Business Performance Management (BPM)

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What is Business Performance Management (BPM)?

Business Performance Management (BPM) is the process of monitoring and improving the performance of a business or organization. It involves setting performance goals and targets, collecting and analyzing data about the business's performance, and taking actions to improve performance and achieve the desired results.

BPM typically involves the use of tools and techniques such as data analytics, key performance indicators (KPIs), and performance dashboards to monitor and measure the performance of the business. It also involves establishing processes and systems for collecting and analyzing data, and for identifying and addressing performance issues or problems.

BPM is an important tool for improving the efficiency, productivity, and profitability of a business. It allows businesses to identify and address performance issues, and to make informed decisions about how to improve the business's performance.

BPM allows companies to collect data efficiently from various sources, analyze it and use this knowledge to improve the company's performance. BPM also allows problems to be identified before they have a chance to grow and spread into other areas of the company. Finally, it can be used to make more predictable and reliable forecasts. Continuous and real-time reviews of data are used in the BPM process.

Business performance management software has traditionally been used within finance departments, but it is now being adopted by various enterprises as a component of their business intelligence.[1]

Business Performance Management is focused on business processes such as planning and forecasting. It helps organizations discover efficient use of their business units, and financial, human, and material resources. It involves consolidation of data from various sources, querying, and analysis of the data, and then putting the results into practice. Continuous and real-time reviews help to identify and eliminate problems before they grow. BPM’s forecasting abilities help the company take corrective action in time to meet earnings projections. Forecasting is characterized by a high degree of predictability, which is put to good use to answer what-if scenarios. BPM is useful in risk analysis and predicting outcomes of merger and acquisition scenarios, and coming up with a plan to overcome potential problems. Business Performance Management provides key performance indicators (KPI) that help companies monitor the efficiency of projects and employees against operational targets.

Business Performance Management software provides a range of functionality around business intelligence that benefits organizations. These systems promote greater visibility and effectively align employee goals and corporate strategies. BPM integrates the company’s processes with customer relationship management or Enterprise Resource Planning. Companies become able to gauge customer satisfaction, control customer trends, and influence shareholder value.[2]

BPM Activities[3]

Business performance management uses three main activities that drive well-informed decision-making. Consider the three main activities of business performance management:

  • Goal Selection: Goal selection is when the business decides on short- and long-term goals. Several members of a management team think of these goals. Goals are realistic and take into consideration the trajectory of the business. At times, the company might decide to focus on specific goals and choose to postpone others. This allows for dedicated time, energy, and resources spent on a few selected goals instead of a broader focus on many goals.
  • Information Consolidation: Information consolidation, also known as information monitoring, is the gathering of data on the business. This activity provides significant information for the management team to assess and guide decision-making. When a business uses information consolidation, they aim to provide accurate and reliable information for the team's reference. Information consolidation is constant, as new data about the company is continually created.
  • Management Intervention: A management intervention, also known as a "managerial adjustment," is the action the management takes to improve business functioning. The business determines this decision by referring to data from information consolidation, considering the business mission, and reviewing goals. For example, a supervisor might begin to check in with an employer weekly rather than on a bi-weekly basis. This approach provides an additional opportunity to ask questions.

Managing Business performance is not a one-time activity and is a regular job to assess the performance and make sure that the company is working towards achieving the goal. BPM has three major activities- goal selection, measurement information consolidation, and managers' intervention to improve future goals. The three activities present here are sequential but they run simultaneously in line with the organization's objectives.

Business Performance Management Process[4]

The BPM cycle consists of four primary processes, with each stage feeding into the next.

  • Develop Strategy: This initial stage consists of identifying the organization’s overall goals and developing strategies to reach those goals. This stage may include defining the company’s vision, values, and strategic objectives in addition to identifying revenue and profitability targets. Strategy development is typically carried out by the organization’s CEO and other top managers, based on input from experts across the company.
  • Create Operational Plans: Create specific operational plans for achieving the goals laid out in the previous stage. This includes defining specific tactics, initiatives, and anticipated results for each department in the business, from production and finance to marketing and HR. The plans also detail the budget and other resources required to reach these goals.
  • Define, Monitor, and Analyze KPIs: Determine the most important metrics for tracking progress toward each objective. Some KPIs, such as revenue growth, may apply across the entire business, while others are specific to each department. This step also involves determining how to gather data for those KPIs. If the company is using software to monitor business performance, this stage includes building dashboards and reports that display up-to-date status results as well as trends in the KPIs. Analytical tools can be used to delve into trends and issues highlighted by the KPIs to uncover underlying causes.
  • Review and Respond: Based on reviewing the analysis of KPIs and underlying data, the company takes action to respond to changing business conditions. This stage may include reviewing how much progress the company has made toward its goals and determining whether strategic or operational changes are needed to achieve success. The results of this stage feed back into the first and second stages of the cycle, enabling the organization to continuously make course corrections by adjusting its goals and plans.

The Importance of Business Performance Management[5]

  • Business performance management leads to better business decisions: Knowledge is power. Shooting from the hip is not. When it comes to decision-making, the more financial information you’re privy to, the more calculated your decisions will be. As a bonus, when stakeholders can see how financial information interrelates across departments, they get a 360-degree view of the financial impact that decision will have.
  • Business performance management makes staff more efficient: Business performance management software is built to streamline financial processes. The software automates processes like data collection and reporting. By using tools that have features like a single set of data, collaboration tools, built-in workflow, dashboards, and pre-built templates, the users of performance data are able to complete financial processes faster.
  • Business performance management promotes alignment across LoBs, departments, branches, and divisions: Does the left hand know what the right hand is doing? Business performance management software provides users with a look into financial data at every level of granularity, from a high level to the minutiae. While regional users can access the information that pertains to them, global users can get a bird’s eye view of the trends happening across the organization and then better prioritize budgets, plans, and actions.
  • Business performance management helps management identify risks: With frequent monitoring using tools like performance dashboards and real-time updates to KPIs, management can identify risks and respond in a more timely manner.

See Also

Enterprise Performance Management (EPM)