At the second annual Business Performance Management Summit, held last fall, practitioners, consultants, academics, and vendors met to discuss critical trends in the evaluation, implementation, and administration of business performance management (BPM). The meeting included discussion sessions organized around three essential themes: people, processes, and technology. The following excerpts from those discussions demonstrate that although some organizations have achieved best practices in performance management, many continue to struggle to align their financial and operational budgeting, planning, and reporting.

The sessions were moderated by Andy Birch, director of product marketing, Americas, for SunSystems; Jim Brett, manager of sales and marketing operations for Cartesis Inc.; Susan Gershman, chief marketing officer for Longview Solutions; Tobin Gilman, director of product marketing for PeopleSoft; Kraig Haberer, global marketing director for SAP; Brian Hartlen, vice president of Geac; Robert Kugel, vice president and research director, financial performance management, with Ventana Research; Charles K. Muldoon, vice president of alliances for Cartesis; Kathleen Wilhide, director, IDC; Craig Schiff, CEO of BPM Partners; and Peri Pierone, vice president of vertical markets for SRC Software.

Craig Schiff, BPM Partners: Where are you in the BPM process? How would you characterize the BPM initiatives you've undertaken in your organization?

Alan Novick, Interpublic Group: We have about 800 operating units in 130 countries, and we're just finishing the rollout of our first global financial application. So we've finally achieved a common platform. The big question now is: What do we do with it? Are we developing tools for SEC reporting? Are we building tools for executive management dashboards? Are we going to focus more on operational management of the independent operating units? Depending on whom you talk to, they all have their own wish lists.

Eric Miller, Conbraco Industries: Developing the framework for how we look at the business has been the precursor to our evaluation of an enterprisewide system, which we're in the throes of doing right now. It's been very important to us to get alignment, in terms of everybody in the organization thinking the same way about managing the business.

Susan Gershman, Longview Solutions: Part of the big promise of BPM is its ability to integrate the strategic goals of the company with strategic business units and departments. How do you prioritize your projects? Is it to achieve this goal?

Miller: Historically finance has not played a very big role in our company. We're experiencing a bit of a metamorphosis right now, as we're managing by the numbers and metrics and we're seeing the value from doing that. For us the difficulty is determining what measures we want to publish. Which ones drive value? Right now, I don't know what I don't know until I get the information. Only then can I see if that information drives value. If we can then disseminate that and we can reduce inventory, improve product profitability, improve quality, and improve performance, then clearly we've created value, which is the goal.

Vaughn Alliton, Merrill Lynch: In larger organizations, there's a layering of complexity. While there are a lot of disadvantages to having different, disparate systems, in an organization like ours, you really can't have it any other way. Everyone has different needs. Senior executives need the broader view; individual managers need a vast level of detail. Your system needs to be complex enough so that the day-to-day work can get done effectively, but roll up high enough so that it supports the big picture.

Novick: You're touching on one of the greatest obstacles to BPM. I've got users in different management hierarchies with different needs, and they currently have whatever legacy systems they've developed. That's what they run their businesses on. But corporate keeps asking for more reports. How do I build something that meets the board's requirements, and regional management, and divisional management, and local management?

Sean Stubbs, IJ Company: We're going through a big culture change right now. We don't have a lot of money to spend on new systems, so we may be a step or two behind. The big thing for us is the culture change; right now, we're primarily finance-driven, and I'm concerned that our IT department is not on board. I don't know if they realize what role they play and how much of an impact they will have on our success with BPM moving forward.

Andy Birch, SunSystems: I think that's a common issue, unfortunately. With many organizations we work with, IT seems to have their own agenda. BPM may need to be driven by finance, but as a partnership with IT.

Karyn Houle, Zarlink Semiconductor: It is critical that IT and finance have a tightly linked relationship and that the priorities of the two groups are aligned. This serves to avoid a situation where different business units are able to source their information from different groups.

Terrence Hobdy, BPM Solutions: Some major pain points as they relate to BPM are more specific to change-management-type activities. For example, a clear definition of BPM, an effective communication program, and buy-in at the senior level within the organization are keys to success.

Bill Primerano, Cadbury Schweppes Americas Beverages: The reality is, you need an executive sponsor who's behind it all the way. With a company like ours, that's grown by acquisition, there are always subcultures and pockets of resistance to change. You need that senior executive push -- especially from the CFO -- to make enterprisewide BPM a reality.

Bill O'Connor, Zarlink Semiconductor: It's intuitively obvious to executives when you move from 200 applications to 100, or from 100 applications down to five or 10. So that's not really the challenge. The real challenge is changing the way you operate. Because in many cases, these are homegrown applications -- a green one for the plant in Sweden, a red one for the plant in the U.K., a blue one for the plant in Germany -- and their business processes are built around these disparate systems. The really hard part was working through the business process challenge. Once the business processes were standardized and we came up with key drivers in each location, it was much easier for us to create a single datamart for our information.

Brian Hartlen, Geac: What strategies would you employ to get executive sponsorship on projects where buy-in enterprisewide is a real issue?

Scott Carlson, Hooker Creek Companies: Hooker Creek is a privately held company, and although we are smaller than other companies around the room, we deal with many of the same issues, which are not any less complex. Overcoming strongholds within the company is a big challenge to our BPM initiatives. It's typical self-preservation with people. Executive buy-in may be the first step; however, getting buy-in from everyone is the endgame, and I don't think they necessarily follow each other. Once we went to centralized accounting and data warehousing, we began to break up the information strongholds. We then focused on gaining early successes, working first with groups that were open to the new processes. These successes bred more successes, and the momentum built from there.

Tobin Gilman, PeopleSoft: Finance is usually ready to jump on board right away, but others can be slow to follow. Once you're able to bring your data all together, you've established the infrastructure. Some groups will gravitate to BPM much more quickly than others. Then you get some who can access all their data much more readily than other groups; what takes them three minutes takes other groups two weeks. Others see that and want to replicate it. You want to get immediate wins first. Find a high level of business pain, get results, and go from there.

O'Connor: You're right. You have to be a realist. If you apply the big bang theory and try to get it all done over a period of two to three years, it won't survive. We cut our projects into 90-day chunks. We focused on a critical area, where the information was discrete and available. We captured the necessary information and produced tangible analysis reports, all within the 90-day time period. Early on, we delivered the most critical report. As a result, we gained a lot of credibility in the company because everyone recognized we were delivering tangible evidence of success.

Kraig Haberer, SAP: Let's talk about your approach to the compliance issue. Is your organization just trying to merely comply with the Sarbanes-Oxley Act, or are you trying to leverage your approach to provide maximum long-term value?

Novick: Sarbanes-Oxley has taken a lot of heat in this country, but for us it was a blessing. It was the stick we needed. We needed controls, but they weren't a high priority. Sections 302 and 404 changed all that. But at a company like ours, data transparency is still a huge issue, as we're a holding company; we're made up of a lot of operating units that actually compete against each other. What do you share for transparency's sake, and what do you protect for competitive reasons? It's a tough balancing act.

Bill Radel, University of Rochester: We are not directly affected by SarbOx, but because of its influence we're undergoing an internal audit right now where we're looking at individual internal controls. It's self-initiated, but it's to meet the standards that we now assume are standard operating procedures -- best practices, if you will -- for businesses today.

Novick: There's so much pressure on getting everything done that there's a risk of really burning everybody out. You can see it and feel it because it's gotten to the point where people are asking, "What's our priority today? We've got so much to do, what needs to be our priority?" I even see it with external auditors. So the question is: Where do we go from here? After working 24x7 at 120 miles per hour to comply, does leveraging our compliance infrastructure become a high priority?

Peri Pierone, SRC Software: Is there a commonality of objectives across the various businesses that your company is in?

Carlson: Sure. This goes to the idea of different versions of the truth. Accounting and finance look at our objectives from a financial standpoint, but BPM encompasses a lot of nonfinancial measures. The question then becomes: How do you quantify these measures? Quantifying and defining nonfinancial measures with compensation incentives makes perfect sense. Where we have been able to do it, we've had terrific results. But it's difficult to do.

John Colbert, BPM Partners: Prior to rolling out compensation plans tied to measures, organizations need to ensure that the right measures have been selected, that there is organizational buy-in to the measures themselves, and that trust exists in the systems that track them. If these initiatives are rolled out prematurely, there is risk that the company will not embrace the overall plan and alignment may fall short of objectives.

Charles Muldoon, Cartesis: Many in the finance space still use Excel to manipulate data once it's been collected. Is that still the case? Or are you using OLAP and other types of reporting tools?

Edward Feinberg, Consultant: The proliferation of spreadsheets is a vexing problem. It is hard to imagine a BPM package providing the kind of flexibility and ease of use that a spreadsheet provides. But it is also hard to live with a system that is nearly impossible to document or audit, is not properly secured, and winds up dispersed in pieces on multiple hard drives. It seems to me there are two options. One is to build a system through a rigorous process that incorporates all the functions of BPM. The second is to systematize the use of spreadsheets.

Corey Baker, Volex: We learned the hard way with Excel. Even after implementing a new budgeting and forecasting tool, users were still just taking the data and throwing it into Excel. Too many people inside and outside of finance have been using Excel for too long. It's a tool they're comfortable with.

Janet Gose, American Century Investments: Excel is already ubiquitous, easy-to-use, and you can do a lot these days in Excel. It's not going to go away. Using Excel as the front end to your database has some significant advantages, regardless of what some applications vendors may tell you.

Michael Zola, Porter Novelli: Yes, but there are limits. When you have a lot of data, to drill down to the level of detail required can be very frustrating for all parties involved. And because of SarbOx, Excel is less of an option.

Feinberg: All-in-one systems are the holy grail of BPM. Progress in this direction has been impressive. Competition and consolidation of vendors of BPM systems have resulted in a number of choices that provide consistent, standards-based modules that address most major parts of budgeting, planning, and financial systems. Yet it's unlikely that a do-it-all solution will emerge covering the whole fiscal area. Building one would require a thorough understanding of the functions, relationships, and communication of each of its parts. Moreover, the system would have to be capable of working in each of the fiscal areas: budget, business planning, tax, risk, economics, business development, strategic planning, and executive management. The spreadsheet will continue to support components of the fiscal function -- and, hence, BPM. Spreadsheets are expected to remain part of the mix and should be included in BPM design and execution.

Kathleen Wilhide, IDC: Are you getting a return on your BPM technology investments?

Sylvie LeBouthillier, Bombardier: We measure ROI, but the soft benefits are probably the primary benefits of our BPM initiatives.

Brian Dobie, GMAC: As far as the ROI goes, it's hard to quantify. But we have tremendous opportunity for soft ROI. The problem is: Can we sell the soft ROI to get the buy-in we need to keep the project moving?

Radel: For BPM to be really effective, you have to combine both the financial side and the operational side. There has to be a connection between the strategic plan and the key deliverables of the information you're collecting and presenting. Even a qualitative, process-oriented initiative can provide significant payback, as it provides for a culture that more completely aligns the organization to work toward common, strategic goals.

Baker: While it's great to pursue ROI, we also have to live on a day-to-day basis. We need to get out of the mentality of justifying initiatives only from the tangible perspective of their potential payback. Instead, we should be asking ourselves, "How does this help our process?"

Patricia Beaumont, University of Rochester: The organizations that are establishing best practices in BPM aren't driven by technology or ROI. These organizations react to a unique and fundamental need with system and process solutions that get amazingly positive results. Whether it be the need to "slash and burn" or develop predictive analytics or develop metrics which the organization can seek to achieve and people can all be held accountable to, a common thread in successful BPM initiatives is the immediate provision of relief for a unique pain point. Done well, it can spread from there.

Robert McMartin, Circuit Research Labs: Typically, senior management is focused solely on the bottom line. But now we have other measurements. It's more than profits; [it's] how well you're aligning the organization with what you're trying to accomplish. Dashboards can keep you informed on how well you're aligning the organization through the metrics you track.

Natasha Goncharova, TnR Global: That's why metrics can be so effective, primarily from an operational point of view. They can help establish objectives that can collectively be pursued and met.

Robert Kugel, Ventana Research: Sometimes when you set up these metrics it's the law of unintended consequences, though. Did any of you find that there were some things you had to adjust?

Miller: Absolutely. The old saying "Be careful what you wish for because you might get it" applies. When your employees are all focusing and pushing in a specific direction, where they weren't very well focused before, there are ripple effects in other places. So you have to factor in as best you can the ramifications -- and the repercussions -- of managing by these metrics.

Patricia Asp, formerly of ServiceMaster Corp.: We created a very strong incentive for presidents, managers, and field supervisors to educate their field employees on how to interpret the dashboard and the metrics we track and pay incentive compensation on. Once it's understood that their livelihood depends on achieving certain targets, if you've got capable people on your team, they're going to get it done. Simple changes like these can have profound results.

Jim Brett, Cartesis: Is customer or project profitability an important consideration in your BPM initiatives?

Hobdy: Customer profitability is an important consideration for BPM initiatives. However, companies have to recognize how to effectively apply activity-based costing/management techniques to achieve these objectives. Having successfully applied ABC/M to measure customer profitability for over 14 years, I understand the difficulties with this type of approach. However, since many companies have not applied ABC/M effectively, they have truly missed out on the real value of this management approach to effectively measure and manage customer profitability. Perhaps an initiative around customer activity analysis can be applied across the company, without using the ABC/M terminology, while avoiding excessive detail. Additionally, customer profitability and ABC/M fit nicely with the development of strategy maps and a balanced scorecard. There are some excellent examples of companies who have successfully managed customer profitability with this type of approach.

Gary Reck, Resources Global Professionals: What about security and the overlap of controls? Private companies may not consider this a contingency right now, but can somebody comment on controls and security and how you're managing that with your BPM systems?

Richard Liscinsky, Information Strategists: Many businesses we consult with adhere to very strong controls to minimize information disseminated from the corporate offices to the field offices. "Transparency" is a nice buzzword and it's well-intentioned, but many senior executives feel that at some point it's counterproductive. Limiting information only to what's germane and relevant to the specific objectives is a key focus.

Miller: It's a delicate balance between information and control. You can still provide information without losing control. Most downline employees don't get any information typically. We don't give equipment operators raw sales data, but they see how we're performing against our objectives, and they can act accordingly. If we're not hitting our targets, they can assess what's their part in it and try to help improve performance.

Dobie: Sarbanes-Oxley is not calling for unrestricted data; it's calling for stakeholders in organizations to have access to the data they need to make informed decisions.

LeBouthillier: The whole idea about BPM that is implied is that when you consolidate disparate data, there are consequences. When you have multiple systems and everybody is running their own spreadsheets on the side and inputting data, it's very difficult to control the integrity and accuracy. To achieve alignment, you're really talking about a consolidated system that is completely integrated and effectively controlled. Many of the best practices that have been discussed here have shared this characteristic. They've achieved this "single source of truth" via a unique central point of information -- that is, no misinterpretations or modifications.

Reck: The cycle of centralizing and decentralizing financial and operational information is thankfully over, I think. Technology has caught up to the point where information can be centralized for control purposes but decentralized because everybody can have access to the data, if you want them to, no matter where they are.

The Event

Convened annually, the Business Performance Management Summit plays a critical role in building the growing body of knowledge related to BPM processes and technologies. The 2005 BPM Summit will be held at the Hyatt Regency in Old Greenwich, Conn., September 8 and 9, 2005.