But, how did you come up with that plan? Is it simply a percentage increase over last year’s numbers? Or did you derive the plan from a carefully laid out strategic business growth plan? The budget and forecast is only as good as the strategic plans it supports and is only one part of an overall corporate performance management (CPM) strategy.
Strategy Alignment
Many firms try to implement CPM from a tactical approach like putting in place a new budgeting system. But this is putting the cart before the horse. The tools that need to be in place must be selected and implemented in order to support the business goals and firm strategies.
A good CPM strategy links a company’s goals and strategy to the financial and operational plans that should be developed to drive execution. This is a top-down approach as it derives the direction of the firm from upper management and its stake holders.
With clarity of direction management can more easily implement business unit strategies that support the firm’s goals. With all business units aligned, the participants are all rowing the boat in the same direction.
Measure Results
Once goals and strategy has been defined at a firm and business unit level, a good CPM strategy has systems and methodologies in place that support the measurement of the results of the financial and operational plans.
To accomplish this, firms need to collect relevant data and present it in a manner that supports business performance management. But, CPM is more than just the technology systems that provide data. That data must be turned into actionable business information that can be evaluated and measured to see if the company is succeeding in achieving its goals and plans.
Key performance indicators (KPI’s) provide a means to drive this measurement process. Understanding the KPI’s that matter to your business and industry will provide a means to establish evaluation priorities. Measuring them regularly will allow you to manage the business and meet your goals.
Remember, that which we measure we can control.
Continuous improvement
One of the keys to business growth is the ability to continuously change and improve. A CPM strategy provides the framework for continuous improvement through periodic reviews and adjustment of the established plan.
This improvement begins with the management and employees of the organization. The establishment and reevaluation of employee goals that are aligned with business unit (and therefore, corporate) goals provide a foundation for evaluation and improvement.
Holding employees accountable for attaining realistic goals drives a business toward meeting its overall goals. As such, rewarding employees and management for their actions that help the firm meet its goals and strategy should be a firm priority.
Reevaluation and changes to company and employee goals and strategies will drive new plans that keep the firm moving forward and begins the CPM process a new. This is the natural evolution of business growth.
Benefits of a CPM Strategy
There are many benefits of a successful corporate performance management strategy. Here are some, just to name a few:
Improved agility so that you can take advantage of opportunities as they arise.
It provides one version of the truth so that data can be trusted when making business decisions.
The Finance Department can spend their time analyzing the business instead of gathering data
The firm can manage key performance indicators that matter so that a focused approach to business growth can be fostered.
The firms that are serious about growth must be intentional about their approach toward a clear alignment between strategy and performance.
If you would like more information about how to implement a successful corporate performance management strategy and the systems and tools needed to support it, contact us at Business Solution Partners.