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Business Performance Management Solutions for Finance and Operations

Originally published December 4, 2005

Although the corporate financial group generally implements Business Performance Management (BPM) solutions, we have observed that business performance management can deliver the most benefits outside of finance. Many people are surprised by this conclusion. Our field experience has shown that operations can contribute the most to improving the overall health of an organization. This is true for both effectiveness and cost-savings with the help of a well-designed BPM solution.

While the idea that business performance management can deliver the most benefits to finance, it goes against common expectations. In fact, we have encountered several examples where companies recognized the benefits of applying business performance management to their operations areas. One insurance company purchased a BPM solution for departmental budgeting, planning and reporting. At the end of the budgeting phase, a purchasing manager asked about technology to help monitor and track suppliers. The purchasing group was in the middle of a software selection process and heard finance was using a tool, which could cross over to help them. Consequently, the purchasing manager contacted the BPM vendor and is now evaluating its software for his department’s use. 

Another example of BPM’s value was evident when a sales vice president and corporate president needed to track sales performance by individual sales account manager. They also wanted “what-if” functionality to model and monitor their individual sales representatives’ performance, which was done on a customer-by-customer basis. The BPM application significantly improved the accountability of their sales force. This was accomplished by allowing sales reps to log their hourly sales activities using a BPM solution that enabled analysis of productivity by day, client and product.

The importance of business performance management was also obvious when a large engine manufacturer needed to improve its warranty modeling. Additionally, this manufacturer needed to improve its forecasting of parts, suppliers, repairs, potential claims, estimated potential liabilities and impact on future cash outflows. This information is currently collected manually and is retained in multiple spreadsheets, which generally evolve independently and lose consistency with one another. The ongoing use of these massive-calculation spreadsheets is time consuming, prone to manual errors and does not allow real-time analysis. Having real-time analysis is particularly important, since it is needed for the fast response that can reduce overall warranty costs.      

A final example of this was illustrated when a quality analyst heard that his company’s finance group was conducting a BPM initiative. This analyst was able to replace an old manual scorecard procedure by developing a quality scorecard, using the latest BPM tools. This BPM solution perfectly met the company’s quality analysis needs.  Now, their quality scorecard consolidates in real-time, and provides powerful analytics and reporting. Companies or individuals with this type of BPM-enabled foresight could achieve competitive advantages by improving their quality, warranty, sales and purchasing. 

These BPM solutions today tend to focus on financial processes like budgeting, forecasting, consolidations or report distribution. Virtually all sales efforts from major BPM software vendors target CFOs, controllers and other finance decision makers. These people want to improve compliance, reporting, budgeting, consolidations, modeling and budgeting. Although numerous BPM solutions have built-in finance functionality (making them more attractive to finance), there is great potential in extending these technologies into operations.

Such successful BPM solutions, however, are not happening often enough. We seldom see an operations manager spearhead a BPM effort. Instead, a financial analyst, controller, or VP of financial reporting and planning with a final buy-in from the CFO driving the BPM project usually does this. This isn’t necessarily because the rest of the company is apathetic about performance. We rarely see the finance department invite other departments, such as a sales VP, inventory manager, or purchasing director, to participate in a BPM initiative. Whereas the CFO is focused on efficiencies in finance, the staff often labors through manual loading and consolidation of budget, forecasts and actuals. Every day, the CFO sees expensive personnel plagued with re-keying errors that contribute to late and sometimes incorrect reporting. 

CFOs and other finance executives must step forward and include all departments in a BPM selection process, preferably under the leadership of a C-level executive. Without senior sponsorship, it will be difficult for departments to improve their processes. But with a senior executive’s influence, the organization has a better chance of leveraging one unified BPM solution, instead of ending up with disconnected departmental solutions. 

Clearly, the communication between finance and operational departments must improve. As mentioned earlier, it was communication that encouraged the insurance company purchasing manager to consider leveraging the BPM solution that the finance department had successfully implemented. If that purchasing department had purchased its own BPM solution, the company would have paid more for training, maintenance, software and implementation costs. 

Operations unquestionably drive company profits. For their part, operational departments should give greater attention to the BPM initiatives occurring in their finance departments. Operational BPM systems, also known as Enterprise Performance Management (EPM) and Operational Performance Management (OPM) applications, have attributes similar to finance-oriented BPM solutions. All these systems help companies answer basic questions about their businesses: Are our customers satisfied? Are we shipping on time, early, or late? What are the inventory levels? Which products are most profitable? Which products are least profitable? What type of returns do we have? How many returns do we have? When these basic operating metrics are tied to a finance-centric BPM solution, a company will improve decision making and overall performance. 

If you plan on starting a BPM initiative, you should approach the operations groups and determine how information is accessed, reported and modeled. Discover what metrics, KPIs and scorecards are priorities to monitor. Then, you should see if modeling, planning, workflow and forecasting are required. If so, include them in your RFP and selection process. You may find a lot of common ground. Is your process of accessing information from ERP systems, transactional systems, and MSRP as difficult and cumbersome as in [pre-BPM] finance? Are your people suffering through extensive re-keying, lack of information security, static reporting and scattered Excel worksheets that rely on endless macros and links? Does your ERP, MSRP or transactional system provide sufficient accessibility? 

If you are in finance and have started a BPM project, invite operational personnel to learn about the implementation and the enabling technology. Help them understand how their operational drivers and KPIs can be consolidated and used in a new BPM environment.  Often, operations require increased data volumes and the complexity to include non-financial and unstructured data. Today’s BPM solutions can tie such information together and handle the increased data volumes. Additional customization may be required to add operational analytics, but the development effort is worthwhile. Integrating BPM throughout the company will leverage a standard technology set, reduce development and ease the maintenance. This will also lower dependency on IT by avoiding the problems of multiple disparate BPM solutions. Functional users in operations and finance will become more proficient with a cooperatively owned BPM solution. Metadata and data mapping can be leveraged. Training and workshops become a joint effort. Synergies are gained as new employees begin using the new BPM solution. Knowledge of the system will reside in multiple departments, creating less dependence on one power user or administrator.

When establishing a BPM strategy, review the entire organization’s need for information, budgeting, forecasting, ‘what-if’ modeling, scorecarding, collaboration and workflow. Identify the gaps in operations that a BPM system can solve. Taking the big picture approach to your organization’s BPM strategy will help ensure a higher adoption rate and better odds of reaching goals. 
Keys to Success: Include Operations in the Implementation Process
To ensure a successful implementation; you should deploy the BPM project in manageable phases with a sizable group of finance users, who are committed to working with the consulting partner. Those corporate users then become internal consultants. After working through each stage of implementation to gain knowledge of the technology and methodology; you’ll be positioned to help operations find similar BPM success. Ideally, you should choose an employee with strong functional and IT skills. Such an individual can help manage the project and bridge the gap between technology and operations.

As prototypes and deliverables emerge, invite operational managers to learn about the new BPM functionality and identify ways it can help their operational productivity and performance. You can also encourage sales managers, purchasing managers, supply chain managers or inventory managers to participate. Sketch a high-level design outline that focuses on their operational performance issues and creates a road map for development. Estimate the effort and internal resources necessary to implement an operational performance application, and compare it with other technologies in the market that seem like more targeted operational solutions. Finally, determine whether the effort to leverage finance’s BPM technology is justified, and if synergies between departments and communications will improve.

Including operations in a BPM initiative will alleviate the pitfalls of duplicating business performance management or business intelligence software efforts and expenditures. A common solution eliminates the creation of more islands of information. Today’s BPM vendors offer capabilities that can add tremendous value to operations. Companies looking to improve their BPM practices should include operations in the BPM selection effort. By doing this, these companies can reduce software license fees, support costs and training. They will also be able to improve corporate collaboration and decision making with a common BPM platform.

  • Bryan Wirthlin

    Bryan is the President of SandPoint Consulting, has more than eight years of experience with business intelligence and business performance management solutions. Bryan founded SandPoint Consulting. They specialize in implementing OutlookSoft CPM, a leading BPM software solution.



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