Business Performance Management

Business Performance Management

1. (BPM)

   • Refers to the business processes, methodologies, metrics, and technologies used by enterprises to measure, monitor, and manage business performance.
   • Three key components
     • 1. A set of integrated, closed-loop management and analytic processes, supported by technology, that addresses financial as well as operational activities
     • 2. Tools for businesses to define strategic goals and then measure and manage per- formance against those goals
     • 3. A core set of processes, including financial and operational planning, consolidation and reporting, modeling, analysis, and monitoring of key performance indicators (KPis), linked to organizational strategy
   • BPM is an outgrowth of BI and incorporates many of its technologies, applications, and techniques.

2. BI

   • The term BI now describes the technology used to access, analyze, and report on data relevant to an enterprise. It encompasses a wide spectrum of software, including ad hoc querying, reporting,
   • BPM is the convergence of BI and planning on a unified platform-the cycle of plan, monitor, and analyze

3. STRATEGIZE: WHERE DO WE WANT TO GO?

   • strategic planning process
     • Conduct a current situation analysis.
       • Determine the plan11ing horizon
         • Conduct an environment scan.
           • Identify critical success factors.
             • Complete a gap analysis
               • Create a strategic vision.
                 • Develop a business strategy.
                   • Identify strategic objectives and goals.
   • The Strategy Gap
     • Reasons for the "strategy gap
       • Communication
       • Alignmeut of rewards and incentives.
       • Focus.
       • Resources

4. PLAN: HOW DO WE GET THERE?

   • Operational Planning
     • Translates an organization's strategic objectives and goals into a set of well-defined tactics and initiatives, resource requirements, and expected results for some future time period, usually, but not always, a year.
     • Strategies
       • tactic centric plan
         • tactics are established to meet the objectives and targets estab- lished in the strategic plan.
       • budget centric plan
         • A financial plan or budget is established that sums to the targeted financial values
   • Financial Planning and Budgeting
     • Has a logical structure that typically starts with those tactics that generate some form of revenue or income.

5. MONITOR: HOW ARE WE DOING?

   • Pitfalls of Variance Analysis
     • focuses on negative variances when functional groups or departments fail to meet their targets. Rarely are positive variances reviewed for potential opportunities.
   • Diagnostic Control Systems
     • Is a cybernetic system, a process for transforming the inputs into outputs, a standard or benchmark against which to compare the outputs, and a feedback channel to allow information on variances .

6. ACT AND ADJUST: WHAT DO WE NEED TO DO DIFFERENTLY?

   • the process has five basic steps:
     • defining. quantifiable objectives of a marketing campaign or test procedure
       • executing. The campaign is designed to provide the right offer and message at the right time
         • tracking. Not only are response rates measured, but other metrics are as well, such as revenues generated by the incentive
           • evaluating. by determining the net value of the campaign and its profitability relative to other campaigns.

7. BPM METHODOLOGIES

   • Balanced Scorecard (BSC)
     • is both a performance measurement and a management methodology that helps translate an organization's financial, customer, internal process and learning and growth objectives
     • Process
       • 1.-Developing andformulating a strategy
         • 2.- Planning the strategy
           • 3.- Aligning the organization.
             • 4.- Planning the operations.
               • 5.- Monitoring and learning.
                 • 6.- Testing and adapting the strategy
   • Six Sigma
     • set of activities that transforms a set of inputs, including suppliers, assets, resources, and information into a set of outputs

8. PERFORMANCE MEASUREMENT

   • key performance indicator (KPI)
     • Strategy.
     • Targets.
     • Ranges.
     • Time frames.
     • Benchmarks
   • Operational Metrics
     • Customer performance
     • Service performa11ce.
     • Sales operations.
     • Sales plan / forecast.

9. APPLICATIONS

   • Strategy management. Strategy management applications provide a packaged approach to support strategic planning, modeling, and monitoring
   • Budgetiug, planniug, andforecastiug. These applications support the development of all aspects of budgets, plans, and forecasts.
   • Financial cousolidation. This type of application enables organizations to reconcile, consolidate, summarize, and aggregate financial data based on different accounting standards and federal regulations.
   • Profitability modeling and optimization. These applications include activity- based costing (ABC) applications that determine and allocate costs at a highly granular level
   • Financial, statutory, and management reporting. BPM applications require specialized reporting tools that can format output as structured financial statements.

10. DASHBOARDS AND SCORECARDS

    • Dashboards and sco1·ecards both provide visual displays of important information that is consolidated and arranged on a single screen so that information can be digested at a sin- gle glance and easily explored.
    • VS
      • Dashborads
        • dashboards are used at the operational and tactical levels. Managers, supervisors, and operators use operational dashboards to monitor detailed operational performance on a weekly, daily, or even hourly basis.
        • Feactures
          • 1. Monitoring. Graphical, abstracted data to monitor key performance metrics.
            • 2. Analysis. Sununarized dimensional data to analyze the root cause of problems.
              • 3. Managetnent. Detailed operational data that identify what actions to take to resolve a problem
      • Scorecards
        • Executives managers, and staff use scorecards to monitor strategic alignment ;nd with gic objectives and targets