Where BPM Is Going

Best practices are always changing. Whatever term we use to refer to business performance management, expanding our capabilities in this area will be an ongoing journey. The past decade has seen tremendous improvements in BPM, as the Vision Award winners demonstrate. Interestingly, although many companies now have the processes in place to link thoughtful strategies with individual actions, weaknesses remain in the human interactions necessary to drive better performance through those processes. Currently companies' BPM efforts have many behavioral rough spots, and I expect this to be the subject of our next retrospective in a few years. I see the greatest opportunities for improvement in three areas:

The development of better strategies. When a company identifies the key drivers impacting its results and understands how to manipulate those factors, it is operationalizing strategy. Strong success in aligning plans with strategy begs the question: Was the strategy strong in the first place? For a significant proportion of corporations, strategy is not documented, agreed-upon, or grounded in marketplace reality and competitive positioning. For others, goals are set too high because they're devoid of the intellectual rigor required to deliver the desired results. Organizations that fail to meet their plans may find that their underlying strategy isn't what it needs to be.

The development of better strategies is the responsibility of the executive team, but battles over resource consumption, operational efficiency, and the business's ability to execute cloud the strategy question for many executive teams. Clarifying these issues with facts improves the quality of corporate strategy, and the performance analytics data that is part of many BPM initiatives is crucial in successfully defining and/or validating strategic goals.

Increasing collaboration in the planning process. When goals are set within a confrontational environment that pits middle managers against their leaders, the result is an inefficient series of negotiations. The plans that emerge from such a system tend to understate the performance potential of business units that might be able to excel, while placing unrealistically high expectations on other groups. The result is often underperformance of the former and disappointment in the latter. In contrast, plans that are developed in a more collaborative environment yield more commitment from the people who have to bring them to fruition.

To improve collaboration, senior leaders should take three big steps. They should approach planning as an open and honest, team-based process. They should decouple personal incentives from budgets. And they must make decisions about growth, profitability, and capital spending priorities before they ask managers to generate individual business units' budgets.

Improvements in the accuracy of business forecasts. Having correct expectations for the future is critical both in developing an operating plan and in managing performance over the course of the plan's time horizon, but a lot of organizations struggle to ensure that their forecasts are accurate. Although many businesses have dedicated a substantial amount of effort to improving their financial forecasting capabilities within the current reporting year, very few have yet addressed the accuracy of their operational forecasting or of their longer-term financial forecasting.

Improving the accuracy of forecasts requires a commitment on the part of functional leaders, who must begin sharing information openly and working through multiple iterations of their projections until they reach the desired result through trial and error. They can do so by leveraging fairly simple processes and tools, but their mind-set may have to change substantially.

I expect the process improvements of the past decade to serve as the foundation for many future breakthroughs in the ways individuals interact to deliver superior corporate performance. Although I've isolated these three areas as particularly promising, I look forward to being surprised as I judge future Vision Awards contests by the creativity of managers in the contestant organizations. Ultimately, the people on the front lines of BPM will be the ones who discover the solutions that will work to deliver value to customers and establish the best practices of the future.

John Pancoast is a principal with Experient Consulting. He's been a judge of the Business Finance Vision Awards since their inception. You can reach him at john.pancoast@experientconsulting.com