Look at today’s global business. Without ongoing and meaningful measurements, how will you know a company in China is making your product faster and cheaper and better? Oh, you’ll eventually figure it out—when the Chinese company eats your brand for breakfast and you have to make the dreaded call to the financial analysts that you’re lowering your financial expectations.
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That’s where corporate performance management (CPM)—the process of monitoring and managing business performance across the enterprise—comes into play. The moment that Chinese company product hits the market (and perhaps even before) CPM can enable you to make immediate adjustments to keep your product on the top of the heap.
CPM produces a balanced set of metrics that measure both internally (how we’re doing this), and externally (how we’re impacting customers and other stakeholders). It should be viewed as an ongoing process; not only a goal or a snapshot, but a continuous improvement process that adapts to the changing economic and market conditions.
CPM should contain a set of critical indicators or metrics that allows the organization to align its processes, people, IT and operations with the strategic objectives that create and sustain stakeholder value. For example, measuring and acting upon a vendor’s inventory levels might allow you to improve the efficiency of the whole supply chain.
Companies that have embraced the vision of CPM understand the value of enabling and engaging everyone in an organization to manage the organization’s performance. These organizations understand how CPM can help them answer fundamental business questions: How are we doing? Why? and What should we be doing?
It’s not financial reporting or financial measures alone; a common misconception. In fact, financial measurement commonly makes up 80-to-90 percent of corporate performance management approaches. Your company should also have a measurement strategy in place to see how well you are aligning your daily tactics with process, people and IT.
These measurements are short-term and near real-time, and should have a variety of inputs and metrics. Knowing what happened without finding out why, is of little use to the business. Knowing why something happened, but being unable to plan and make the necessary changes is likewise of limited value.
With CPM, you can see what’s coming and measure your reaction, shorten up the manufacturing process, put more resources into that new CRM software, and launch a laser-focused marketing campaign. How can you measure global competition so you can quickly adapt when five-year strategy plans are out the window? Think five-month strategy plans instead.
CPM provides this kind of consistent competitive feedback to senior management, who can respond immediately with a change to strategy. The only way to know what is happening in the marketplace and be able to change quickly is to have comprehensive performance metrics in place for process, people and IT.
Yes … process, people and IT—the real stuff companies are made of. Analyzing the results into sustainable performance improvements: the stuff of corporate performance management.
In future columns, we’ll outline additional corporate performance management topics, including: how to make process and performance a success, why proper CPM is so rarely done well, and critical factors to think about when setting up your CPM system.
Roberto Goldammer is chief client officer and regional managing director for Neoris He is responsible for managing global sales and delivery processes, ensuring consistency in execution and a positive return on investment (ROI) for clients across diverse cultures and business environments.