What is Corporate Performance Management (CPM)?
Corporate Performance Management (CPM) refers to a tool used by corporations to formulate organizational strategies through prescribed methodologies, data analysis, processing, and reporting to monitor and manage the performance of an enterprise. In other words, CPM helps corporations use proven and tested methods and processes to improve their business management.
Although CPM is described as a business intelligence and strategic management tool, its concept is pretty straightforward. For instance, it includes all collaborative efforts, successful performances, and failures of a corporation. This means that the CPM output is vital to the organization in ensuring it maintains its key metrics to improve its revenues and subsequently grow its profits.
Sources of Metrics for Building CPM
Information used in the creation of CPM metrics originates from books of accounts such as cash flow statements, balance sheets, and income statements. Other sources may include budgeting and forecasting data, which contain reports such as revenues, expenses, and inventory. Albeit, there are many relevant data sources that are not cited in this context, the fundamental goal lies in providing insights using processes like strategic financial planning, budgeting, scenario analysis, forecasting, financial consolidation, and data reporting.
It is prudent to caution that corporate performance management is not a strategy by itself. Instead, it is a compilation of intelligent business tools to measure the performance of a company. Therefore, companies should put in place viable frameworks to ensure there is actual performance management. Below are common frameworks.
- Balance Scorecards – A collection of several organizations’ viewpoints
- EFQM Excellence Model – A framework that bases strategies on how a competitive organization should operate
- MPO – Maps strategies or trends of how a business should be adapting to the changing global business experiences
- Six Sigma – A data-driven framework that ensures the successful operations of a company by eliminating defects by using a simple DMAIC (define, measure, analyze, improve, and control) approach
- Key Performance Indicators (KPIs) – Measures performance of the above frameworks
Human Performance Management (HPM) vs. CPM
Sometimes in corporate management, it is not apparent what strategic managers mean when they refer to performance management. A worst-case scenario is confusion between human performance management (HPM) and corporate performance management (CPM). However, there are distinctions between the two.
In HPM, performance management refers to a subset of human resources regarding employee turnover. It pertains to employees’ productivity, their level of satisfaction, or their operational capabilities. On the contrary, CPM doesn’t even outline or refer to employees anywhere. In fact, it is all about how to communicate, align, and deliver actionable strategies through strategic frameworks, as discussed earlier. Therefore, it’s important to clarify the context of performance management in the discussion.
How to Avoid Corporate Performance Management Pitfalls
When a company communicates effective performance management across the organization, it must draw critical expectations, as well as expected results. However, this does not always happen smoothly. As a result, CPM faces significant challenges that need remedies in the initial stage as outlined below.
1. Strategic alignment of major elements
This refers to ensuring that every part of the organization processes and all vital elements are aligned with the primary objective such as budgets, project and program management, risk management, etc.
2. Smart automation
A poorly executed CPM will mean absolute failure. That’s why a corporation should establish an accessible, elaborate, and appropriate ICT infrastructure to ensure information is easily integrated, processed, and reported as per proposed standards.
3. Goals synchronization
Companies should not just use existing strategies without even focusing on their unique strategies. They should instead focus on articulating their primary goals across the corporations so that CPM and all stakeholders are in line with the set strategies.
4. Collection of Key Performance Questions (KPQ)
Though derived from KPIs, KPQ is about collecting meaningful, relevant, and usable data by asking the right questions of the proper departments and sources.
5. Fostering a positive learning environment
Once data has been collected, analyzed, and interpreted, the next course of action is using the information in meaningful ways. That is, ensuring that organizations have empowered relevant departments to use, correct, and improve areas suggested by CPM metrics.
Importance of Corporate Performance Management Software
In the era of business management intelligence, it’s important that corporations embrace processes automation. Here are some of the benefits of adopting a CPM solution.
1. Real-time feedback
Performance management software has smart dashboards that contain every measurable metric a management team may need to use in its decision-making. However, the advantage is not in the variety. It’s in the ability to read and use data as changes happen in real-time across all parts of the organization.
2. Data consolidation for easy management
The tools have the intelligence to gather, group, and combine data from multiple sources, be it departments, spreadsheets, or even companies.
3. Provide ease of risk management
One significant advantage of CPM is the integration of tools such as what-if models. For instance, the model empowers managers to mitigate risks and make informed decisions based on the simulation of the best- and worst-case scenarios.
4. Provide simple data feedback and access
Performance management tools enable managers to have ease of access to information while still fostering accuracy and quality.
5. Ease of collaboration
CPM tools are not only locally integrated but also cloud-connected to allow all users to stay in sync across all departments.
How to Choose an Effective CPM Software Solution
With the wide range of options in the market, it can be difficult to choose a high performing CPM software. Therefore, below are two fundamental elements to consider when shopping for a CPM solution.
1. High rating
A good product must have positive feedback because it drives satisfaction. The opposite is also true for an average product. However, there is an exception to this rule. Some companies may have a great product, but they are relatively new in the market and are yet to receive some feedback. The best way forward, in this case, is to use their trial version before committing to purchasing the full package.
2. A product from a reputable organization
Even though it’s not always true that reputable businesses will attract excellent ratings, these providers have the resources, significant market share, and a wide range of options. Meaning, their CPM solutions will probably make the grade.
CFI is the official provider of the global Financial Modeling & Valuation Analyst (FMVA)™ certification program, designed to help anyone become a world-class financial analyst. To keep learning and advancing your career, the additional CFI resources below will be useful: