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CPM Title (06)

See also:
CPM: What it is and how it is different from traditional approaches? -- Part One
CPM: Systems and Steps to CPM -- Part Two
CPM: 12 Best Practices in Implementing a Solution -- Part Three
CPM: Selecting the Right Technologies -- Part Four (A)
CPM: Selecting the Right Technologies -- Part Four (B)
CPM: Selecting a CPM Vendor -- Part Five

          In this final article on the topic of CPM, we will take a look at some of the new emerging technologies and systems designed specifically to support the formulation, communication and monitoring of strategy.

          Software vendors of CPM solutions aim to provide integrated applications that support all of the basic processes of Corporate Performance Management (CPM) -- from the formulation of strategy, through implementation, monitoring, forecasting and reporting on progress. But for the most part, these rely on the collecting and reporting of measures either by some kind of table or in a graphical 'stop-light' format. Apart from the entering of budget/forecast numbers, many of these systems are basically reporting systems. What they lack is the ability of senior management to communicate organizational objectives and high level strategies to which operational managers can build tactical plans that have a clear 'cause and affect' relationship to those organizational objectives.

          Norton Kaplan in their follow-up book to The Balanced Scorecard The Strategy Focused Organization said this about management systems. "Organizations need a new kind of management system -- one explicitly designed to manage strategy ..."

          "Organizations today need a language for communicating strategy as well as processes and systems that help them implement strategy and gain feedback about their strategy. Success comes from having strategy become everyone's everyday job."

          The truth is that today's systems don't really meet the need for planning, communicating and monitoring strategy. For example, take a look at a typical management report that shows measures as rows and actual/budget figures as columns. -- typical of budgeting and reporting systems that are prevalent in business.

Figure 7A

           While these reports are great for telling us what happened, they are of limited value when it comes to managing the business. The reason is:

Bullet   They tell us what happened but tells us nothing about the actions or the relationships that produced them.

Bullet   They are predominantly about the past and provide little or no information about what needs to happen in the future.

Bullet   They are an accounting-based view of the world -- and not directly related to the activities of operational managers -- activities that determine future results.

Bullet   And finally, there is no way of knowing from this report if strategy is being executed or even how successful it has been in generating the results obtained.

          Managing performance is all about planning and managing the activities that support strategic goals. To manage the business, we need answers to these questions while planning:

Bullet   What are we trying to achieve?

Bullet   How are we going to achieve the goals?

Bullet   What actions need to take place?

Bullet   Who is going to be responsible?

Bullet   How 'balanced' is the plan in terms of business perspectives and priorities?

Bullet   Can the current plan be implemented in the timescale set?

           And as the plan goes into operation we need answers to:

Bullet   How well did the plan work?

Bullet   Were the tactical plans implemented?

Bullet   How successful were the tactics at achieving strategic goals?

Bullet   How did individuals contribute to the creation of shareholder value?How did the individual units contribute to the success of the plan?

Bullet    What would be the impact if some tactics are not completely implemented?

          The trouble is that most traditional systems cannot easily answer them.

          From a management perspective, there are a number of methodologies that can help organizations formulate, communicate and then monitor strategy. These methodologies move away from managing the business from an accounting view and instead focus on activities that support strategic goals. They do this by translating strategy into some kind of action plan that can be measured and monitored. These action plans are typically organized into 'cause and effect' which is important as it allows organizations to plan by considering actions and their affect on strategic goals. Some, like the Balanced Scorecard methodology breaks down the enterprise vision and mission into strategic objectives that can be categorized in various perspectives. Theoretically, there are 4 perspectives -- financial, customer, internal process, and learning and growth -- which are used to make sure that the plan covers all areas of the business that are essential for its survival.

          Software solutions for these methodologies tend to focus on the reporting of these measures and not the enterprise development and communication of the plan. But things are about to change.

          There are new kinds of software tools designed specifically for the enterprise development, communication and monitoring of strategy. They enable senior management to define corporate objectives and overall strategies, to which operational management can then build supporting tactical plans to achieve those corporate goals.

          Once built, the plan can be assessed for overall 'cause and effect' viability and can be modified as required throughout the year. These tools have very innovative and intuitive ways of communicating and visualizing the plan. They complement the existing functionality of a CPM system by combining the numerical reporting of budgets and management reports with an intuitive way of visualizing the actions that support those results. In so doing they are able to provide answers to questions that traditional budgets and reports typically cannot answer. Answers such as: What actions are needed to produce the desired results; what actions actually took place, and were those actions effective.

Figure 7B

New software tools that provide a clear linkage between
strategic goals and detailed operational plans

          These systems come with a range of reports that allow plans to be viewed from multiple perspectives. These reports show whether the plan is working and the status of individual tactics. They show the affect that those tactics have on achieving corporate goals and allows those accountable to see how well they are performing.

          In addition to the 'cause and affect' relationships, the 'plan objects' can hold a range of information including start and end dates, the person responsible for delivering the goal, notes, attachments and 'drill-thru' linkages to traditional reports and analyses.

          In summary, these new management tools that focus on 'caused and effect' relationships are set to change the way management formulate, plan and monitor strategy. And when used in conjunction with CPM systems they provide management with an effective tool in which to manage corporate performance.

About the Author:

Profile of Michael Coveney

Email: mcoveney@comshare.com

See also:
The Strategy Gap: Leveraging Technology to Execute Winning Strategies
Michael Coveney, Brian Hartlen, Dennis Ganster and David King
John Wiley & Sons, 224 pages, US$27.97 / 22.98 (Amazon.com)

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