Turning On the Lights with CPM ................................................................
As companies have grown larger and more complex, the demand for action-
able information has grown dramatically. Boards of directors, CEOs, CFOs,
and executives at all levels want an accurate view of the performance of the
business. Outsourcing has also driven the need for more detailed informa-
tion. A company that hires another company to perform a task seeks to keep
track of how the work is going, which is especially important because under
most regulatory schemes, the company using the outsourcer is liable for
what the outsourcer does. The world moves fast, and serious operational
risks can appear in a blink.
As with most common needs of business, this desire for information has been
recognized, studied, and analyzed. The name given for the large number of
activities that take place to provide better information to managers is called
corporate performance management, or CPM. To understand how CPM and
GRC are two sides of the same coin, you first must look at the different parts
of CPM.
CPM has evolved from financial budgeting and consolidation to a complete
360-degree view of performance management for an organization. This
panoramic view adds in strategy management and profitability management
to optimize the basics of financial budgeting and consolidation. Although
CPM has been covered in many books, white papers, seminars, and confer-
ences, it can be accurately simplified into the following dimensions:
Strategy management:This part of CPM concerns itself with translating
corporate goals into initiatives and key performance indicators, which
provide guidance that align actions across the organization. Strategy
management also encompasses monitoring the performance of the cor-
poration to see if the strategy that has been set forth is being achieved.
The mechanisms of strategy management are initiatives, KPIs (key
performance indicators), and high-level analysis techniques like the
balanced scorecard that organizes important indicators of a company’s
performance. One important idea behind strategy management is that
the company must understand its behavior not only in financial terms
but also in terms of the other sorts of public and private value that is
created. The challenge of strategy management is to ensure that all
employees understand the impact that their actions have on the perfor-
mance of the organization. Therefore, key performance indicators must
be chosen carefully and calculated from accurate data.
Planning:With a strategy clearly in place, planning can begin. But you
shouldn’t think of planning only in terms of budgets. Planning is about
strategic resource allocation. What resources does each part of the busi-
ness need to do its job? How are resources going to be allocated accord-
ing to the strategy? How will the company know if the resources are being
282 Part IV: Managing the Flow of Information
