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t’s no good saying that if God had wanted us to have performance management systems, he’d never have given us spreadsheets. It’s a question of evolution: ever since small firms started growing into large companies, while others complicated matters by entering multiple marriages at home and abroad, software vendors have been racing to provide suitably sophisticated systems to help them manage all branches of their overgrown family trees. “Know thyself ” might be one way to ensure individual happiness, but, when it comes to today’s complex organisational structures and rigorous regulatory demands, it’s a lot easier said than done. The trouble is that, in evolutionary terms, these systems are still in their infancy and their parents have not even agreed on a name for them. Some call them business performance management (BPM), others call them corporate performance management (CPM) and then there’s strategic enterprise management (SEM). But they all agree that the ultimate goal is organisation-wide data at the touch of a button,
Illustration: Paul Boston
CPM, BPM or SEM? The software vendors can’t agree what to call it, but they say you need it anyway. Ruth Prickett explains what you’re missing if you’re still using MS Excel to run your business.
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formatted and presented in a way that suits individual users, allowing everyone to see how this information affects their decisions and their roles. It should be timely; sufficiently flexible to reconfigure according to future requirements; reliable enough to leave an audit trail and satisfy external requirements; and user-friendly so that it doesn’t alienate operational staff or confuse non-expert directors. These are high expectations – the parent vendors aren’t just showing their babies flash-cards; they’ve signed them up for an MBA. “We start from the point of view that there is only one set of numbers and directors may want to see these in a multitude of ways,” says Clive Jefferies, UK managing director at Longview Solutions. “It’s our job to present this financial truth in as many formats as we can think of, and then to add ten more.” These aspirations aren’t new, of course. Suppliers have been promoting the idea of connecting financial systems with operational data in order to help companies plan, forecast, budget, make decisions and monitor progress for several years. They have provided tools to perform elements of this and suggested
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ways to link them together. But now the race is on to provide a single platform that can manage information from across the organisation’s departments, functions and subsidiaries, however remote, and can run a range of applications to meet the requirements of different directors and processes. Simply bolting together separate applications and data sources is seen to be less efficient and less reliable, running a higher risk of data loss or corruption. “It’s not a question of tying different applications together, but of having one central engine with common functionality that you can run different applications from as necessary,” says James Fisher, director at Cartesis. “Vendors have been guilty of putting smoke and mirrors around this. But, if you’re not sure whether a system has a common engine, a basic indication is whether it needs an extra tool to tie all the parts together. If it does need one, it’s not fully integrated.” These developments are being driven by several factors. New regulatory demands are forcing companies to focus on their audit trails and the timeliness and accuracy of their figures, while third parties ranging from consultants to auditors are
urging client companies to make their lives easier. In the public sector, demand is being fed by the findings of the Gershon review and pressure on public services to demonstrate their value for money. “Lots of organisations met the compliance challenge by throwing people and spreadsheets at it. There hasn’t been much attention yet on sustainable compliance,” explains Nigel Youell, marketing director at Hyperion. “These businesses have met the deadlines, but only by holding it together with chewing gum and string. They will struggle to keep it going and the process of achieving compliance probably hasn’t been well documented. If the person who did the spreadsheets leaves, the chances are that no one else will know what they did and the firm will be back to square one next year.” Richard Barrett, vice-president of global marketing at ALG Software, agrees. “One current driver is the operating and financial review (OFR) requirements. You can produce an OFR with paste and glue and a consultant. But if you want to do it well you need a good CPM system to back it,” he says, adding that the changes may lead to a shift in the role of management
accountants. “A lot of the information that needs to go into the OFR is not currently in the finance domain – HR and marketing data, for example – so are accountants going to go out and bring this information into their offices? They should do.” Not surprisingly, suppliers are scrambling to highlight the shortcomings of spreadsheets. A recent survey of 415 CFOs across Europe and the US found that 68 per cent were not providing strategic counsel to the chief executive, according to Geac. In Europe, 36 per cent of CFOs agreed that they were not spending enough time on setting strategy at corporate level, while 58 per cent said they were failing to set strategy at a business unit level and 66 per cent saw their main responsibility as setting targets and monitoring revenues, costs and profits. Most said they spent too much time entrenched in low-value activities and 76 per cent of European CFOs (compared with 44 per cent of those in the US) used
“Lots of organisations met the compliance challenge by throwing people and spreadsheets at it. They will struggle to keep it going”
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Cognos, for example, which now owns Frango and Adaytum, decided it needed to work out with external analysts what they really thought CPM should include. “We identified planning, consolidation, regulation, strategy and strategic processes elements, as well as the business intelligence and balanced scorecard areas. We then acquired to meet these needs,” explains Laurence Trigwell, financial services industry director, EMEA, at Cognos. “There’s still confusion about what CPM really means, but we’re getting better at explaining what it is and how it can meet customer needs.” A crucial issue for CPM systems is the way in which financial and non-financial information can be linked to strategy, according to Jon Brooks, EMEA managing director of Geac. “The vast majority of companies still don’t link strategy to budgeting in any formal way,” he says. “They use lots of people with MBAs to think up a strategy and then go and put a budget together. They don’t feed information back to measure progress against strategy. This requires the finance function to look ahead rather than at past results. It’s no good doing X to meet the fourth-quarter results if it doesn’t fit the long-term strategy and means that you end up with no work for the business in the first quarter of the next year.” Barrett points out that, although some consulting firms have confused the issue further by expanding the scope of CPM into other organisational processes – supply-chain management, for example – Gartner has recently restructured its The institute has set up a CIMA strategic enterprise management (SEM) network forum. CPM team and brought it firmly back This supersedes its previous round table and enables senior finance professionals from large into the finance function. “The key areas multidivisional companies to learn from each other’s experiences and gain greater insights into that it covers are financial,” he argues. a range of approaches to improving strategic decision support and performance management. “It’s all about reporting, planning and Organisations from industries ranging from supermarkets and car manufacturing to budgeting, cost and profitability analypharmaceuticals and TV broadcasting discuss the ways in which they align their strategic objectives tics and scorecards.” to resource allocation and performance management. They are considering the opportunities Youell is also looking to Gartner to offered by new IT systems to improve the collection, storage, analysis and presentation of data. analyse the state of the industry. “It has But they are also focusing on getting the right processes and people in place and on understanding produced a ‘magic quadrant’ diagram for the tools and techniques required to enhance decision support and performance management. the CPM market that sets the visionary The participants are rethinking and implementing a new service delivery model for the finance ability of vendors against their ability to function, based on efficiency and effective involvement in the process of strategic and operational execute their ideas. Everyone wants to be planning decisions. in the top-right corner of this quadrant, The main aim of the forum is to compare experiences in a range of organisations and sectors in because that’s the leader’s slot, but no an informal environment. Participants drive the agenda, while CIMA facilitates the meetings. The one is up there yet,” he explains. “We are focus is on learning from each other’s challenges and solutions, rather than on listening to lectures. pushing on the line in the visionary Anyone interested in learning more about CIMA SEM should contact Stathis Gould at section, but are further back on the exestathis.gould@cimaglobal.com or on 020 8849 2379. cution. Traditional ERP vendors tend to
spreadsheets and manual processes for planning and managing corporate performance. Cartesis, meanwhile, surveyed directors in the FTSE 350 and found that almost a third took between 11 and 25 days to report figures to stakeholders, with another 43 per cent taking six to ten days. Most of those who reported in five days or fewer (17 per cent) were using integrated CPM systems. The vendors are, therefore, united in arguing that companies need CPM systems to meet their business needs, shareholder demands and regulatory requirements. But, as anyone who has tried to buy such an application will know, the agreement ends there. This is partly because of developments in the software industry. Three different types of supplier are now converging on the CPM market, Youell explains. The traditional financial analytic application vendors and the business information system providers are looking covetously at each others’ strengths, while traditional enterprise resource planning (ERP) suppliers have started muscling in, offsetting their general lack of experience of analysis with their technological clout and massive customer bases. The competition has led to a series of acquisitions and alliances between different types of vendors keen to pool their expertise. Most industry experts believe that the consolidation trend still has some way to go. This can lead to considerable confusion about what the terminology means and what the various systems really offer.
“There’s still confusion about what CPM really means, but we’re getting better at explaining what it is and how it can meet customer needs”
CIMA STRATEGIC ENTERPRISE MANAGEMENT
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do well on execution but fall back on the vision. It’s a race to cross that line.” The perfect, complete CPM application may not yet exist, but this is no reason for companies to lag behind in has the capacity to provide the level of support implementing the first crucial sections. It that your organisation will need. simply means that you need to think hard Ask for detailed references and examples of about the future uses of the program that how the provider has addressed similar issues you choose and how it will link in with in other organisations. Do you have a clear vision of your desired CPM other applications. solution? For example, does this include a single “Organisations that have a problem platform, or even a single database? What do today need a solution today. Waiting Think about the additional benefits that you you want to achieve now and in future? costs money and carries unacceptable may be able to accrue from a new system. risks, so it’s not an option,” Youell What do you need ultimately, and what else argues. “There are lots of people out do you need in order to achieve this? Can the system cope with unpredictable future there who can fix these bits, but far fewer developments, from further regulations to who can fix these bits and then fix more changing internal demands; and from new in two years’ time. Eventually the system managers to changing business needs? How committed is the supplier to the CPM should be able to do everything, but you market? Is this its core business and does it Can you reconfigure your data needs and the should be able to start anywhere.” presentation of information in your firm, or do have a track record in this area? Others agree. “If you are planning to you need to go back to the supplier each time? buy new CPM software now, don’t look only for a budgeting system or a conHow willing and able is the supplier to connect solidation system; look for a module of a disparate data sources now and in the future? How many people will be using the system? complete CPM cycle that can later be Make sure the system can cope with a much Consider future plans for acquisitions and linked together with other modules for, developments, and ask whether the supplier larger number and a wider geographical spread. say, reporting and monitoring strategy,” Brooks advises. It’s also worth looking at your organisation’s future information requirements. “Whenever we implement a system we find that two or three head office who says ‘this is what I need’. times as many people use it as expected,” Jefferies warns. “If the They invest and it doesn’t work, because data is there, people will want to use it.” they’ve forgotten that the process of This is an important message. Whatever the external drivers, planning and budgeting is an operational suppliers are keen to remind potential clients that CPM is not activity that doesn’t start and end in the only a question of software. Top-level planning, budgeting, finance department.” monitoring and strategy all depend on individuals. All that the Fisher agrees. “The systems’ technosoftware can do is to provide the information they need in a logical architecture has improved and the reliable, consistent format, with options to drill down to the technical experts can draw up exciting detail or to look at the overall situation. diagrams showing all this. But CPM is Implementations can also involve significant change not about the technology; that’s merely management if they affect the way in which front-line staff use an enabler. It’s about people and processes,” he says. “We need and record data. “Change management issues are crucially to make systems easier to use and more attractive – not only to important. No CPM implementation will succeed without conhead office, but also to the front-line users and different departsidering these,” Barrett warns. “Management accountants have ments. They have got to be easier and cheaper to adopt and got to get out of the office and find out what the business really more people-friendly.” needs and how this will be understood across the organisation. Many things about CPM may be complex and confusing, Too many systems in planning and budgeting have been but there are clear messages. The technology, the concept and brought in without an adequate understanding of what people the suppliers are evolving. Financial managers must do the at the front end actually do. They’re dreamt up by someone at same if they are to take control of the new opportunities. FM
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“Organisations with a problem today need a solution today. Waiting costs money and carries unacceptable risks, so it’s not an option”
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