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10 Questions to Ask Before Purchasing Business Performance Management Software
What is business performance management (BPM)? How about enterprise performance management? Or corporate performance management? Whatever name you choose, "it" is the alignment of people, processes and technology to support the successful execution of a company's strategies. It is an enterprise-wide approach to monitoring, measuring and managing business performance in real time - an approach that enables an organization to adapt and synchronize its actions as business conditions change. Technology makes it possible.
Certainly, executives and managers today are able to conduct business using the various technology solutions they have at hand, such as text documents, spreadsheets, electronic slides and email. Using this hodgepodge of systems, however, creates barriers to effective performance. For example, the strategic plan is often stored as a bound text document buried in someone's office. The operational budget - the tool by which strategic plan becomes action - is created in a spreadsheet. The two processes are not linked. Because of this lack of linkage and visibility, a manager may fail to fund a critical strategic tactic. A supervisor may assign a key employee to work on a nonstrategic task. Employees may not even know what the strategies and tactics are, let alone how they will be measured on achieving them. Management has no way to manage the execution of the organization's strategies.
Another example of a technology-induced performance gap is the typical reporting process. A manager or executive is given a stack of paper to review each month or quarter. Not only is it difficult to find enough time to wade through the data and, hopefully, identify any problems or opportunities buried within it, but the information is already outdated. Furthermore, trends remain hidden and the static nature of the report does not readily allow data analysis.
Forward-thinking companies have recognized that technology now exists that can help them improve the speed, accuracy and effectiveness of their management processes. By using the right BPM technology in conjunction with best business practices, these companies are able to:
10 Key Questions
How do you know what to look for in a system? Begin by asking these 10 questions when analyzing performance management technology.
1. Will this technology help me integrate my business management processes?
Integration is what makes it possible, for example, to jump-start the budgeting process by using data from your planning and forecasting processes. It helps you link corporate strategy to budgets, people, and performance measures. A performance management system should integrate planning budgeting, financial consolidation, forecasting, reporting and analysis functionality. Look for an application that features a single data repository, the component that enables true integration. If the application is Web-based - and it should be - having a single integrated system also greatly simplifies ongoing maintenance because IT can perform updates centrally rather than having to visit individual computers and multiple sites.
Another integration-related consideration is verifying that the BPM software is standards-based, not proprietary. This makes integration with the company's existing technology systems and data sources possible. Leveraging what you already have is more cost-effective and less risky than "ripping and replacing" legacy systems.
2. Will this software automatically notify me of business problems and opportunities?
Consider the typical monthly or quarterly management report. Likely, 90 percent of the information reveals that everything is going according to plan. What you really want to know about, however, is the hidden 10 percent that isn't going according to plan. A true performance management system will continuously search underlying data and proactively warn users of exceptions, the results that differ negatively or positively from expectations. The BPM application should deliver such alerts immediately, not at the end of a month or quarter, to the appropriate people via an email message. This helps give organizations and individuals time to take corrective action.
3. Will it help me quickly focus on what is important and gain insight?
Often, today's managers are not challenged by too little data; they are overwhelmed by too much data. A BPM system can help solve this problem by summarizing volumes of data and presenting the information - in real time - in an easily understood, focused format, such as a performance scorecard or a dashboard of key performance indicators. The software should allow people to access color-coded charts, tables and graphs that enhance understanding. It should also allow people to view information in the most useful context for their purposes, such as by region, product, time period, strategic initiative and more.
Because data only becomes "information" when an organization can act on it, a performance management technology must provide strong analytical tools such as sorting (e.g., best profit margin to worst), forecasting, trend analysis and charting capabilities. It should also enable people to drill down from summary numbers to the underlying transactional detail for a transparent and complete view of performance.
4. Will my organization use it?
As with any strategic technology, employees will use it if the senior executive makes it a job requirement. To ease the transition, however, look for an application that incorporates familiar, user-friendly technologies. For example, an Excel interface is more user-friendly to today's business professionals than a green screen. If the BPM system integrates Excel on top of a secure, centralized database, the organization receives all the benefits of spreadsheets without the drawbacks, and system users quickly become comfortable with the technology.
5. Will the BPM application help my employees understand their role in implementing corporate strategy?
Surprisingly few employees in a typical organization know about the high-level strategy. Even fewer understand how they directly affect its success or failure. A performance management system should not only help executives ensure that employees know what the strategy is, but it should also help employees see how their day-to-day tasks support it. Additionally, look for a system that can act as an information portal, which is a central online location for the communication of plans, policies, timetables, results, or whatever management needs to share across the organization.
Next, make sure that the BPM solution provides a cause-and-effect structure for organizing data and results. That is, for each component of your strategy, you should be able to see the supporting plans and resources. For each activity, the appropriate departments or people should be able to see who is responsible, how they will be measured, what the performance goals are and the results to date. Clearly defining expectations in this way helps promote accountability at all levels for the organization's business results.
A BPM system should also help the organization see more than results. It should allow you to see which strategic activities have been implemented, to what extent, and whether they are having the intended effect. With this information, management can assess whether it needs to reallocate resources, rethink plans or stay the course.
6. Will it let me report nonfinancial results?
Financial measures and reports are a necessary indicator of how an organization performed over a given period, yet these lagging indicators do not help an organization proactively manage for future success. Therefore, it is essential that an integrated BPM system be able to cope with and report on leading indicators as well. Depending on the type of business, some of these success drivers could include customer satisfaction ratings, percent of order filled, hours of training and percent of employee turnover.
7. Will this technology help me adapt to changing business conditions?
Remember the old days when plans remained intact for an entire year? Today, change happens continuously. A company's technology must help the organization adapt quickly. With the right BPM solution, an organization should be able to make a change once and then rely on the software to replicate the change throughout the rest of the system. For example, when the company adds a new business to the budget, that information should automatically also appear as part of the financial consolidation process and in the management reports.
8. Will this technology automate data processing?
Performance management systems should automate the processing of ratios, currency conversions, allocations, elimination of minority interests, the consolidation of results and more. BPM software should free people from redundant, manual, non-value-add tasks so that they can spend more time on important functions, such as analyzing the business and making the right decisions.
9. Will it help me collaborate with my peers?
A Web-based performance management system provides on-demand access to information so that system users can work from anywhere, anytime. In addition to providing this access to a single version of centralized data, BPM software enhances collaboration in several other ways. First, it allows employees and teams to access information based on their roles in the organization. They can interact with the information they need for their area of responsibility, but cannot see sensitive information outside of those roles. Second, it provides guided-workflow capabilities that help everyone see, understand and monitor processes, deadlines, approvals and progress. Third, a BPM solution enables people to attach worksheets, text notes and discussion threads to data to show the context in which decisions were made. This information is especially useful to teams when they review plans and results.
10. Will the software expand with my business?
Implementing an enterprise-wide system that helps you improve your core management processes is not a task for the faint of heart. Therefore, make certain that the system will accommodate not only the number of business users you have today but also the number you anticipate having as your business grows. Ask to see formal documentation regarding the software's scalability and any testing that can substantiate vendor claims.
If this article had been titled "11 Questions to Ask," the last question would have been this: Must I implement all the application's functionality at once? The answer should be no. BPM systems touch the entire enterprise. It is a big project - one that must be performed carefully. The best approach to implementing a BPM system is to address the most urgent business issue first, such as budgeting or financial consolidation. Implement additional functionality as needed and as resources allow.
There are several benefits to a phased approach. First, by solving the most pressing problem early on, you demonstrate the value of the system and gain organizational buy-in for other capabilities you plan to introduce later. Second, phasing the implementation enables you to deliver business benefits sooner than if you waited to introduce an entire BPM system at once. By delivering a group of new capabilities every 90 days or so, for example, you can create the momentum and excitement that is necessary to keep such a large project moving forward across an enterprise. Third, by starting with just a few capabilities, you give system users time to learn and become comfortable with the new technology, rather than overwhelming them with it. Creating this comfort level makes it easier to add functionality later and ultimately can reduce the overall training time required.
By implementing a business performance management system, organizations can improve their decision-making, enhance their ability to react quickly to change and increase the likelihood of achieving strategic goals. By arming yourself with these 10 questions, you can more easily work through vendor noise and determine which solutions are worth your further evaluation.
For more information on related topics visit the following related portals...
Best Practices/Benchmarking, Business Intelligence (BI) and Corporate Performance Management (CPM).
Michael Coveney is director of Extensity Business Services (formerly Geac Business Services), a group of domain experts that helps enterprises combine "best management practices" with technology to improve the efficiency and effectiveness of their performance management processes. He is a regular speaker at many international events. He is co-author of the book, The Strategy Gap, published by John Wiley and Sons and a course leader on corporate performance management with the American Management Association.