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Expanding a corporate performance management system for enterprise CPM

Get tips on designing and managing an enterprise CPM software deployment, and learn how to extend the use of corporate performance management systems beyond the finance department.

The use of a corporate performance management (CPM) system is often limited to the finance personnel within organizations....

In fact, CPM is still sometimes narrowly pegged as financial performance management. At first glance, the odds seem stacked against creating an enterprise CPM system, but a closer look reveals a variety of opportunities for leveraging CPM tools company-wide.

One of the major challenges to establishing a broader CPM strategy stems from the way in which CPM software was first developed years ago. Many of the initial CPM applications were point products focused on a particular need, primarily finance-related. And even though CPM vendors have expanded their offerings into full product suites, a lot of buying is still driven by individual business cases.

"If you're in the market for a planning solution,” Forrester Research Inc. analyst Paul Hamerman said, “it's because you have some business need around planning, budgeting or forecasting and you need to address it now -- and you're not thinking about financial consolidation and performance measurement across departments. But certainly the whole exercise of planning transcends finance and goes across the business.”

With that as the backdrop, here are some tips to help you start thinking along enterprise CPM lines:

Find your organization’s leading indicators. Measuring corporate performance based on a set of key performance indicators (KPIs) is growing in popularity, according to Hamerman. “And KPIs can and do go across the organization," he said. Once KPIs are defined for a company or for individual business units, the potential value of rolling out an enterprise CPM system can begin to take shape.

Hamerman recommends that companies should also focus on forward-looking “leading indicators." In a sales context, for example, predictive performance management metrics could include the level of customer inquiries, leads or sales calls. "Those predictors of activity could be related to a product pipeline and ultimately to a revenue stream," he said.

Look to existing planning systems for possible CPM uses. This could be a bit of a double-edged sword: You may end up extending CPM concepts to other systems instead of expanding the use of your performance management tools themselves.

"Outside of finance, you can certainly develop a strong case for performance measurement in a planning system in any area of the business," Hamerman said. "Inevitably, though, you'll also find that certain areas of the business have their own planning components -- and that's not necessarily a problem.”

For instance, production planning isn’t something that is going to be done in a CPM system, he noted. But you may be able to add CPM metrics to an existing production planning system.

Raise your hand and speak up. One of the biggest challenges to expanding a CPM rollout beyond finance is that companies often aren’t set up to consider the enterprise as a whole. "When people are going to buy a budgeting and planning application, well, that's their job -- they are going to find a budgeting and planning application," said Robert Kugel, an analyst at Ventana Research.

Don’t be afraid to draw the connections and jump-start the enterprise CPM conversation. "If you're seeing applications that are underutilized, maybe it's a good idea to raise your hand and say, 'Gosh, just in case anyone wants to do this stuff, here's what we can deliver,'" Kugel advised.

Don’t get lost in the budget. Another reason that companies have a hard time broadening the use of CPM systems, he said, is that they get too locked in on the budget itself instead of treating the budgeting process as the means to a broader performance management end.

"I've seen very few companies that have bought dedicated budgeting and planning software and are actually using it in a way that's giving them the full value of the capabilities,” Kugel said. “Typically, companies know how to budget, so budgeting is what they do, and that's what they keep doing."

To take better advantage of CPM software, he recommends that organizations start thinking in terms of integrated business planning. "You need the budget to run a company," he said. "But the budget doesn't run the company."

Look at CPM tools and consider the possibilities. Some CPM vendors have added expanded performance management functionality to their software -- building CPM suites in an effort to expand their appeal to business users. The upshot? Chances are good -- and getting better -- that your current CPM software already has core capabilities in more than just planning and budgeting.

"Many of these applications can almost immediately be positioned outside of the finance department," Gartner Inc. analyst John Van Decker said. Granted, the uses they support are usually finance-related, he acknowledged. But he added that with recent developments in the CPM market, it’s now possible to apply CPM tools to tasks such as sales forecasting and customer profitability management.

Seek assistance from those who can provide it. Unless you're a C-level executive yourself, you're probably going to need help from a visionary executive to sell the idea of an enterprise CPM system internally. It doesn’t have to be the CEO or even the chief financial officer, Van Decker said. He suggested getting, say, the director of business planning onboard as a CPM sponsor and advocate.

For smaller organizations, though, the CFO might be the person best suited to see and promote the cross-enterprise benefits of CPM software.

Enlist internal business partners. There are also benefits to finding advocates and allies in business units, especially when business executives have seen firsthand what a CPM application can do for their operations. Business partners of that sort "should be able to communicate the value they achieved to help spread the word outside the finance organization,” Van Decker said.

Get smarter with your business processes. The bottom line, he said, is that extending CPM software beyond the finance department requires a well-thought-out approach to making use of the technology -- and if an organization’s business processes aren’t mature enough, “they're not going to be able to leverage some of the functionality that's within these applications.”

Companies should do a CPM-readiness assessment of their internal skills, such as their ability to develop profitability models and understand key financial processes, according to Van Decker. The assessment may point to the need to make investments in CPM education, certifications and training before beginning an enterprise CPM system deployment.

Chris Maxcer is a freelance writer.

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