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The Enterprise Performance Management Leadership Imperative

Originally published septiembre 11, 2007

Enterprise performance management (EPM) solutions transform organizations. When complex businesses can align – and measure – individual and group behavior against high-level strategy and corporate goals, efficiencies can be found, changes made, and value added throughout the entire organization.

Historically, enterprises have only been able to do this at the department level, but now integrated technology exists that extends the power of performance management across the enterprise, helping companies align their corporate strategy to core business processes and results.

Despite enormous advances in tools and technology, true enterprise performance management success relies on participation from every decision maker in the organization – a tall order. Many companies already have an EPM approach or framework in place, yet they have not been able to execute on their goals because they’ve been unable to manage change across the many complex internal and external stakeholders, such as employees and vendors.

Designing and implementing pervasive systems that touch all the right groups and integrate the most meaningful processes is a challenge that wise organizations recognize as, essentially, a people problem.

If employees are not confident in the integrity of the EPM approach, if there is a distrust of the data and metrics, or if internal groups are unhappy with the pace of change, it will be a challenge to turn the tide. And, if back-end processes and technologies are too complex, it’s an open invitation to ignore EPM protocols altogether and go back to doing things “the way they’ve always been done.”

It is imperative, therefore, that the right technology solution is put in place and that the vision is shared across the organization. In a word, success requires an enormous leadership commitment.

Research into high-performance businesses and organizations shows several common principles related to people, processes and technology – the three key ingredients of success.

First, and foremost, implementing a best-in-class EPM practice demands strong executive sponsorship. Because EPM touches so many different daily business processes, corporate officials have a responsibility to set direction and motivate the entire team.

Factors related to a company’s most important resource, its people, include:

Building a results-oriented culture: People at every organizational level must understand how individual actions contribute to achieving the overall business goals.

Aligning incentives and rewards: An incentive plan should tie rewards directly to performance, with multi-year budget targets driven by corporate goals. This should also include incentives at lower levels of the organization to provide “line of sight” and help foster a results-oriented culture.

Training for skills, capabilities and talent: To effectively and successfully change its business performance management, a company must have the appropriate training and education programs in place to support the change.

The second critical enabler of EPM success is a commitment to understanding, evaluating and streamlining a company’s existing business processes including:

Assessing a company’s unique structure: Form should always follow function. The unique structure of a business should not be an impediment to the EPM plan. Understanding key processes is the first step to enabling an effective EPM capability, and it requires a patient analysis of how the work gets done.

Standardizing management processes: Enterprise performance management is fundamentally about improving decision making in a way that drives sustainable value. Therefore, it is of tremendous importance to clearly specify the processes and associated governance frameworks that define how key decisions are made. (Examples include prioritizing what drives company value, how capital investment is approved or how strategic change is determined.)

Reinforcing a common performance language: Robust and consistent definitions must be used for all key metrics, assets, and decision support information requirements. This performance language “dictionary” should be consistently used to eliminate or minimize endless debate about straightforward measures such as customer, headcount, and returns in the daily glossary of each business.

Placing value on data quality and integrity: Before embarking on an expensive technology project or data warehouse implementation, it is wise to consider the quality of information needed for business decision making. Within accounting rulemaking, a tension has traditionally existed between relevant information and reliable numbers. For management decision making, it is more important to get relevant information quickly than perfectly accurate information late.

Lastly, the breakthroughs in finally making enterprise performance management a high-value, sustainable tool are the vital technology enablers, which include:

Ensuring the data model is relevant across the enterprise: This model specifies how data will be captured, aggregated and reported. This is an important exercise because the data model must be cross functional (i.e., marketing, supply chain), cover intangible as well as tangible assets, and take into account the company’s priorities for non-traditional data such as customer satisfaction surveys or point of sale transactions.

Creating an integrated technical architecture: The power of an integrated technical platform is significant, as it eliminates redundancy and provides an effective management tool that enhances decision making and value creation. The ability of an EPM technology vendor to provide integrated capability is paramount; historically, this has been problematic, but new solutions are emerging that signal great improvement.

Providing ease of information access and delivery: Providing people at varying levels of the organization with the ability to easily access and analyze data that is critical to their day-to-day operations through familiar desktop applications is an important step in the enterprise-wide adoption of an EPM strategy.

Considering your regulatory controls: Recent regulatory requirements (e.g., Sarbanes-Oxley (SOX) and Basel II) make it increasingly important for companies to ensure that their business processes have adequate internal controls. It is important to have adequate controls across your entire performance reporting infrastructure. For example, SOX requires financial transparency and reporting on all public companies that do business in the U.S. Smart companies view these new requirements not as a compliance burden, but rather as a catalyst for reviewing and improving their controls and information infrastructure across the entire EPM framework.

For years, managers have sought to drive strategy down and across their entire organizations, and have struggled to transform strategies into actionable metrics. The quest to see direct cause-and-effect relationships between daily decision making and impact upon the organization has been a long one.

“If you can’t measure it, you can’t manage it” – or so the saying goes. Many organizations are looking for a complete, integrated view of their overall organizational health. Thus has been the promise of an integrated, top-down EPM solution.

Any EPM solution worth considering must provide processes, methodologies, metrics, and systems to measure and manage the performance of an organization. By aligning enterprise strategy with core processes and activities, overall organizational improvement will occur. When employees have agile, inexpensive, relevant and easy-to-use management tools, improved decision making across the entire enterprise becomes standard practice.

By exerting management leadership, and insisting on ownership at all levels, enterprise performance management becomes a daily part of everyone’s standard working environment. It begins with a clear understanding of how people, processes and the right technology are the keys to great results.

SOURCE: The Enterprise Performance Management Leadership Imperative

  • Markus SprengerMarkus Sprenger

    Markus is a BI Global Solutions Director and Avanade's primary business intelligence (BI) expert. He defines and directs the implementation of Avanade's solution strategy relative to Microsoft's BI products and alliances, including the creation of intellectual property (IP) and reusable implementation assets that accelerate customer deployment.

    Markus leads a team of solution architects who work closely with the Microsoft Office Business Applications product group. His team influences the Microsoft product road map through the escalation of technical learnings, challenges and feedback from Avanade customers and the global BI community. Markus joined Avanade in 2005, and has more than 10 years of experience in designing and delivering Microsoft-based BI solutions. Prior to joining Avanade, he owned a business intelligence consulting company in Germany and worked in the management of a BI-focused ISV.

    Editor's note: More financial articles, resources, news and events are available in the BeyeNETWORK's Financial Services Channel, led by Markus Sprenger. Be sure to visit today!

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