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Analyst View: What makes your business tick?
And how knowing all about it could be a boon...

By Anthony Plewes

Published: Monday 18 April 2005

Looking to make your business more efficient? Corporate performance management, or CPM, could hold the answer. But what exactly does it mean and how can it help you? Anthony Plewes hears from three leading industry analysts.

Corporate performance management is a growing area of interest as companies attempt to get a deeper understand of what makes their organisation tick – and can be a great help in orchestrating programmes or projects that affect an entire organisation.

All performance management is in the eye of the beholder, however, and it can mean many different things to many different people.

Here are three viewpoints from leading industry analysts on how organisations can use CPM to become more successful.

John Hagerty, vice president of research, AMR Research
Many organisations use CPM as a catalyst for change. "Initiatives often start out in finance, but performance management often ends up creating a better understanding of what motivates the customer base or what drives the expense base," says AMR Research's John Hagerty.

From a top-down perspective, the best place to start in CPM is to measure the business so that senior management can understand where it stands. This knowledge can then be used for scenario planning, so that organisations can set their strategic goals. These goals can then be cascaded throughout the organisations into initiatives, which are then translated into projects and strategic programmes.

In practice, however, companies adopt a more scattershot, bottom-up approach. "Theory always says that performance management is dictated from the top down, but in practice it happens from the bottom up," says Hagerty. "Companies usually improve parts of the business and then pull them together into a broader programme. These little islands of improvement can be used to spread performance management throughout the organisation." Once the foundation is in place, the management philosophy can be added to the mix to accelerate performance management throughout the organisation.

CPM initiatives have a direct impact on projects and programmes throughout the organisation. For example, if the strategy is to improve customer satisfaction for 15 per cent, then organisations will typically start a customer retention programme.

For CPM to work there needs to be feedback loop from the programme back to the strategy to ensure that the strategic goals are being met. "Companies are looking for a more responsive way to measure these goals," says Hagerty. "Rather than relying on monthly progress reports, managers want to make changes on the fly and want to be immediately notified when a business metric is changed so that they can take action."

Companies do need to pay extra attention to what measurements drive this response. "People do tend to default to what is easiest to manage and this is often the financial goals," warns Hagarty. "They may have the numbers, but they might not tell you enough about the strategic status of the project." (continued on next page...)