Corporate Performance Management (CPM) refers to an entire improvement activity in a company: development and execution of company strategy to improve management quality, and assessment of that execution process, such as what should be checked, who and when, how to build such a mechanism, and what type of implementation ways are possible. In Japanese, CPM is called "Kigyo Performance Kanri" or "Kigyo Gyoseki Kanri."
Overview of CPM
CPM means a series of processes that assist optimization of profitability of a company.
Specifically, it is required to primarily set company strategies and goals. After setting short-term, medium-term, long-term goals, it is necessary to visualize and quantify these goals, and then the whole company should share an awareness of the goals. Secondly, it is needed to grasp the current situation. By collecting information about the current situation, the company should assume in detail how much cost would be required to accomplish the goals and what type of risk exists. Based on the current situation grasped, the company needs to decide whether the goal is doable and how potential risks should be handled. In order to grasp the current situation and to make a correct decision, it is indispensable to always collect accurate information on a timely basis. As a result, the company creates indices for collection of necessary information. Furthermore, it has to continuously assess whether the indices are best and appropriate.
CPM enables these processes to be monitored, managed, and assessed, and thereby, it determines the next actions based on the appropriate information acquired. When these factors work company-wide, the business performance becomes optimized, and CPM will be accomplished.
EPM(enterprise performance management), BPM(business performance management), SPM(Strategic Performance Management) are concepts similar to CPM. For your information, BPM shown below is the abbreviation of Business Process Management, and is different from BPM (business performance management) in this paragraph.
Technique for CPM execution
There are different techniques for different purposes because CPM is a very broad concept and because a series of processes include various factors such as visualization of business or collection of information etc. We can use Six Sigma for business process improvement of production lines in manufacturing, TQC for quality control of products, BSC for goal setting from diversified perspectives and for visualization of goal-attainment approaches, BI for information analyses, and data warehouse for storage of information.
However, adopting just one of these techniques would not result in expected CPM outcome. Instead, making each tool work for each purpose brings about accomplishment of CPM.
Objectives of CPM
The primary objective of CPM is to manage business performance properly. In addition, CPM aims at early detection of problems by measuring and monitoring the business performance from diversified standpoints and to execute reform measures. Also, CPM is expected to support enhancement of use efficiency of resources such as capital, human/material resources, etc.
Specifically, CPM provides us with the following benefits.
- Improvement of information accuracy and speedy decision of next season's budget can be achieved.
- We can speed-up our decision making because workers can have decision criteria thanks to visualized management objects/strategies.
- Business management that goes beyond the boundaries between the headquarters and subsidiaries, etc, is realized because of the centralized information.
- We can detect unnecessary parts by visualizing business processes and thereby can increase time/cost efficiency.
- By conducting analyses simulations in advance with proper information, we can identify the agenda for budget attainment and grasp risks. Thereby, announcement and commitment to shareholders can be done.
- As a by-product, company-wide data can be obtained, and thereby administrative abilities of a chief of each department and a participant in charge of an organization can be improved.
Integrant Elements of CPM
In order to execute CPM, there are three integrant elements: visibility, timeliness, and consistency.
First, visibility here means visualization of business processes, disclosure of information, and ability to see a situation in the same metrics, unit, and calculation procedure.
Timeliness is specifically to be able to acquire information when necessary, to prepare an advance indicator that enables outcome prediction/prevision, etc. And, examples of consistency are consistency between management strategy and business management system and uniformity between administration of head office and that of each base, as well as establishment of PDCA Cycle etc.
In other words, CPM especially intends to gather information on a timely basis, to grasp the current situation, and to take timely measures based on that situation.
It is KPI (Key Performance Indicator) to greatly contribute to this point. KPI sets an important index, decides the assessment method, and thereby enables us to assess the company's business performance/situation on the basis of timely and proper data, which will help us decide the next action.
Background of CPM
Before the information age, it used to be difficult to collect information sources or to analyze information because there was no computer. However, computers were implemented in business fields, and the age full of information came, then it became desired to use information in a timely and appropriate manner. Therefore, in 1989, Gartner Group popularized a technique named BI (Business Intelligence), which is to utilize useful information at the right moment. And then, in 2001, as the importance of BI was rising, Gartner Group advocated CPM as an upper conception. BI aims to take advantage of information in a timely and appropriate manner, however not only information but also business performance has come to be strongly desired to be properly managed, which resulted in the birth of CPM concept.
In addition, now leaders in the field of CPM are selected by "Corporate Performance Management (CPM) Suites Magic Quadrant" published by Gartner Group. This is a graphic representation of supplier’s business performance in a specific market or field, at one point in time or during one period. On the basis of definitions by Gartner Group, evaluation of a case in which a specific supplier is applied to the standard for a concerned market is analyzed. It selects as leader a company that shows excellent business results, has a clear vision of trends in the marketplace, and continuously works on improvement activity to optimize provision of services. However, Gartner Group states that their efforts are to propose an assessment tool rather than recommending only the supplier selected as leader.
Major Tools for CPM
- OLAP (Online Analytical Processing)
- Score Card
- Data Warehouse
- Document Warehouse
- Text Mining
- DM (Data Mining)
- EIS (Executive Information System)
- DSS(Decision Support System)
- MIS (Management Information Systems)
- SEMS (Strategic Enterprise Management Software)
- Digital Dashboard
Effectiveness of CPM in BPM (Business Process Management)
Since the Sox Act was enacted in 2002, more and more U.S. companies utilize CPM as activities to improve BPM (Business Process Management) or internal control level. This is because CPM enables early detection of risks and responses to them and thereby is highly regarded as a tool for risk management and a tool for visualization of task contents and necessary information for tasks.