Value Orientation: Where Companies Are Going With BPM
If you read enough, or talk to enough people, you may begin to think that business performance management (BPM) is some sort of new government regulation. The business press has extensively chronicled the concerns of people who spend more time worrying about their subpar budgeting and financial reporting, or figuring out how to avoid making changes, than planning how they can better drive value for their business. There seems to be a lot more talk than action when it comes to BPM, so it's easy to overlook the many companies that are quietly and purposefully moving forward in the pursuit of sophisticated and efficient performance management. Armed with specific strategic needs and operational imperatives, these companies are not only improving their internal controls structure, they're also improving shareholder value.
Article Tools
Resource Center
Access white papers, product demos, and presentations from companies whose reputations have been built on helping BPM practitioners get the most from initiatives.
- BPM 101: Selecting a Business Performance Management Vendor" -- new white paper from BPM Partners
- "The Finance Challenge of Aligning the Business With Strategic Goals," a podcast featuring Palladium Group's Phillip Peck
- Ventana Research white paper "Decision-Making and Performance: Improving Essential Business Analytics and Technologies"
- “XBRL at a Glance,” white paper from XBRL US
advertisement
Looking at exhibit 1, it's easy to see why so many companies have been distracted from the pursuit of better performance management. For more than a decade, although articles have been written and seminars conducted about the benefits of one BPM derivative or another, external events have been diverting attention away from performance management. Companies have been thrashing around in survival mode. But if you believe in leading indicators such as the level of corporate merger-and-acquisition activity, the number of IPOs, and the quantity of capital reported to be on the sidelines, you know that the time has come to once again focus on value.
Moving From Survive to Thrive
The capabilities and mind-set developed through a BPM implementation are key to shifting a company's focus from surviving to thriving. Not surprisingly, then, a February 2005 Alvarez & Marsal study of large companies' priorities shows that BPM is an important development initiative for leading organizations today. When we asked respondents to identify the top improvement initiatives of their senior finance team, the four most common answers all point toward the growing importance of BPM (see exhibit 2 below).
The third and fourth choices -- improving transactional processes and upgrading controls, respectively -- are initiatives that companies undertook last year to get through the Sarbanes-Oxley test. Most organizations initially deployed a lot of detective controls because those are easy to conceive and implement. After rolling them out, though, managers found that they had a lot of redundancy and only spotty coverage in some key risk areas. In addition, detective controls are challenging and expensive to maintain. As a result, many companies are moving toward establishing preventive controls and embedding them in traditional business processes to simultaneously gain an operational advantage and achieve stronger governance.
BPM is a logical place to start. Implementing a single software system in which managers throughout the company do budgeting, forecasting, and both internal and external reporting carries obvious benefits for compliance efforts. In fact, many view BPM as an über-control. If an organization can set a firm plan and monitor progress carefully -- i.e., if it has a comprehensive and effective BPM system in place -- then it stands to reason that the company will more readily discover events which drive unusual results.
The second-most-popular initiative among surveyed finance teams is upgrading the organization's financial management capabilities. Companies have come to realize that they need savvier people who can work constructively with business groups to establish better financial controls, awareness, and accountability. Finance departments are creating new positions that move finance staff closer to the action and provide business teams with a direct contact who can deal with financial issues and ensure that financial objectives are well-considered.
The only improvement initiative that is a higher priority for senior finance managers than either staffing concerns or sustainable Sarbanes-Oxley compliance is improvement of corporate plan-to-measure activities. Exhibit 3, below, shows that among respondents who said that plan-to-measure activities are a top improvement initiative in their organization, the highest proportion consider planning, budgeting, and forecasting to be a priority. However, exhibit 3 also shows that many companies are focusing attention on improving their management reporting and analytics capabilities.
The survey's finding that organizations are selecting different jumping-off points for moving into performance management is borne out by what we see happening on the street. Each month, we see scores of companies take a step forward by aggressively pursuing a targeted BPM initiative. Unlike broad BPM implementations undertaken with only a vague notion that they're needed to keep up with the competition, purpose-built initiatives generally have the sponsorship to be seen through to completion -- and the focus to end on time, on spec, and on budget. Having a clear starting point, with an overall plan in place to guide future BPM development, appears to be a critical success factor for these initiatives because the expectations are bounded and the development activities are acutely focused.
