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Corporate Performance Management

Originally published November 11, 2004

It has been said that there has not been an original idea in banking in the last 50 years. Well, I don’t necessarily agree with this, but there is one thing for sure. We all watch what others are doing, and we move in herds. This is most evident when it comes to technology. There are early adopters and slow adopters, but we all adopt.

The goal of this article is to identify the current trends in financial services, specifically around Corporate Performance Management (CPM) in banking. CPM is becoming a more commonly accepted term. The concept has been around for years—at least 50. In simple terms, CPM refers to the various ways in which companies measure their performance. This includes applications such as organizational profitability, customer profitability, budgeting and forecasting and scorecards. 

CPM originated in the finance department, but in recent years, as its value has been recognized it has moved throughout the organization. Marketing departments are using CPM to develop better products, assess the results of campaigns and to better understand their target market. Credit departments are leveraging CPM for better reporting and analysis and slicing and dicing portfolios in new and creative ways. Human resource departments are using it extensively to analyze the workforce and the impact of salary and related decisions. Furthermore, executives have near real-time access to key performance indicators, and they are able to interact and drill-down on data where they were previously confined to a static number on a piece of paper.

With Y2K a distant memory and with most financial services companies having recently upgraded their ERP systems, more and more of the technology dollars are going toward CPM solutions. Outlined below are some of the recent trends in CPM and where banks are and are not spending their dollars. 

  • Single Vender CPM—In the 1990s, SAP introduced the concept of one fully integrated system to support all aspects of your business. The concept was great and the expected financial returns were very large. After most companies, including banks, invested millions and millions of dollars some of these expected returns are finally materializing. In the early parts of this decade the CPM vendors targeted the same goal. One stop for all your reporting and analysis needs. Once again a great concept, but none of the CPM vendors have been able to meet this lofty goal. Eventually some will get there, but not in 2004 or 2005. Most financial companies have realized this and have decided to not wait or bet on promises of things to come. Banks are moving forward with selecting the best-of-breed toolset to address a specific problem.
  • Integrated Architecture—The technology advances in the last 10 years have been unfathomable, and as a result of this rapid change many banks have a technology footprint that include technologies that don’t communicate with each other and often leverage proprietary technology. Banks are realizing the numerous inefficiencies that this is creating and are now spending significant dollars to integrate these numerous applications and provide a common reporting and analysis platform.
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  • Customer—Customer, Customer, Customer. The more you know, the better strategic and spending decisions you can make. Most banks have realized that the Holy Grail is not a multi million-dollar CPM application, but banks have not lost focus on the need for understanding more about their customers. The hot areas are customer profitability, customer segmentation and target marketing. 
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  • Scorecard—We are in the middle of the second phase of the scorecarding evolution. Most banks introduced the concept in the mid-1990s. They did this with Microsoft Excel, Access and numerous other non-enterprise type technologies. Banks have seen significant profitability improvement since scorecards were introduced. These banks are now outgrowing their existing scorecard technology and are spending dollars to build a more scalable and dynamic scorecard environment. 
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  • Spot Solutions—IT is taking a stronger stance on not allowing the business side to implement solutions that don’t fit into the overall technology architecture. In the past, IT has not focused on CPM applications. Their concerns have been around the core transaction systems. IT has become tired of numerous requests from the business side for the same information in a slightly different format to support some new application. IT is now inserting themselves in these technology decisions and ensuring that the technology is an open platform that will fit into the existing technology architecture. 
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  • Value from Data Warehouse—Most banking data warehouses were funded under the promises of big returns. Reality is most of these data warehouses were built to support one specific application—most commonly credit risk. Management is now ready to recognize these promised benefits. Dollars are being spent to expand the use of the data warehouse across the organization—finance, marketing, BASEL II etc. 
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  • Reporting Tools—During the last two years there have been significant consolidations within the reporting tool software segment. Some of these mergers have good potential and others we are just waiting for the outcome. As a result, most companies are waiting for the mergers to settle. With every major reporting vendor currently going through an integration or new product rollout, the buying community is waiting to see who comes out with the best and most tightly integrated solution. 
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  • Push—This is in the early phase, but executives want their dashboard to push them the information they need to focus on, vs. either pulling the information or basic KPI reporting. There are more important variables to a business that can fit on one page or one computer screen. Having a dashboard with the intelligence to identify the important leading and lagging events and deliver it to them on a single screen is very appealing to many executives. 
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  • ETL—The late adopters are moving forward with ETL tool implementations. The early adopters have been leveraging tools such as Informatica, Ascential and Ab Initio for several years. The late adapters have seen the light and are quickly moving away from writing their own custom code. 
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  • Activity-Based Costing—The larger banks have gone through the pain. Having heard the stories, the regional banks are not quite ready to move forward. Everyone understands the benefit and power of this information, but currently there are simply bigger fish to fry. There are several good pieces of software that help enable this process. This software is actually pretty mature in its lifecycle. The issue is the human capital required to analyze and determine the appropriate business rules to apply. This requires not only time to analyze, but also time to sell and convince those impacted areas that the cost allocation methodology is fair and accurate.

As you move forward with implementing your CPM environment you will be faced with many decisions. You will have to develop the “one version of the truth,” you will have to adjust and validate that your tactics align with your strategy and ensure that this new information is being used for effective decision-making throughout the organization.  

This list above will continue to evolve and different solutions will come in and out of vogue. CPM solutions can provide you with insights into your company that you have never had before.  

The most important factor for any CPM effort is to have a vision and a roadmap that addresses what is important to your organization and helps achieve your long-term strategic vision. There is no magic CPM bullet that fits every company, but there are best practices and good frameworks for CPM that can result in successful projects.

  • Don Price

    Don Allen Price is the Head of Operations Finance and Management Information for Barclays’ United Kingdom Retail Banking Unit. Prior to joining Barclays, he was a consultant specialising in corporate performance management and business intelligence. 

 

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