused on analysis tools. Back in the day, analysis tools presented a high learning curve. Things are far better today. And yet, a lot of BI tools are still sitting on shelves in companies. That's because while analysts go to work to "analyze," most people go to work to do their job. Monitoring, specifically scorecarding, is an easier and more intuitive entry point to performance management for most employees. The scorecard is a straightforward tool most employees can consult, daily or more often, which relates current results to the plan. When you see a red traffic light or thumbs down, you are suddenly motivated to do some thinking or analysis. Hopefully your company provides the data you need and easy-to-use tools to support you. And once you decide your course of action, hopefully you modify the plan and monitor the results.
So, what is performance management? Performance management encompasses monitoring, analyzing and planning your business. Through planning, performance management adds a future orientation to BI. It connects insights to decisions, implemented as changes to the plan of record and made in the corporate context. It includes tools for scorecarding, analysis, budgeting and forecasting. Done well, performance management turns the annual budget cycle into continuous business improvement. Performance management is accountable BI.
As usual, I am happy to take questions and comments about this article and other BI subjects at email@example.com
Register or login for access to this item and much more
All Information Management content is archived after seven days.
Community members receive:
- All recent and archived articles
- Conference offers and updates
- A full menu of enewsletter options
- Web seminars, white papers, ebooks
Already have an account? Log In
Don't have an account? Register for Free Unlimited Access