Saturday, April 23, 2005

What is Corporate Performance Management (CPM)

The companies, who want to adapt themselves to the changing competition conditions in a short time, support their improvement activities with various management types, information technologies and accumulation management activities. One of the management approaches is CPM. Could you please provide brief information about CPM?

CPM (Corporate Performance Management) draws together a number of existing, proven management approaches and combined they will allow the company to understand its current level of performance, and therefore take actions to improve.

The approaches or disciplines are Strategic Planning, Budgeting & Planning, Process Management, Scorecarding & Metrics, Compliance Management. i.e. the metrics, processes, roles and responsibilities all presented in a consistent coherent picture which everyone in the business can understand, with an auditable history of all changes.

It is expected that the demand for CPM will be increasing in 2005. Do you think there is an inclination to CPM solutions in today's environment? Could you give some numbers as an example to this increase?
Firstly you should consider Performance Management rather than CPM, as this term is more general. Various analysts and software vendors seem to each have their own version and acronym: BPM (Business P.. M.. ), CPM (Corporate P.. M..), EPM (Enterprise P.. M.. ) SEM (Strategic Enterprise Management) and so on.

We are seeing that there is significantly greater interest at the Executive Team to consider Performance Management overall, rather than as individual initiative or projects being delivered in isolation down in a business unit or department.

Another measure is the number of well-attended conferences. I now speak at 2-3 events per month on the subject of Performance Management.

There are niche analysts covering purely Performance Management, and all the major IT analysts, such as Gartner, Butler and AMR Research have dedicated analysts covering the area.

One final point, is that for some Business Intelligence software vendors CPM is seen as simply Planning and Budgeting for the Finance Department. This is far too narrow a definition.

Do you think the companies started to apply CPM in an efficient way?
Every company has a different driver (or catalyst) for starting to get a better understanding of the metrics, processes, roles and responsibilities in their business. Only once the basics are in place can a company consider CPM.

We are already seeing companies with fantastic benefits from applying CPM, and these projects have been delivered in less than 12 months. For example Lockheed Martin, the defence contractor, in the UK has reduced costs by $8m this year and expect year on year savings of $6m, and have identified process improvement savings of $21m. This has resulted in their contract win rate going from 30% to 100%.

The greater level of awareness, plus the improvement of the economy combined with strong competitive pressures is forcing every company to consider how it can improve its operational performance. And that is what CPM is focused on.

Time, cost and efficiency-based directing and monitoring are essential to achieve success of the projects that have been started by the companies, who want to adapt themselves to the competitive environment. What could be the difficulties that a company faces with during the realization of the strategies? How can a company overcome these difficulties?
With any initiative / project the challenge is getting the changes in working practices or improvements, which were identified by the project team, adopted or accepted by the rest of the company.

In the book we have a formula R = I x A2 where R is the result for the company, I is the initiative / project and A is Adoption of the changes suggested by the Initiative. Some people have said it should not be A2 (squared) but An where n=14. It is FAR more important to get adoption for a few key initiatives than no adoption on a huge range of disconnected initiatives.

For the success of the organisations, the ability to realize the strategies is as important as determining them. The research shows that only 10% of the companies realise strategies successfully. What is the most important reason for this?
I think that there is a real problem with company's ability to translate the strategy into a series of activities which are clearly communicated and can be understood at the lowest levels in the organisation. The strategies stay in senior management's heads, and the workers carry on as normal.

When the CEO says "We will be more Customer Focused", what does that mean for the Call Centre operator? Should they pick the phone up and smile, or give a bigger discount. The critical part is – "How to you want me to act differently based on the corporate strategy, and how am I going to be mesured".

The approach of hierarchically breaking down the top level picture of the business (the strategy) which is described in terms of metrics (outcomes) and activities to deliver those outcomes (processes) is THE way to communicate the strategy and turn it into reality.

Two of the reasons of project failure are not to spread the project deliverables amongst employees and not to connect the strategy to the people's daily operations. What must the companies do for the possession of the strategies by the employees? What are the benefits of the adoption of the project outputs and the strategy?
I think that I've covered the first part in the answer to the previous question.

The benefits of adoption are
- better staff morale (people know what is expected of them)
- more efficient/effective operation (people are doing the right things)
- the business is more agile (change to react to markets can be faster)
- can expand more easily (you have a blueprint of how the business works)
- alignment of strategy with day to day activities

If a company applies the CPM in an effective way would there be an increase on its profit?
Of course – that is what we are seeing from our clients in profit making industries. In non-profit making industries (Government) we are seeing reduced cost, or additional capacity.

Do you have any advice for small and medium sized companies? What do they have to do in order to increase their profitability? How must they use CPM?
The principles of CPM is relevant to large as well as small companies. It is is more difficult for an organisation with less than 75-100 employees, because they cannot necessarily afford to dedicate a full time project manager and part time project team to really make the project deliver. However, when we were only 40 people Nimbus adopted the principles and it has enabled us to respond to a huge demand from the market.

My advice is to start to apply the principles, no matter what size of company you have. It is is critical to appoint a Project Champion who is part of the Executive Team and who has the energy, vision and rive to ensure that the work is completed.


Anonymous Anonymous said...

Excellent, love it! »

12:45 PM  

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