Recent Trends in Business Performance Management

To explore the possibilities of "Business Performance Management" (BPM) we must first ensure we understand its definition.  Business Performance Management is a set of processes that assist organizations in optimizing their business performance. It is a framework for organizing, automating and analyzing business methodologies, metrics, processes and systems that drive performance. Corporate Performance Management (CPM) regards "all of the processes, methodologies, metrics and systems needed to measure and manage the performance of an organization," a concept introduced by Gartner Research in 2001. Operational Performance Management (OPM) is a performance management system that addresses the growing pressure to increase revenue while managing costs; meeting ever-evolving and expanding customer demands. CPM and OPM are subsets of Enterprise Performance Management (EPM), which represents the strategic deployment of Business Intelligence (BI) solutions.

Some of the characteristics of BPM are given below:

• BPM involves consolidating data from various sources, querying and analyzing the data, and putting the results into practice.
• BPM enhances processes by creating better feedback loops. Continuous and real-time reviews assist in identifying and eliminating problems before they grow. BPMs’ forecasting abilities ensure corrective action may be completed in time to meet earnings projections. Forecasting is characterized by a high degree of predictability which addresses what-if scenarios. BPM is useful in risk analysis and predicting outcomes of merger and acquisition scenarios, as well as in mitigation plans to overcome potential issues.
• BPM provides Key Performance Indicators (KPIs) that assist companies in monitoring the efficiency of projects and employees against operational targets.
• Most of the time, BPM simply means the use of several financial/non-financial metrics/KPI's to assess the present state of the business and to prescribe a course of action.

In discussing BPMs, one cannot overlook the relevance of BI. BI refers to technologies, applications, and practices for the collection, integration, analysis, and presentation of business information. It can also be used to describe the information itself. BI systems provide historical, current, and predictive views of business operations, most often using data that has been gathered into a data warehouse or a data mart. Occasionally BI systems draw from operational data.

Earlier BPMs focused almost solely on financial functions, but now BPM is reaching out to the lower levels of organizations and all the different functions. BPM is built on the foundation of BI and takes BI to the next level, actually giving it a context. While there are many BPM components, such as Consolidation, Score Carding and Modeling, Planning is the most critical because it promotes discipline within the organization. Companies are compelled to draw a line and say – "Here is what we are going to do in the next planning period." It is this planning that provides accountability at individual, department, and enterprise levels. BPM unites BI knowledge and value with the Planning and Control cycle.

Now that we have an understanding of BPM and its relationship with BI, we will consider the possible trends in BPM in the near future.

• Merging of BI with BPM: Historically, BI and BPM have been related but very separate disciplines. The big trend right now is the drawing together of BI and BPM. With the variety of acquisitions that have taken place over the past two to three years, it is becoming clear that the large players in this combined category are going to be joined at the hip and have deep technology infrastructure parts tied to high-level executive viewing capabilities.
• BPM Applications Going to a Wider Range of Users Across the Entire Company: This trend revolves around the importance of the company gaining competitive advantage to survive and move forward. BPM is now receiving unprecedented attention and is no longer the "necessary evil" that it was once considered. Companies’ strategic, operational and HR departments are poised to derive the maximum advantage. BPM is also being reviewed as a tool for streamlining processes, reducing costs, and collecting and analyzing data to support strategic workforce decision-making. This has led to many more people being involved in the BPM process.
• The Importance of Year-round Performance: Going beyond the annual or quarterly performance has become important because it is easier to achieve goals via monitoring them throughout the year, which greatly reduces the probability of year-end surprises. It is much more effortless to monitor the performance of Key Metrics on a daily basis than in the past.
• Alignment of HR Management with Operational and Strategic Goals of the Company: Increasingly, companies are focusing on "strategic HR," aligning human resources initiatives with the overall goals of the organization to improve business success. Aligning goals of Employee Performance Management with goals of CPM produces the following effects:
  • Linking reward and recognition programs to performance.
  • Targeting learning and development toward performance gaps.
  • Identifying skills and competencies of top performers for retention and succession planning.
  • Aligning employee goals with corporate goals.
• Off-the-Shelf Products and Customization: A large number of organizations are looking for an "off-the-shelf" solution to meet their BPM needs. Customizations catering to specific needs is proving costly and time consuming. This process takes up an abundance of executive time. To reduce the expense of customization and the labor involved, organizations are now willing to change their business processes to fit into the "off-the-shelf" products rather than the other way around. Moreover, there are some vendors with good "off-the-shelf" products like Centage (Budget Maestro), Prophix, Applix and Adaptive Planning. Some products provide hosted solutions such as Adaptive Planning to appreciably decrease both the initial cost and the cost of maintenance and upgrades.
• Software Consulting Services and its Importance: Companies have come to understand that technology itself cannot be the panacea to all the competitiveness and effectiveness. Technology demands the services of skilled implementers who will consider the existing business processes and requirements.

Lastly, why are more of the large companies and some relatively smaller companies not adopting BPM readily? What is stopping them?

You may have thought that with all of their resources and massive amounts of data these companies would have been some of the first to pick up on BPM. However, their very size has held them back. They have large numbers of disparate systems which may be spread territorially or globally. They also cope with politics around those systems, not to mention corporate bureaucracy and the simple inertia of being a large company. Senior Management must not only support the change, but own it as well. They have to consider all the personnel that may be affected, and for a large company that is often the problem. But this is changing and more large companies are expected to join the BPM bandwagon.

There are an amazing number of smaller companies (under 100 million dollars) making investments in BPM. Their focus tends to be on replacing the spreadsheet budgeting process and less on the strategic alignment aspects of BPM. One of the reasons more small companies are doing BPM now is that there is finally a good range of cost-effective options available. More large companies are poised to make investments in BPM as it becomes understood as important, unavoidable, and ultimate. More importantly, with all the acquisitions that have taken place over the last few months, the BPM market is undergoing a big change and reorientation. The battle for BPM market supremacy will be very interesting. The big players: Oracle, SAP, IBM, and Microsoft are set to dominate. SAP and Oracle in particular are trying to sell their entire platform gaining more customers in the process.

In conclusion, BPM can be viewed as the next generation of BI software. BPM will become more pervasive among most organizations.

Written by Bernie Akporiaye, Practice Manager