In October 2008, Apple CFO Peter Oppenheim commented that “visibility is low and forecasting is challenging,” which seemed to be a polite way of saying “We have absolutely no idea what will happen tomorrow.”

In June 2010, UPS CFO Kurt Kuehn reported that “normally we are very obsessive about building good and accurate plans, but as the recession dragged on we realized that trying to build a forecast was almost a waste of time.”

Apple and UPS were not alone in their struggles. From early 2008, with the collapse of Bear Stearns and the bursting of the U.S. housing bubble, through the bankruptcies of General Motors and Chrysler, much of the framework of modern management practice came crashing down. Corporate titans were humbled, strategies abandoned, budgets became obsolete on a daily basis, and the only certainty about any forecast was that it would be wrong.

Despite years of best-practice application and technology investment, most organizations were flying blind. The promised insight, agility, and flexibility of business performance management (BPM) solutions proved illusory at best; managers were forced into making major decisions with little or no credible information as to their future impact.

So what went wrong?

In short, the world changed and our management practices didn’t. During the boom years from 2002 through 2008, when sales and profits were growing and credit was abundant, this mattered little. But as the cracks emerged in the global economy during late 2007 and early 2008, the basic assumption that underpinned all management processes — that the past is an accurate predictor of the future — was found to be fatally flawed.

Over the last few years the world has been transformed from a series of loosely connected economies with reasonably predictable flows between them to a complex web of relationships where the global impact of local events is felt almost instantaneously. In relatively short order managers have had to respond to the impact of terrorist attacks in Mumbai; China’s emergence as the world’s second largest economy; oil rocketing to $147 a barrel and then falling just as fast to $35; a flu outbreak in Mexico that became a global pandemic in less than seven days; numerous natural disasters; and a global credit crisis followed by fears over sovereign debt, to name just a few of the seismic events that have destroyed the best laid strategies, plans, budgets, and forecasts.

Managers everywhere found that the traditional rules and processes that governed their actions were obsolete. The bedrock of the traditional management process is multi-year strategic plans, static annual budgets, quarterly forecasts, monthly reports, and — most dangerous of all — a compensation philosophy that’s as likely to reward failure as it is success.

We need a new manifesto for business performance management, one that recognizes that volatility, uncertainty and risk are here to stay. And we must implement behaviors, processes, and systems that allow managers to make effective decisions. At a minimum, BPM must apply the following rules:

1. Replace calendar-based management processes (five-year strategies, annual budgets, quarterly forecasts, monthly reports) with event-driven, real time processes that adapt and respond to events in the marketplace as they happen.

2. Explicitly address risk in all management decision-making processes. Consumer and investor confidence are crucial in good times as well as bad; witness the damage to Toyota and BP caused by recent missteps. Understanding the threats to an organization’s reputation and developing appropriate prevention and mitigation strategies is a key responsibility of management.

3. Embrace contingency and scenario planning techniques so that managers can continue making fast, confident decisions in volatile and uncertain times. Ask basic questions such as “What if our assumptions are wrong?” and “Under what circumstances should we abandon this strategy, plan, project or investment?”

4. Rather than focusing solely on cost reduction, create a flexible cost structure that allows expenses to be more accurately synchronized with increasingly volatile revenue streams. For example, adopting variable cost techniques such as leasing, outsourcing, or software-as-a-service can help you link expenses to the overall level of business activity.