How to Embrace and Understand Enterprise Performance Management

Mar 28, 2014

Vya Staff

DocuStar is honored to welcome Gary Cokins to our Marketing Organizational Leadership series. Gary is the founder of Analytics-Based Performance Management LLC, an advisory firm located in Cary, North Carolina.GaryCokins

Gary is an internationally recognized expert, speaker and author in advanced cost management and enterprise performance and risk management systems. He began his career in industry with a Fortune 100 company in CFO and operations roles and then worked for 15 years in consulting with Deloitte, KPMG and EDS. From 1997 until recently, Gary was a principal consultant with SAS, a leading provider of enterprise performance management and business analytics and intelligence software. His two most recent books are Performance Management: Finding the Missing Pieces to Close the Intelligence Gap and Performance Management: Integrating Strategy Execution, Methodologies, Risk, and Analytics. His most recent book is Predictive Business Analytics.

In the first discussion of a three-part series, Gary takes a look at Enterprise Performance Management, what it actually means and why businesses should be adopting its various methodologies.

Q: What does the term Performance Management mean to you?

A: There is confusion in the marketplace about the term Performance Management. Just Google the term, and you will see what I mean. This confusion in part is due to semantics and language. We often see in the press and media the acronyms Business Performance Management (BPM), Corporate Performance Management (CPM) and Enterprise Performance Management (EPM).

I’d like to focus more on EPM and its various methodologies. EPM is perceived by many as far too narrow. More recent confusion comes from the term being narrowly applied to a single function or department, such as Marketing Performance Management or Information Technology Performance Management.

EPM is not a new methodology that everyone now has to learn, but rather EPM tightly integrates business improvement and analytic methodologies that executives and employee teams are already familiar with. Think of EPM as an umbrella concept -- EPM integrates operational and financial information into a single decision-support and planning framework. These include strategy mapping, balanced scorecards, costing (including activity based cost management), budgeting, forecasting and resource capacity requirements planning. These methodologies fuel other core solutions such as customer relationship management (CRM), supply chain management (SCM), risk management, and human capital management systems. It is quite a stew, but they all blend together.

Q: What are your thoughts on the relationship between Performance Management at organizational, departmental and individual level?

A: Historically the term “Performance Management” referred to individual employees and was used by the personnel and human resources function for employee appraisals. But today, the term is widely accepted as EPM of an organization as a whole, whether it is a commercial, not-for-profit or government organization. Clearly the performance of employees is an important element to improve an organization’s performance, but in the broad framework of EPM, human capital management is just one component.

Q: Which companies would you recommend to be looked at due to their particular approach to Performance Management and subsequent results?

A: There are hundreds, possibly thousands, of companies applying various EPM methods that are at different stages of maturity with each method and collectively with EPM as a whole. Rather than name specific companies, my suggestion is for the creation of “stages of maturity” assessments or refinements of existing ones.

Q: Which are main challenges of Performance Management in practice today?

A: In general, one of the frustrations of those of us in the EPM advocacy community is the slow adoption rate of EPM methods; Technology is no longer the obstacle. The obstacles and challenges involve behavioral change management (to gain buy-in) and cultural issues.

However, to be specific, main challenges with two EPM methods are:

1) Selecting the correct strategic KPIs for use in the balanced scorecard and selecting appropriate operational performance indicators (PIs) displayed in dashboards.

2) Right-sizing activity-based costing (ABC) models to prevent them from being overly complex and well beyond diminishing returns on extra accuracy relative to the incremental administrative effort to collect, validate, calculate, and report the information.

Q: What do you think should be improved in the use of Enterprise Performance Management tools and processes?

A: I note that this question is not about improvement with EPM tools but rather the “use” of the tools. Although the former is not being asked, I would answer that a major improvement would be more robust integration of the EPM methods. For the latter, their “use,” my answer would be imbedding analytics into the various methods. As an example, with a strategy map and its companion balanced scorecard, to apply correlation analysis to measure the explanatory value that “influencing” KPIs have on “influenced” KPIs to validate the quality of the KPI selection.

Q: What would you consider best practice in Enterprise Performance Management?

A: There is often ambiguity when it comes to describing a “best practice.” Since EPM is such a broad integration of various EPM methods, at its “umbrella” level, a “best practice” is the seamless information integration among the methods combined with more imbedding of analytics in each method.

Q: What are the limits in order to achieve higher levels of proficiency in Performance Management among practitioners?

A: The most significant “limitations” among EPM practitioners are (1) their likely lack of sufficient experience implementing each EPM method, and (2) their lack of skills with behavioral change management to gain user buy-in and overcome the natural resistance to change that is to be expected (e.g., suspicion that the method is of little use, not wanting to be measured or held accountable, fear of knowing the truth).

Q: If you are to name in few words the main aspects governing Performance Management today, what would they be?

A: I interpret this question as related to main aspects governing “the rate of adoption” of EPM methods today. The slow adoption rate is much more behavioral, social and cultural. One aspect I have hesitated to mention is weak leadership. If the executive team does not have the vision of a fully integrated EPM suite of methods nor the emotional will to expand their level of maturity, then their organization will not attain a competitive advantage.

Q: As a consultant, what are the most common issues that your customers raised related to Enterprise Performance Management?

A: Unfortunately the most common issues involve misconceptions about the EPM methods. They typically misperceive that there are pre-requisites like perfect data quality, a single data warehouse (in contrast to disparate data sources), employee time-sheet data collection systems, and data from IT systems in place of some estimates from reasonably informed employees. EPM can be attained without these. If these misconceptions could be removed, there will be more impetus to “get started” or “go further.”

What is your experience in Enterprise Performance Management? Submit a comment below or join the discussion in the LinkedIn group, “Marketing Organizational Leadership.”

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Tags: Marketing Organizational Leadership, business analytics, business performance management, intelligence software, analytics-based performance management llc, risk management, SAS

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