Business performance management is a set of management and analytic processes that enables the management of an organization's performance to achieve one or more pre-selected goals. Synonyms for "business performance management" include "corporate performance management (CPM)" and "enterprise performance management".
Business performance management is contained within approaches to business process management.
Business performance management has three main activities:
- selection of goals,
- consolidation of measurement information relevant to an organization's progress against these goals, and
- interventions made by managers in light of this information with a view to improving future performance against these goals.
Although presented here sequentially, typically all three activities will run concurrently, with interventions by managers affecting the choice of goals, the measurement information monitored, and the activities being undertaken by the organization.
Because business performance management activities in large organizations often involve the collation and reporting of large volumes of data, many software vendors, particularly those offering business intelligence tools, market products intended to assist in this process. As a result of this marketing effort, business performance management is often incorrectly understood as an activity that necessarily relies on software systems to work, and many definitions of business performance management explicitly suggest software as being a definitive component of the approach.
This interest in business performance management from the software community is sales-driven - "The biggest growth area in operational BI analysis is in the area of business performance management."
Since 1992, business performance management has been strongly influenced by the rise of the balanced scorecard framework. It is common for managers to use the balanced scorecard framework to clarify the goals of an organization, to identify how to track them, and to structure the mechanisms by which interventions will be triggered. These steps are the same as those that are found in BPM, and as a result balanced scorecard is often used as the basis for business performance management activity with organizations.
In the past, owners have sought to drive strategy down and across their organizations, transform these strategies into actionable metrics and use analytics to expose the cause-and-effect relationships that, if understood, could give insight into decision-making.
History
Reference to non-business performance management occurs in Sun Tzu's The Art of War. Sun Tzu claims that to succeed in war, one should have full knowledge of one's own strengths and weaknesses as well as those of one's enemies. Lack of either set of knowledge might result in defeat. Parallels between the challenges in business and those of war include:
- collecting data - both internal and external
- discerning patterns and meaning in the data (analyzing)
- responding to the resultant information
Prior to the start of the Information Age in the late 20th century, businesses sometimes took the trouble to laboriously collect data from non-automated sources. As they lacked computing resources to properly analyze the data, they often made commercial decisions primarily on the basis of intuition.
As businesses started automating more and more systems, more and more data became available. However, collection often remained a challenge due to a lack of infrastructure for data exchange or due to incompatibilities between systems. Reports on the data gathered sometimes took months to generate. Such reports allowed informed long-term strategic decision-making. However, short-term tactical decision-making often continued to rely on intuition.
In 1989 Howard Dresner, a research analyst at Gartner, popularized "business intelligence" (BI) as an umbrella term to describe a set of concepts and methods to improve business decision-making by using fact-based support systems. Performance management builds on a foundation of BI, but marries it to the planning-and-control cycle of the enterprise - with enterprise planning, consolidation and modeling capabilities.
Increasing standards, automation, and technologies have led to vast amounts of data becoming available. Data warehouse technologies have allowed the building of repositories to store this data. Improved ETL and enterprise application integration tools have increased the timely collecting of data. OLAP reporting technologies have allowed faster generation of new reports which analyze the data. As of 2010, business intelligence has become the art of sieving through large amounts of data, extracting useful information and turning that information into actionable knowledge.
Business Performance Management Software Video
Definition and scope
Business performance management consists of a set of management and analytic processes, supported by technology, that enable businesses to define strategic goals and then measure and manage performance against those goals. Core business performance management processes include financial planning, operational planning, business modeling, consolidation and reporting, analysis, and monitoring of key performance indicators linked to strategy.
Business performance management involves consolidation of data from various sources, querying, and analysis of the data, and putting the results into practice.
Frameworks
Various frameworks for implementing business performance management exist. The discipline gives companies a top-down framework by which to align planning and execution, strategy and tactics, and business-unit and enterprise objectives. Reactions may include the Six Sigma strategy, balanced scorecard, activity-based costing (ABC), Total Quality Management, economic value-add, integrated strategic measurement and Theory of Constraints.
The balanced scorecard is the most widely adopted performance management framework.
Metrics and key performance indicators
Some of the areas from which bank management may gain knowledge by using business performance management include:
- customer-related numbers:
- new customers acquired
- status of existing customers
- attrition of customers (including breakup by reason for attrition)
- turnover generated by segments of the customers - possibly using demographic filters
- outstanding balances held by segments of customers and terms of payment - possibly using demographic filters
- collection of bad debts within customer relationships
- demographic analysis of individuals (potential customers) applying to become customers, and the levels of approval, rejections and pending numbers
- delinquency analysis of customers behind on payments
- profitability of customers by demographic segments and segmentation of customers by profitability
- campaign management
- real-time dashboard on key operational metrics
- overall equipment effectiveness
- clickstream analysis on a website
- key product portfolio trackers
- marketing-channel analysis
- sales-data analysis by product segments
- callcenter metrics
Though the above list describes what a bank might monitor, it could refer to a telephone company or to a similar service-sector company.
Items of generic importance include:
- consistent and correct KPI-related data providing insights into operational aspects of a company
- timely availability of KPI-related data
- KPIs designed to directly reflect the efficiency and effectiveness of a business
- information presented in a format which aids decision-making for management and decision-makers
- ability to discern patterns or trends from organized information
Business performance management integrates the company's processes with CRM or ERP. Companies should become better able to gauge customer satisfaction, control customer trends and influence shareholder value.
Application software types
People working in business intelligence have developed tools that ease the work of business performance management, especially when the business-intelligence task involves gathering and analyzing large amounts of unstructured data.
Tool categories commonly used for business performance management include:
- MOLAP -- Multidimensional online analytical processing, sometimes simply called "analytics" (based on dimensional analysis and the so-called "hypercube" or "cube")
- scorecarding, dashboarding and data visualization
- data warehouses
- document warehouses
- text mining
- DM -- data mining
- BPO -- business performance optimization
- EPM -- enterprise performance management
- EIS -- executive information systems
- DSS -- decision support systems
- MIS -- management information systems
- SEMS -- strategic enterprise management software
Design and implementation
Questions asked when implementing a business performance management program include:
- Goal-alignment queries
- Baseline queries
- Cost and risk queries
- Customer and stakeholder queries
- Metrics-related queries
- Measurement methodology-related queries
- Results-related queries
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