The process of continuously determining, measuring and developing the performance of your employees is “performance management”. You can do so by setting goals, monitoring their progress, and giving them regular feedback on their tasks. It ensures that employees are on the same page as the company goals and have the necessary skills to achieve them.
With the help of enterprise performance management software, companies can achieve their goals, and improve processes. So, let’s see in detail why it’s so important and exactly what it entails.
Importance of Enterprise Performance Management
There are a few reasons as to why you should prioritize performance management in an enterprise management setting:
Have Realistic Expectations
You might express a desire to grow your business, but there’s a significant difference between aiming to double your profits in five years and targeting a 2% annual growth rate.
Corporate enterprise performance management allows you to establish clear benchmarks for achieving your growth objectives, moving beyond the vague mantra of “Let’s work harder and smarter to see results!”
Encourage the Right Behaviour
Managers at all levels of your organizations make decisions that can impact the entire company. Whether these decisions come from marketing, operations or HR, they can either enhance overall performance—when aligned and working in harmony—or lead to widespread challenges if they’re misaligned. Performance management fosters collaboration to promote the former and prevent the latter.
All Team Members Must Agree on the Company Goal
If each department understands the goal of the company, then the department-specific decisions will send the organisation in the right direction.
However, if the department heads are not aware, then their choices can come into conflicts. For instance, let’s say the organisation leaders want a broader job description to attract talented applicants. However, the HR continues posting very defined job roles. This could be a miscommunication.
Promoting Departmental Cooperation
Enterprise performance management market solutions ensure that all departments, divisions and groups in the company make choices keeping the broader picture in mind. In fact, you might find that one department is ready to adjust its decision or project direction because it sees that resources could be better used elsewhere. Allowing departments to work together will help ensure success for the whole company.
However, there are some obstacles in managing enterprise performance. You need to make most of the benefits so that these challenges don’t affect the workflow and productivity of your business.
To be informed, let’s see what the challenges are.
Benefits of Enterprise Performance Management
1. Improved Management Efficiency
EPM maximizes investments in ERP, CRM, and other transactional systems to streamline management processes, including:
- Budgeting, planning, and forecasting
- Financial consolidation and reporting
- Management reporting and business intelligence
- Profitability analysis
Common EPM plans include:
- Strategic Plans: Annual budgets, cash flow forecasts, and balance sheet plans.
- Financial Plans: Revenue, expense, sales, and CAPEX plans.
- Operational Plans: Workforce and project financial plans, as well as marketing and demand plans.
- Forecasts: Sales, expense, demand, and project forecasts.
These plans are stored in a multidimensional OLAP and relational database, enhancing analysis and business intelligence.
Best Practices in the Planning Process
- Explore value drivers and create plans based on validated targets.
- Identify constraints to improve financial and operational models.
- Correlate financial and operational plans across the business for optimal decision-making.
- Adjust forecasts and plans quickly based on actual results to maintain competitive advantage.
- Link budgeting and forecasting processes back to financial and operational models.
Onto the next benefit.
2. Enhanced Strategy Execution
EPM helps organisations understand the connection between desired outcomes and actual results by:
- Creating business models to meet strategic targets and documenting assumptions.
- Connecting models to annual plans, budgets, and forecasts.
- Monitoring variances between actual results and plans.
- Identifying root causes of variances and integrating insights back into the business model.
- Establishing a common business language and master data to enhance visibility and alignment.
Not only these, the business performance also improves.
3.Better Business Performance
EPM positively influences the bottom line and overall return on capital by enabling informed decision-making based on timely, relevant information. Key benefits include:
- Enhanced visibility into key value drivers.
- Insight into how operational metrics affect financial performance.
- Focus on critical business areas.
- Increased agility in business models and organizational structures.
Effective use of information leads to improved decision-making, resource utilization, and accountability. Important qualities of impactful information include:
- Relevance: Information should significantly impact the business.
- Volatility: Frequent data changes increase urgency.
- Variance: Understanding the difference between planned and actual data is crucial.
- Cross-Impact: Data should reflect its effects on other business areas.
- Reach: Ensure the right data reaches the appropriate stakeholders.
You also have lower chances or risk.
4.Reduced Risk
EPM enhances transparency and ensures that the right information is accessible to the right people, allowing employees to understand business performance and enabling managers to test models for better resource allocation:
- Ensures global governance and compliance of data and reporting.
- Increases accountability for results.
- Prepares organisations for change and reduces surprises through improved collaboration.
- Provides standardised reporting to meet compliance standards such as GAAP and IFRS.
The need of enterprise performance management ensures that all levels of the organisation work towards executing the corporate strategy.
5.Competitive Advantage
Organizations working with EPM have an automatic competitive edge:
- Enhanced strategy formulation and planning.
- Reduced complexity and costs by unifying management information.
- Increased flexibility in response to mergers, acquisitions, or organisational changes.
Access to reliable information allows quicker, confident decision-making connected to company objectives. Key focus areas include:
The ability to respond rapidly and accurately to market changes is a significant competitive advantage in today’s business landscape.
So, with that, shall we look a few real-life examples of enterprise performance management platforms?
Real-Life Enterprise Performance Management Examples
Here are some real-life instances of this process:
IBM: IBM sought a performance management system to boost innovation and employee-management connections. Discontent with year-end assessments, they revamped the process by gathering employee input. The new model, Checkpoint, emphasized self-driven feedback for a holistic evaluation, empowering employees to take charge of their development.
Oreganon: Organon is a global healthcare brand maximising women’s health. They use a comprehensive approach to performance management for providing plenty of employee recognition.they have understood the importance of making all employees feel connected to the company.
Enterprise Performance Management Tools
EPM Tools are software solutions that help organisations monitor and improve performance across departments.
Key Features:
- Budgeting and Forecasting: Create budgets and accurate forecasts.
- Financial Consolidation: Automate data consolidation from various departments.
- Reporting and Analytics: Provide real-time insights and customizable reports.
- Performance Scorecards: Monitor key performance indicators (KPIs) to align goals.
- Scenario Planning: Model business scenarios and assess impacts.
- Collaboration Tools: Aid communication and alignment among teams.
Popular EPM Tools:
- Oracle Hyperion
- SAP BPC (Business Planning and Consolidation)
- IBM Planning Analytics
- Anaplan
- Adaptive Insights (Workday)
- Microsoft Power BI
- Prophix
These tools enable informed decision-making and drive performance improvements across the enterprise.
FAQs: Mastering Enterprise Performance Management: Your Essential Guide for 2024
What are the goals of performance review?
Aim for productivity that motivates employees, time management to ensure maximum efficiency for managing workflow, efficiency so that even if meeting the deadlines is priority, there should be very few mistakes and high-quality work.
How is performance appraisals different from performance management?
In an appraisal, the manager will conduct an assessment of the employees, evaluating their overall contribution. They usually occur yearly. However, performance management is a continuous process that focuses on the future and aims to increase efficiency.
What are the types of performance management?
The three types are: Management by Objectives, Key Performance Indicators, and 360-degree Feedback System.
Conclusion
Enterprise performance management will be a key success factor in enabling organizations to enhance their performance, bolster collaboration, and achieve strategic goals in 2024. With great EPM strategies and tools in place, they enable organizations to set reasonable expectations for their behavior, incentivize them, and drive performance improvements while also reducing risks to acceptable levels. With Qodenext, you have the tools and insights you need to be successful! Start now.
