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Who Needs BI or BPM?

  • August 01 2007, 1:00am EDT

Business performance management (BPM) is currently helping many companies make better investment decisions, focus on what is strategically important and, ultimately, improve their bottom line. There are potential benefits for virtually any type and size of company. Unfortunately, the companies that probably need BPM the most are the ones least likely to be pursuing BPM. They fall into several categories, and I'll take a look at each to try to understand the root of their challenges.

The most obvious company that needs BPM is one that needs to improve its performance. BPM can help companies better understand what is happening in the business in time to take corrective action. It can help them focus their energies on high-return activities. It can enable them to model various cost management scenarios and anticipate the resulting impact. It can save them money through reduced headcount requirements for budgeting and reporting. However, a company that is losing money or missing its targets by a wide margin is the least likely candidate to move forward with BPM. I've heard comments such as, "We're missing our numbers as it is, so we can't make any large expenditure right now." Maybe if they had a performance management initiative in place, they wouldn't be missing their numbers. Without BPM, it will be much harder for them to crawl out of their hole. Sometimes you have to make that tough investment to achieve the desired results.

At the other end of the spectrum, you have companies that are doing exceptionally well. When you are growing rapidly, you need to manage that growth, along with customer satisfaction, product quality and service quality, or eventually company reputation and employee morale may suffer. As the company grows, having a single system to share a consistent set of key data companywide is more important than ever. Companies flush with cash should be in the best position to move forward with BPM. Alas, much like the poor performers, many of these organizations are delaying the move to BPM. The reason given, "There's so much going on that we're too busy right now to take on anything else." Hopefully we won't see you in emergency mode if conditions change.

Companies have been acquiring or are being acquired at a fairly rapid clip. It is highly likely that the merged companies will end up with multiple transactional systems that need to be reconciled. BPM can help address this persistent problem. A BPM data mart can hold summary management information from multiple transactional systems in a common format, mapped to a standard chart of accounts and organizational hierarchy. While the company is transitioning to a single enterprise resource planning (ERP), customer relationship management (CRM) or supply chain management (SCM) system, BPM can provide a single unified view of the entire business. When it has moved to a common set of underlying systems, BPM can help create strategic alignment across the new, larger and culturally diverse organization. Some companies maintain multiple systems indefinitely, and then BPM and its consolidation capabilities are critical. An often-heard comment, "We are quite busy trying to merge the two organizations, the products, the people and the systems; there is no time for BPM right now." This is a situation where BPM can really help pull together key information from the disparate data sources as well as get the two merging organizations on the same page strategically.

Budgeting capabilities have been one of the most popular aspects of BPM. The reason is that many companies are still using spreadsheets for this critical task and are in extreme pain. Many companies have started their BPM projects by implementing the budgeting and planning module first, but some never seem to be able to move forward with BPM.  

For example, a company goes through its budget cycle, realizes just how bad it is and vows to do something about it before the next cycle. As the budget wraps up and the pain subsides, they move on to other projects and make a note to do BPM next year. When next year rolls around, they begin to look at BPM, meet with several vendors and quickly realize they have more homework to do before they can move forward. As the days and weeks pass, it becomes apparent that they will not be able to develop detailed requirements, evaluate alternatives, purchase, implement and test a new budgeting system before the start of the next budgeting cycle. The project gets shelved until the following year. The whole process repeats itself a year later.

One other scenario that I have seen is the financial analysts and managers who deal directly with budget preparation and collection feel the pain and understand the potential for error. Their senior management may just see the finished product and not be fully aware of what went into creating it and the inherent risks in relying on this data. In that situation, senior management may think everything is fine and be reluctant to invest in BPM for a new budgeting system. The cost in both of these cases is an unreliable budget, little time for meaningful analysis and low morale/possible turnover in finance.

While many companies who should be doing BPM are not, many more are. At this point in time, it is safe to say that the majority of organizations today are either engaged in or are seriously considering BPM. This will create one more reason for the companies described here to move forward with BPM: to remain on equal footing with their peers and competitors.

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