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Performance Management Business Processes

The key processes of performance management are:
• Strategy Planning
• Operational Planning
• Operational review or Monthly management reporting

Every organization go through the above exercise of reviewing and developing their long term strategy, resulting in projects or initiatives to walk out with. These strategies are tied against the business goals the CEO or the Top management wanted to achieve. The initiatives could be things like creating a new product, focusing on a new market segment opportunity, adopting to some quality processes to beat competition etc. These strategies and the initiatives are reviewed and accepted formally.

The next process in the performance management area is to cascade these initiatives into detailed plans. This is done in the form of periodic operating plan, usually annual. This involves participation and commitment from the entire organization – from Top Management, Sales & Marketing, Human Resources, Operations (Supply chain, Service chain, Financial services operations depending on the industry the organization is part of) and offcourse Finance to develop an integrated operating plan that results in clear direction and financial budgets. This whole process is also well known as Bottoms up planning. The annual operating plans are committed, signed up and approved across the organization.

Now comes the actual execution cycle. The various functions execute on the strategies and detailed plans. The actual scenario in real life could vary from the planned scenario. To understand the variation and take corrective action, organizations sit together at various levels to run Operational review process. Here these teams try to understand the Leveraging Variance Analysis in CPM , review the various key performance indicators and decide on action items to correct the situation. This is one of the most important process in performance management.

Organization wide solutions

As you see in the above processes, the organization wide effort is required to ensure best results from performance management. The underlying solutions to support the above processes should also have capabilities that extends to Organization wide.
SAP is building comprehensive solutions for these processes, that can extend to entire organization. These offerings will complement the SAP gets serious about EPM offerings. The chart reflects how the performance management solutions would like:

As you see in the chart, the solution offerings would be organization wide and would support the performance management process very effectively. With tight and Why EPM solution with integration to ERP and built in GRC are critical? , all the data required is going to be available for the decision makers to take right decisions in their operation reviews, as the information available is going to be available at the right time and they can rely on the same as it is accurate. The underlying solutions are going to empower the Empowering the business user to implement business change with CPM to own and manage these business processes, and therefore implement business change rapidly.

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  1. …that the key components are only “planning”.  The value comes in the real-time exception monitoring and the “actionability” of performance management metrics.  I’d also say that a single approach will generally not work.  You need to also combine methodologies such as Six Sigma to create a knowledge-based and “institutionalized” means for driving variability out and predictable performance to target in.  I also think that any solution dependent on delivering the UI exclusively through the portal will fail if you truly want to drive performance, in real-time to *all* employees.

    Most performance management systems based on daily, weekly, or monthly analytics provide what I like to call the “we sucked yesterday” charts – it is already too late to do anything actionable to *correct* or *prevent* the deviation from planned performance.

    A totally new model for performance management is needed.

    1. Former Member Post author
      Thanks for your comments Rick. The blog does not say only planning but if you see the most important process is ‘Operations review’ which is not just planning. But having said that Planning is a very important component of PM.
      One of the key difference between Performance management and Business Intelligence I would say is trying to measure something against a goal in PM vs just looking at the measure as they happen. As you rightly pointed out ‘we sucked yesterday’ is a typical BI scenario. But no business can sustain if goals are not declared/reviewed. The ‘we sucked yesterday’ is going to happen no matter what you do – because of the various competitive, external and internal factors beyond the control of the managers. The PM solutions should enable and ensure atleast ‘we don’t suck tomorrow’ based on corrections & better predictability. The Insight module within SAP BPC does allow for indicating what could be factors for variations. Do check my earlier blog on variance analysis.
      The frequency of the review depends on the industry and the criticality of the indicator and I do agree with your view point that it needs to be real time.
      Your thoughts on combining methodologies like six sigma would be really cool.

      I don’t understand by what you mean by “I also think that any solution dependent on delivering the UI exclusively through the portal will fail if you truly want to drive performance”
      Once again thanks for your comments

      1. …notifications via mobile devices of critical business events…

        …multimodal information delivery – portal, other UI’s, 3rd party UI’s…

        …integration of performance deviations with business workflows…

        I love the “we don’t suck tomorrow” concept!  Brilliant!  ๐Ÿ˜‰

        1. Former Member Post author
          Thanks for your clarifications.
          Absolutely, the things you mentioned are already available/planned for in the underlying infrastructure. Mobile is a very important strategy SAP is pursuing and delivering the Performance Management results through this is definitely in the radar. Great thoughts and once again thanks for your comments.

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