Thriving businesses are the backbone of financial health of a nation and hence it is important that they perform well and expand. The challenges faced by CEOs and Directors are many and are of varied weights, for e.g, inflation, customer retention, keeping production volumes in sync with demand, fighting volatility in foreign exchange rates, planning a good marketing strategy, competition from other businesses, etc.

With so many parameters affecting the health of a business, it is important to define the performance metrics first and then measure them correctly and timely because what cannot be measured can't be controlled. Correct set of metrics enable correct planning and decision making. Without these metrics, management will be completely blinded.

Business Performance Management (BPM) is the name given to the process of tuning internal parameters of a company like people structure, service stacks, products and internal processes, to optimize business returns and its overall health. Parameter optimization requires apt decision making by the management and it is possible only if change decisions are backed by real data pulled from across the organization on a regular basis. BPM provides Key Performance Indicators (KPIs) that reflect a close measure of company's health. Organization's data is used to calculate these KPIs. These KPIs are carefully chosen to reflect the attributes that would impact company's long and short term goals.

BPM is sometimes confused with Business Process Management and hence, to avoid confusion, people have started calling it, Corporate Performance Management (CPM) or Enterprise Performance Management (EPM). Business Process Management is actually a part of Business Performance Management.

In the old, computer less days, the amount of time needed to pull the data from various parts of a big organization was huge and hence it could only be used for long term strategic planning and decision making. Short term, tactical decisions were more or less taken intuitively and hence more often than not, they led to disasters or poor optimizations, affecting long term goals as well. In modern times, however, businesses have realized the importance of having business data as quickly as possible to stay in the competition. Computers have made it possible.

There are various methodologies in existence to incorporate BPM within an organization. To name a few, they are, Six Sigma, Balanced Score Card, Total Quality Management, etc. Six Sigma and Balanced Score Card are more popular these days. Most of these require the KPIs to be defined and measured on a weekly or monthly basis and fed to the management, who in turn, uses these to further optimize processes. It forms a constant feedback loop.

These days BPM is backed by Business Intelligence (BI) software, like, Cognos and Business Objects. These advanced set of technologies are capable of deriving intelligence out of raw business data and provide for more enriched KPIs. Businesses that use BI software are at competitive advantage over their peers.

Since performance management requires constant fine tuning and change in the way business is carried out, people element is a must to have control upon as most of the resistance to the change, often comes from people. It is imperative that a company has right and well connected leadership in place to mitigate any resistances and draw consensus from all stakeholders. People element is the most non-linear one and difficult to control. Perhaps, this is one of the biggest challenges management team faces everywhere.

Learn more about this author, Anusheel Tandon.
Click here to send author comments or questions.

---

Add your voice

Know something about Business performance management explained?
We want to hear your view. Write now!