Five Top Tips for CPM

In a world where the traditional bases for competitive advantage have largely evaporated, corporate performance management (CPM) is emerging as a key approach for leading companies to guide decision-making and extract maximum value and competitive advantage from their performance data and information. These companies are doing much more than just collecting and storing performance data in large quantities; they are now building their competitive advantage around their ability to exploit relevant performance information and on their ability to act on the performance insights gained from it.

CPM is about managing and improving business performance, which, of course, is at the top of the agenda of senior executives across the globe. While businesses are pressing forward with CPM initiatives shedding blood, sweat and tears to put balanced scorecards, KPI dashboards, and business intelligence applications in place, there is mounting evidence that the execution of CPM is often too mechanistic, too number-focused and not integrated enough. As a consequence of this failure to execute CPM, many organizations are not seeing the desired performance improvements.

In principle, CPM should be easy: agree on your strategy, collect meaningful and relevant performance information, and use this information to gain quality insights that allow you to improve your strategy and its execution. So how can we move beyond the meaningless collection of data and metrics to a situation where we collect relevant performance information that helps us to learn and improve?

In this new series on corporate performance management, we discuss how to avoid some of the most common CPM traps and provide practical advice on how to turn your business into a truly performance-driven organization.

1. Do map your strategy

If a company wants to reach its goals, it must first know what those goals are. If the overriding strategy is clearly articulated, everyone will be able to pull into the same direction and will be more likely to focus on what matters the most, to produce real results. Research has shown that producing a strategic map outlining your value creation logic on one piece of paper can be one of the most important success factors in any CPM implementation. Such maps ensure strategies are focused, coherent and integrated and they allow easy communication of the strategy to all employees and external stakeholders. Important is that these maps include the outcome objectives, the core activities or core processes to achieve the outcomes, as well as the enabling elements and intangible drivers of performance. It is also important that these maps outline the cause and effect relationship between these different elements and how one supports the other.

Don’t just populate existing strategy map templates without thinking about your unique strategic objectives and their causal relationships. Strategic maps have to reflect your unique business strategy at this point in time.

2. Do collect meaningful information by asking the right questions

Without the right performance data, organizations would be stumbling around in the dark, having little idea of whether they were ‘on track’ or not. Yet, to be of value, performance indicators should help measure the things that matter the most. This means indicators need to be tightly and directly linked to the strategic objectives of an organization. In addition, performance indicators need to have a high information value (i.e. they have to provide you with information that helps answer your critical business questions). A new concept in CPM is called key performance questions (KPQs). KPQs are developed to identify the most critical performance related questions managers need to have an answer to. KPQs therefore ensure any indicator that is subsequently collected helps to answer a critical question and therefore has real information value. Best practice is to identify between one and three KPQs for each of your strategic objectives, before you start collecting any data or information.

Don’t just collect everything that is easy to measure.

3. Do ensure strategic alignment

CPM is more than just collecting performance measures based on your strategic objectives. It is about aligning key elements and processes of organizational management with your strategic objectives. This means aligning budgeting, the management of projects and programs, performance reporting, knowledge management and the management of risks with your strategic objectives. Top performing organizations are able to identify strategic objectives and ensure their budgets and projects are aligned to deliver on their objectives. In addition, they ensure that performance indicators are used to monitor performance and risks related to their strategic priorities.

Don’t run performance measurement, budgeting, project management and risk management in parallel to each other without tight alignment.

4. Do create a positive learning culture supported by analytics

Once organizations have collected performance information, they must analyze it before they can work out what it means and to gain insight into how they may need to change things to improve success against their goals. Knowledge is power – but only if it can be extracted quickly and efficiently from an ever-growing mass of data. Business intelligence tools provide the capability to convert performance data into relevant information and knowledge. The difference between good and bad information is determined by how well it supports critical decision-making. Without analysis that leads to insights and actions, any CPM exercise is of little or no value. Leading organizations now use their information to quickly and accurately answer their key performance questions. In addition, they put in place processes that create a positive learning culture in which performance insights are discussed and acted upon. A key to this are regular performance review meetings in which key individuals get together and discuss performance openly and honesty, where the results from the analytics are used to inform a dialog about performance, and where collaborative decision making leads to actions and performance improvement. These meetings are not there to look into the past or to fingerpoint at bad performance but to identify possible shortcoming in the future and to ensure actions are being taken to avoid them.

Don’t spend all your time and efforts on collecting and reporting data and not enough on extracting valuable and actionable insights from it.

5. Do automate appropriately

Having the right IT infrastructure in place and using it appropriately is a key success factor. CPM software applications facilitate data integration, process alignment, analysis and reporting to a level that would never be possible without automation. Major software vendors such as Oracle, SAP, IBM or Microsoft are focusing in on CPM and are starting to offer powerful and integrated solutions that enable companies to map their strategy, collect meaningful information, achieve alignment with budgeting, project management etc. and provide powerful analysis and reporting engines. However, these solutions only deliver benefits if they contain the right information and if they are used appropriately to improve decision making. It is important to understand that automation is clearly not the magic pill that will sort out all your CPM problems. Indeed many organizations are seen to implement CPM software only to find that, once the initial excitement had worn off, they are left with a costly IT system and a slow realization that CPM is not about technology but the people and their processes.

Don’t just buy a software solution without a clear understanding of how it will enable your CPM processes to drive better decision-making.

A lot of the dos and don’ts of CPM are based on common sense. Unfortunately, common sense is not always common practice and organizational realities often mean that we end up focusing on processes and individual parts of a larger jigsaw such as measurement and performance reporting instead of real performance improvement. Over the next issues we will look at each of the above outlined areas in more detail to provide practical tools and techniques to make CPM happen in your organization.

Bernard Marr is the Chief Executive and Director of Research at the Advanced Performance Institute – the world’s leading research and advisory organization on organizational performance (www.ap-institute.com). Marr is a global authority, bestselling author and acclaimed keynote speaker on strategic performance management. He can be reached at bernard.marr@ap-institute.com.