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- What is the business value of performance management
practices and technologies?
- Since there isn't a single CPM application as such,
where do companies start?
- How do CFOs benefit from CPM?
- How does performance management increase a company's
economic value?
- How do the new CPM technologies link to "value"?
- How does Cognos approach corporate performance
management?
What is the business value
of performance management practices and technologies?
Corporate performance management offers value in two ways. First,
CPM rapidly aligns employees and their decision-making with corporate
strategies. When changes occur in the business, companies can swiftly
alter directions and pursue new opportunities. A constantly refreshed
view of gaps between where they are and where they need to be greatly
enhances the likelihood of reaching strategic goals.
Second, CPM offers applied business analytics broad enough to cross
organizational boundaries, but focused enough to highlight outcomes
linked to business processes. Business analytics enable a deepened
understanding of results, and offer a path to translate that understanding
into action for better net profitability. For example, analysis
of customer acquisition, retention, profits, and life cycle can
provide a wealth of insight to product design or marketing teams.
CPM delivers the most value when business analytics are employed
at the process or departmental level with a broad focus that enables
outputs to be rolled up for a higher-level executive view. The intersection
of bottom-up and top-down analysis ensures each employee has the
right information to pursue opportunities or-if necessary-change
strategies at the enterprise level.
Since there isn't a single
CPM application as such, where do companies start?
Many companies initiate CPM through a particular application such
as planning, budgeting, or forecasting; through a business need,
such as information management via scorecards and portals; or through
a business process, such as consolidation across legal entities
and business units for financial reporting. Packaged applications
can speed the path to CPM through any of these routes because they
are quite easy to procure and implement. But it's important to consider
a packaged application for CPM as part of a complete technology
approach. Applications must work together and make use of existing
investments such as an ERP platform. Applications for CPM should
also be able to capture all relevant internal and external information
on customers, operations, supply chain, and finance. By taking a
holistic approach to selecting a suitable packaged application as
an entry point, companies can help meet short-term needs through
best-of-breed applications, and help ensure long-term success by
utilizing a system of well-architected tools that can be supported
and maintained over time.
How do CFOs benefit from CPM?
Short-term pressure from regulatory and reporting requirements
is increasing the stress on CFOs who are striving for faster close
cycles, greater transparency into their financials, and a set of
controls that have been reviewed and tested in sufficient detail
to provide the comfort level necessary to sign off on results. CPM
is helping financial officers look at the entire financial reporting
cycle and make substantial changes to meet emerging requirements.
But automation is not innovation. It is just the first step toward
the broader capabilities that are much more important to the investment
community. Ultimately, CFOs will benefit from CPM by being able
to describe bottom-line-impacting drivers as they report actual
financials in depth, and project-with increased confidence-future
results under multiple scenarios. CPM's comprehensive view of key
financial and non-financial drivers, both inside and outside the
organization, will help CFOs teach the investment community about
the impact alternative business scenarios can have on corporate
results, resulting in a higher degree of confidence in a business's
ability to create economic value.
How does performance management
increase a company's economic value?
The goal of performance management is delivering the optimal mix
of results for both the current value of the company-say, the next
five quarters-and the future value of the organization-say, the
next five years. Creating economic value is not the same as creating
net income, which CFOs worry about over a one-year cycle. Economic
value derives from maximizing the current value of the enterprise
and then sustaining it through multiple changes in the competitive
environment. Many companies think too much about measuring and reporting
on the current value of the business, and think too little about
making capital investments that positively impact the future value
of their organization.
How do the new CPM technologies
link to "value"?
By using a suite of corporate performance management tools, organizations
can gain insight into current performance and-with increased visibility
into key metrics and the flexibility to quickly respond to changing
market conditions-more accurately predict future results. The end
result will be a more competitive financial operation yielding greater,
more sustainable economic value. While a vast number of companies
measure economic profit through financial metrics on a balance sheet,
many visionary CFOs are applying new technology to tie financial
results to the drivers that create economic value. This allows management
teams to distribute responsibility for balance sheet components
to individuals, and helps them decide how best to ensure optimal
growth. By coupling historical financial reporting with newly available
contextual and driver-based information, CFOs gain the unique ability
to understand why results are what they are, and what decisions
need to be made to increase economic value even more.
How does Cognos approach corporate
performance management?
The Cognos corporate performance management solution depends on
three interlinked capabilities-enterprise planning to drive performance,
enterprise scorecarding to monitor performance against plan, and
enterprise business intelligence to report and analyze issues for
maximum effectiveness. Cognos is the first vendor to deliver a comprehensive
framework for CPM by offering proven products that support every
part of the process.
In our approach to CPM, we see as critical the combination of
end-user control and the ability to deploy across the entire enterprise.
It's vital to regularly engage the people closest to the business,
giving those at the front lines a feeling that they are personally
connected to plans and performance. With Cognos CPM solutions the
executive team, including the CFO, can reach across the organization
and engage each department in the performance management cycle-planning,
budgeting, forecasting, scorecarding, analysis, and reporting. Cognos
CPM solutions help make it clear across the enterprise how individual
decisions affect other areas of the business and-ultimately-the
bottom line. The end result is that both management and line staff
can readily understand business goals, execute the plan to achieve
them, and measure and manage actual performance.
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