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Enterprise Performance Management

1 February 2012

What is enterprise performance management?

Gartner Inc. defines EPM as, “the methodologies, metrics, processes, and systems used to monitor and manage the business performance of an enterprise.”

EPM, or Enterprise Performance Management, also called business performance management (BPM) is the next generation of BI. It allows organizations to take the decisions they made through the BI system and strategically align these decisions with their corporate goals. EPM defines the way an organization should operate based on corporate business strategy containing actions and processes that align to the strategy with the identification of KPIs and progress tracking. The phrase enterprise performance management has taken many forms – most popular are BPM, CPM, EPM, xPM, and PM.

EPM core processes include strategic planning, the establishment of key metrics, budgeting, communication, financial consolidation, analytics, reporting, and forecasting. With EPM solutions, organizations not only discover ways to better these processes, but they also find the problems they didn’t know existed.

Hereby are some key differentiators that should give us a better understanding of what BI and EPM tools represent and when each is suitable.EPM has used at the operational, planning, and organizational levels to help organizations improve their business performance. In contrast, BI is used more at the business analyst level, enabling organizations to analyze large volumes of information to make more timely decisions. Integration with both EPM and BI helps organizations roll-up analytics at the operational and tactical levels into KPIs that can be viewed in Dashboards/Scorecards at the strategic level.Both Scorecards and Dashboards are supposed to give the business an idea about the present situation and how does that situation match compared to the general objectives of the organization. In that context, a dashboard is more for quick analysis and informational awareness, such as chart, pivot table, scorecards, KPI, etc. Scorecards is a tool in itself that summarize KPI (Key Performance Indicators) into a simple, readable and meaningful view with indicators that allows decision makers to have a global insight on how the organization is performing now compared with the goal they set out.

Limitations of Current practices

Organizations use measurement systems to evaluate their performance. A key tool in performance management is the well-known “Balanced Scorecard.” The BSC is different from other performance systems in that it is customs to the organization’s needs, operating environments, and strategies. In order to do this, the BSC is designed to measure the organization performance, in four perspectives: the financial perspective uses traditional accounting measures to evaluate a firm’s short-term financial results. The customer perspective measures relate to customer satisfaction of identified target groups. The internal business process view is based on the concept of the (internal organization) value chain. The fourth perspective measures various human resources, as well as learning systems, and support effectiveness.

However, balanced scorecard systems require significant investment. Resources such as time, expertise, and money should be employed in every BSC perspectives.

Despite the widespread use and benefits, based on findings from existing practices, the BSC has limitations both in concept and in practice, the main limitations include: the concept of the BSC has no clearly defined relationship with organization performance, strategic objectives, and definitions of measures exclude different group of stakeholders. In practice, it is necessary to consider the purpose of the measure, the frequency of measurement and the source of data. All these requirements can be a costly and time-consuming in the development and implementation of the Balanced Scorecard model.

The core business process through the extension of the BSC is relatively a new if compared with other systems. Moreover, the BSC reflects the limited progress that most organizations have made in linking employees, information systems and organizational alignment with strategies.

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