A Personal Case Study: A CFO's Perspective on Business Performance Management
The Danish philosopher Søren Kierkegaard wrote, "Life can only be understood backwards; but it must be lived forwards."
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If the most ardent advocates of any new ideas are either those who've conceived them or those who've used them -- to their success -- then Iclassify myself in both camps when it comes to business performance management (BPM). As a finance executive who has dedicated her career to improving BPM processes -- as an auditor in a public accounting firm, an executive in private industry, and now as a member of several boards of directors -- I consider myself an accidental pioneer in some respects: Accidental, in that my expertise, like that of the BPM discipline, evolved as a matter of necessity, and pioneer because I've worked to introduce in a real-world way new methods of effectively managing complex businesses.
Aided by advances in technology, which have helped us achieve more accurate results in less time, executives like me have built a body of work that has come to be collectively known as BPM.
During the early days of this discipline, my peers and I developed tools and techniques to better operate and manage our businesses, especially in the area of corporate financial reporting. Today, BPM represents a significant opportunity for managers to achieve strategic business and financial goals. As businesses today must respond to a more challenging and complex business, economic, and regulatory environment, it is clear we are on the cusp of a new era in which financial efficiency and integrity require even more attention to process.
Understanding how finance and accounting processes have changed in the last 30 years provides an appreciation of the benefits of BPM, as exemplified in exhibit 1. During the 1970s and 1980s, mainframe-based multi-dimensional technologies drove decision support systems (DSS), which created rough models for future planning. Functional managers in finance, accounting, operations, and marketing were limited in their analysis to considerations of distribution channel, customer, and product line. The evolution of DSS into executive information systems allowed companies to analyze and evaluate their organizational strengths and weaknesses. By the 1990s, business intelligence (BI) accelerated developments and improved planning, reporting, and analytical processes. Greater data accessibility through client/server and now Internet-enabled technology has increased efficiency, yet challenged management in the areas of data integrity, uniformity, and control. As we move to an even more dynamic and open environment, balancing performance management benefits with controls becomes even more challenging.
BPM's Evolution Personified
My career in accounting, finance, and now consulting and as a member of boards of directors, has tracked the evolution of BPM. I've grown along with this important discipline, and applied the lessons I've learned from it to every new challenge I've taken on. As Kierkegaard suggests, being an accidental pioneer in all of this, I wasn't able to tie it all together -- nor to understand its significance -- until well after the fact.
Analytics' early days. In the early 1980s, while working as an auditor for a Big Eight accounting firm, one of my earliest BPM initiatives was a project I managed for Marshall Field & Co., the famous Chicago department store.
Department store sales depend upon maintaining the inventory the customer wants to buy. Although this maxim was well understood, the store's inventory management system was hopelessly antiquated and not even close to being accurate. All of the inventory valuation data was manually noted on long strips of paper that were taped to the backs of the same bags customers used. The inventory was valued using LIFO (last in/first out), which requires strict accounting of the different layers of cost from each quarter and for each category of inventory. The company maintained 21 different categories, such as towels, shoes, and fine art. Some of the inventory moved slowly and would be in the store for many months. Instead of having this information on a report from a computer mainframe or on a worksheet that merchandisers could easily analyze, the inventory values were treated merely as data, not as actionable, strategic information. Of course, human intervention and observation from walking the store would provide some input on what to offer the consumer, but if ever there was a need for improved processes, this was the case. The millions of sales transactions created the need for in-house accounting to develop and use DSS to analyze and control the business by distribution channel, customer, and product line.
