Business performance management helps link strategic planning objectives with key operational outcomes and is key to effective strategy execution.
Globally, organisations are facing multiple challenges around managing the complex issue of business performance. They are rethinking their business performance management (BPM) framework to mitigate challenges such as insufficient actionable information, poor linkages between strategic and operational objectives, and inconsistency in financial and operational KPIs (Key Performance Indicators) across different businesses. Milan Sheth, Partner and Technology sector leader shares his thoughts on enhancing business performance management framework.
Business Process Management (BPM) framework
BPM is a framework that aims to provide focused information about the performance of an organisation by enabling access to actionable and reliable information via financial and non-financial metrics. This information is then used to effectively link strategic planning, annual planning, business performance reporting and decision analytics.
Organisations, today, are realigning themselves to a decentralised set-up that allows the CEO to take up a more strategic role. The CEO provides the overall guiding principles and goals for the organisation, reinforcing an organisation’s willingness to delegate more operational independence and strategic freedom to business units. Consequently, the decision-making at the group level focuses on funding, capital management, executive recruitment and taxation matters. Indeed, the group should be involved in decisions with a material impact on the overall strategy and characterised by long-range impact horizon. The centre is gradually getting involved in harnessing synergy. We believe that fostering a culture of innovation and accountability in an organisation is instrumental in unlocking synergies.
Our research suggests that most organisations leverage the Balanced Scorecard or similar approach (encapsulating both financial and non-financial metrics) in their BPM framework.
Typically, a BPM framework will include outcome metrics that define measures of success of an organisation’s strategy (say market share/market price). It is critical to link BPM framework to the group and business strategy.
This can be achieved by adopting a ‘driver-based approach’ which includes developing specific value driver trees for strategically significant focus areas that reflect the underlying strategy of the respective business. Identifying a common set of drivers also allows for sensitivity analysis at different levels of planning and facilitates ‘what if and scenario analysis. A BPM framework facilitates strategy execution since it is built to enable decision-making that makes the organisation’s strategy a reality.
Organisations are combining financial, operational and external performance information to gauge their performance and feed the insights back into the system to develop strategy. Adopting a driver-based approach identifies drivers that operate across dimensions and enable creation of flexible reports and dashboards. Dimensions allow operational and financial users to create custom views by various reporting attributes by leveraging consistent base data. These dimensions can represent hierarchies and support flexible and adaptive driver tree reporting.
Organisations continue to face challenges in aligning and customising the BPM framework to their strategic/business needs and are unable to use BPM to its full potential.
Tarun Satiya, Associate Director, Finance transformation has also contributed to this article.