BPM Is Born: Integrating Information On Demand

As the '90s drew to a close and organizations continued to innovate, many added to their management reporting a level of detail that had not been achievable before. The number of operational metrics they included in performance management analyses gradually expanded. Along with the gathering of this additional information came the need to analyze it -- and eventually the challenge of limiting the information to a small group of key measures that managers could act upon.

InTuition Inc., a company that originates and administers student loans, won a Vision Award in 2000 in recognition of its operational reports, which reflected both companywide and business-unit metrics focused on Balanced Scorecard objectives. The company tailored these reports to data needs at the individual level and then channeled them digitally to the appropriate people. It made a conscious effort to limit the amount of information it pushed out regularly, but it provided managers with online access to analytical tools with which they could drill into the details they wanted to see.

This approach to reporting built on earlier developments in the effort to align goals companywide. Starting in the early 1990s, several leading companies explicitly linked their corporate strategy to their annual planning and financial budgeting processes. Hewlett-Packard and Texas Instruments were two pioneers of such a linkage, effectively creating an end-to-end loop of strategy, forecasting and planning, budgeting, and management reporting processes. Separately, some executives were working with their HR departments to develop new ways of aligning individual performance with business plans and budgets, an area in which management by objectives (MBO) had failed. In 2001, transportation services and logistics provider NTE became the first Vision Award winner to clearly link strategic objectives with reports that provided relevant, actionable information by which to gauge performance against those objectives. Soon afterward, Best Buy, Covenant Healthcare, and Zebra Technologies also won, in part by aligning their performance measures with strategy.

Another major commonality among Vision Award winners early in this decade was their ongoing drive to improve the accuracy of business forecasts. Best Buy, which focused heavily on leading indicators, used them to correctly predict the full extent of its sales slowdown in late 2002 and managed to cut costs rapidly enough to increase operating income for that year. Vermont Castings, a finalist in 2002, created a BPM process that revolved around the critical need to accurately forecast sales in the highly seasonal market for indoor fireplace and outdoor grilling products. Vermont Castings' finance department worked with its field sales teams to improve the accuracy of their product-sales and customer-mix projections. By increasing the accuracy of its sales forecasts, the company delivered production and working capital efficiencies, which led to more predictable margins and supported a higher P/E ratio for its stock.

Around the year 2000, widespread integration of the 1990s' advances in financial and operational reporting with the development of strategically aligned objectives created BPM as we now know it. As a result of the trend toward integrating planning and reporting, our contest was changed to reflect this new "business performance management" orientation.