Taking Enterprise Performance Management to the Next Level

Taking Enterprise Performance Management to the Next Level

What do you expect to get out of enterprise performance management (EPM)? Do you need to analyze the use of critical resources across your organization? 

Perhaps set some clear business goals using modeling techniques? What if there was much more to get out of EPM solutions? Here is how to take EPM to the next level. 

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EPM is Not Just for Finance

bigstock-Big-Data--88068335In the age of big data analysis, there is much more you can do with EPM and analytic software than just improve the operations of the finance department.  Most businesses that leverage EPM solutions install and deploy it only in the finance department.

While EPM is a powerful tool for financial reporting, planning and modeling, this is just a small fraction of what the software is capable of. EPM can gather and analyze useful information from across the enterprise — including production, finance, customer service, sales, and marketing.

To get the most out of your EPM solution, deploy it organization wide. 

Manage Products More Effectively

It’s no secret; every trained and skilled manager and executive knows it — a handful of your products are driving the bulk of your profits while the others are either ramping up or on the decline. It’s the 80 – 20 rule or Pareto Principle in action: 20 percent of products produce 80 percent of the profits.

The problem is identifying the 20 percent and making sure they are getting the right resources.  On the flip side, it’s also identifying the 80 percent and defining strategies to either increase revenue and profits, or manage them out of your portfolio. Among many other things that EPM software can do, it can help identify the 20 and the 80

 

Derive More Powerful Analytics

 

What kinds of analysis can EPM software deliver? An EPM solution can offer answers on revenue and spending trends, resource utilization, and bottlenecks in key business processes. Whether you need analysis and answers about the entire organization, a single department, or even an individual employee, you can use EPM tools to get those answers.

Using KPIs (key performance indicators), you can monitor key processes and determine where things need to be changed in order to improve the workflow and increase performance levels. 

Deliver Insightful Reporting

Host_Analytics_Modeling_Cloud_Grid_with_Chart_-_iPad

Do you need customizable reports? The right EPM software solution is capable of generating highly customized reports and interactive dashboards that provide a greater level of transparency and visibility into your organization.

This delivers deeper, more meaningful insight so you can identify areas in need of improvement quickly and easily. Better reporting also helps you create a fully traceable audit trail so that you can always be sure you are in complete compliance with any regulations your business operates under. 

Would you like to learn more about what a cloud-based EPM solution can do for your enterprise operations? Visit Planful for free videos on a revolutionary new suite of EPM software solutions.  Download this Forrester report on the latest trends in EPM.

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Understanding Analytics-Based Enterprise Performance Management

Understanding Analytics-Based Enterprise Performance Management

Though talk of Enterprise Performance Management (EPM) abounds, full understanding of the concept has not yet been achieved.

What’s important to remember is that EPM is not a completely new concept. EPM, which is often used interchangeably with the term “corporate performance management” or CPM, is actually an integration of sorts with several existing methods of business management that most executives are already familiar with. 

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EPM is essentially a combination of the concepts of strategy maps, balanced scorecards, profitability management, activity-based costing principles, driver-based budgeting, and a few others. When you are a CFO, everyone looks to you for all the answers. EPM is a method to glean deeper, more meaningful insight by collecting and aligning all of the data from various software and applications and combining it for a richer, more comprehensive view of the status of the enterprise. 

EPM is More Than Mere Statistics or BI 

Analysis-Of-Information

Enterprise performance management is much more than just business intelligence or statistical analysis, and gives much deeper insight into the current status of the organization, as well as what the future holds.

Until now, CFOs (and other executives at the helm of large corporations) had a relatively small pool of analytical tools. Using spreadsheets and other more or less manual means, they could derive a bit of business intelligence using data analytics and statistical methods. EPM is a far more robust set of tools and techniques to work with. 

EPM involves gathering data from a wide range of disparate sources and combining the data for a fuller, more comprehensive analysis. The deeper, richer data lends to more robust analysis, including the ability to conduct predictive analysis to guide the business into decisions that do not only work now, but will also serve their purposes well into the future. A good way to look at the difference in EPM and ordinary BI is what kinds of questions you can answer using each method. Using BI, you can answer the question, “What happened?” Using EPM, you can answer the question, “What can happen?” 

Analytics-Based Enterprise Performance Management Includes Internal & External Data 

World-Globe

The data that goes into enterprise performance management is not just the internal data that belongs to the organization. It also includes as much external data as possible to give a holistic view of the situation. 

Naturally, the data that is lumped into enterprise performance management includes all of the internal data from spreadsheets, CRM software, marketing software, financial software, etc., but it also incorporates as much data from external sources as possible. External data can include historical data on financial markets, industry ratios and benchmarks, consumer information, etc. 

EPM gives you better insight into your organization, a better grasp on the future, and empowers you to improve processes, save on expenses, and develop an enterprise that is truly agile, despite its size. Would you like to learn more about EPM and how it can benefit your enterprise? Enjoy this free white paper, “Best Practices: ERP and Enterprise Performance Management,” courtesy of Planful.

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Beyond Budgeting – Are You Ready?

Beyond Budgeting – Are You Ready?

Many organizations are dissatisfied with their annual budgeting process.  Many even dread it.  Yet most organizations continue to support the annual ritual. 

Most, but not all.  A growing number of organizations are moving away from the annual budgeting process and finding better ways to plan and control their resources.

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Recently, I had the opportunity to attend the 2015 Beyond Budgeting Round Table Conference.  There, I heard case study presentations from a few organizations who have moved “beyond budgeting.”  They have successfully adopted rolling forecasts to create a continuous approach to planning and managing their resources. 

As a result, most of them either eliminated the annual budget completely or revamped the annual budgeting process to make it less onerous and more useful.  How did they get there? 

Evolution (vs. revolution) is clearly the preferred approach to moving beyond budgeting.

Beyond Budgeting Round Table Conference – 2015

The 14th Annual Beyond Budgeting Round Table (BBRT) Conference, held on June 17 – 19th in Austin, Texas, was attended by roughly 70 FP&A leaders and practitioners looking for help on how to improve the organizational budgeting and planning process.   The conference provided some useful insights.

BBRT Chair Steve Player kicked off the conference with an introductory briefing on the Beyond Budgeting concept and key principles.  The Beyond Budgeting movement started in 1997 with initial research & book by Jeremy Hope and Robin Fraser.  It was positioned as a way to rethink the entire performance management process and provide a better way to plan and control.  

The movement received a big boost after the 2008 global financial crisis, which caused every company to toss out its annual budget and rethink how it planned and managed resources. 

Since then, the Beyond Budgeting concept has steadily gained momentum, with increasing recognition in financial publications, such as CFO Magazine and the Journal of Accountancy.  In 1998, the Beyond Budgeting Round Table was formed as a community of practice, membership network, and extended community to evangelize the principles.  It now has two active communities in North America and  Europe.

Beyond Budgeting Principles

At the core of the BBRT is the recognition that running a business on an annual budget is flawed.  It’s a fixed performance contract that doesn’t adopt to changes in the economy or business.  The process drives bad behavior – including gaming and sandbagging by department managers.  Most organizations spend 80% of their time collecting and validating data and 20% doing value-added analysis. There’s something wrong with this picture.  The mix should be reversed.

Beyond Budgeting is driven by 12 principles that enable a more dynamic and agile approach to planning.  Here’s a breakdown of the most important principles:

  • Goals – set ambitious medium-term goals, not short-term fixed goals
  • Rewards – based on relative performance, not meeting fixed targets
  • Planning – continuous and inclusive, not top-down annual event
  • Coordination – dynamically, not through annual budget/planning cycle
  • Resources – make resources available as needed, not through annual allocations
  • Controls – fast, frequent feedback, not on budget variances

Revolution vs. Evolution

Organizations can take either a revolutionary or evolutionary approach to Beyond Budgeting. There were some cases documented in early BBRT research of success with the revolutionary approach.  In more recent BBRT research, though, the evolutionary approach is getting more traction.  This is especially true in North America, where they see more gradual adoption – starting with rolling forecasts. 

At the BBRT Conference, attendees got to hear some of these examples, including detailed case studies delivered by MD Anderson Cancer Center, Ossur, Dimensional Fund Advisors, Stanford Health Care, and Southwest Airlines.

In the case of MD Anderson, since they are part of the University of Texas and state-run, they must submit budgets to the State of Texas.  However, they recognized that the annual budget process was outdated, rigid, disconnected, and encouraged sandbagging by managers.  Now, they drive the annual budget off a rolling forecast.  Targets move as conditions change. 

At Stanford Health Care, they took an evolutionary approach to adopting the Beyond Budgeting principles by implementing quarterly rolling forecasts.  Then they eliminated the annual budget and revamped performance reporting across the organization.  They still, however, maintain a central committee to approve hiring requests.  They also maintain an annual capital budget. 

Southwest Airlines, which has become the biggest and most profitable US airline, has adopted a more continual planning process.  Here’s what their process looks like:

  • Mid-term plan – which is more strategic, with business area plans and 5-year financial forecasts
  • Annual operating plan – master plan for portfolio, which refines the mid-term plan, and includes a bottoms-up forecast from all areas, with targets and management incentives
  • Quarterly budgets – which is really a rolling forecast and refinement of the annual plan, aligns to quarterly goals, and reflects changes in the business/economy
  • Weekly flash reporting

Key Takeaways and More Information

My takeaway from the conference was that the evolutionary approach makes sense.  Many companies have already embraced rolling forecasts in some fashion. This can be a great stepping stone to eliminating or reducing reliance on the annual budgeting process.  You cannot change organizational culture overnight. Thus, paying attention to change management is important. 

Raise awareness of the problem.  Communicate your plans to change.  Involve everyone to get their buy-in.  Take a longer term view of the business and its intended direction.  Track and manage based on the right KPIs.  And at the heart of a smooth process?  Make sure you have the right technology in place to support a more dynamic planning process.

Want to learn more about beyond budgeting?  Visit the Beyond Budgeting Round Table website.

For even more helpful information, check out these Planful resources:

Best Practices in Rolling Forecasts

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