Corporate Performance Management - Understand How CPM Works

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Corporate Performance Management (CPM)

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Last Updated:November 13, 2023

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What is Corporate Performance Management (CPM)?

Corporate performance management, or CPM, is about the methodologies, metrics, processes, and systems for business monitoring.

Many software programs are used for tracking CPM, and the most popular ones include Oracle Cloud ERP, Prophix, Anaplan, and SAP Analytics Cloud.

Those applications are designed to provide teams with advanced capabilities, including planning, forecasting, and scenario modelings, such as automated manual processes, analytics to react to market shifts, and automatic updates of market trends.

Every business across the industry uses CPM to maximize its performance, and the following industries use it frequently– financial services, IT services, software and hardware technology, healthcare, management consulting, merchandise, and educational institutions.

The KPIs of CPM include:

Consistent and correct KPI-related data to reflect insights
Timely availability of KPIs-related data to reflect the efficiency, and effectiveness
Capability to unveil patterns or trends through the organized data

Principles of CPM include:

Selection of goals
Consolidation of data relevant to the firm’s progress
Interventions made by managers based on the data reviewed to improve future performance

What does CPM do to the firm? First, it saves time and energy and acts as a motivator.

According to a guide by UC Berkeley, an effective CPM process sets the foundation for aligning the individual's efforts with the firm's goals.

It links individual efforts with the organization's mission and objectives, so both parties understand the job distribution better.

It also helps set clear performance expectations and eliminates work that is longer useful.

Lastly, it promotes flexibility through regular check-in discussions, including status updates, coaching, and feedback. It allows employees and the firm to identify problems early on and adjust to solve the situation accordingly.

Sources of Metrics for Building CPM

MOLAP, or multidimensional online analytical processing, is used by businesses to understand their customers, uncover trends, and make informed decisions by capturing data from data warehouses and storing them in multidimensional arrays or data cubes.

Balanced scorecard

It is one of the oldest performance metrics introduced in 1992 for business tracking, processing, and control. It focuses on the following four categories that contribute to business outcomes-- learning and growth, business processes, customers, and financials.

Data warehouses

According to Oracle, it is A type of data management system designed to enable and support business intelligence activities and is solely intended to perform queries and analysis.

For example, an ETL-based data warehouse involves staging, data integration, and access layers to house its essential functions.

The raw data are extracted from disparate source data systems, then integrated with an operational data store database, and moved to a data warehouse database to be further arranged into dimensions and facts.

DM, data mining

Methods used in extracting and discovering patterns in large data sets include machine learning, statistics, and database systems.

It usually involves six tasks:

Anomaly detection: the identification of unusual data records
Association rule learning: relationships between variables
Clustering: the discovery of similarities between groups and structure in the data
Classification: sorting different data
Regression: find a function that models the information with the slightest error
Summarization: representing the overall data set

BPO, business performance optimization

Identification and implementation of new methods for higher cost-effectiveness
Automation of repetitive tasks
Application of machine learning to equipment operation

For more info: riverlogic

SEMs, strategic enterprise management software

It has a two-way flow of information:

Strategy analysts monitor performance using feedback from the business execution systems; adjustments to the strategy can be driven down to the operational level via new targets and KPIs.

Five application components SEMs have:

Business planning and simulation
Business information collection
Business consolidation
Corporate performance monitor
Stakeholder relationship management

For more info: sap SEM

Design and Implementation of Corporate performance management

Based on Quantic, A general performance management cycle includes setting goals, executing the plans, assessing the results, and giving & receiving feedback.

The more detailed process is carrying out each of the following steps respectively: plan → management goals → review system → feedback giving skills → ongoing employee performance management.

1. Create a performance management plan

The plan needs to be detail-oriented and includes the following concerns -- main objectives, blending the project with daily work assignments, the contribution of each part of the plan to the company, and the development of a practical reward system.

2. Set Goals for Performance Management

Setting SMART goals is critical to your company’s success, that is, to set specific, measurable, attainable, relevant, and time-based goals.

3. Build a Review System

The two key criteria are quantity and quality. That is quantifiable measurements such as the number of hours, net profit, number of viewers, and qualitative measures such as recognition, time invested, and customer feedback.

But qualitative measurement can be tricky, especially in dynamic industries such as the entertainment and fashion industry, because efforts can often be underappreciated.

4. Develop Strong Feedback-Giving Skills

Find a balance between pushing your subordinates to perfection and keeping them motivated to do better -- it is just as essential to give positive feedback as to provide negative feedback.

5. Ongoing Employee Performance Management

Keeps the cycle rolling by giving instant feedback, reacting to feedback on time, and making flexible plans and systems because business trends are constantly changing, and you want to stay on top of that.

CPM and Performance Management

What is frequently asked is the difference between enterprise performance management (EPM) and CPM. EPM and CPM are both under the umbrella term “business intelligence.

They are similar in concept because they are both software applications developed for performance management and analytic processes that replace the time-consuming and more error-prone manual processes.

Gartner reclassified CPM as financial planning and analysis (FP&A). Gartner popularized the term “business intelligence” back in 1989 to improve business decision-making using fact-based support systems.

Performance management as a concept was first introduced as early as the 1950s by Peter Drucker; a management consultant once invited to work for General Motors.

He came up with the idea of management by objectives (MBOs) that emphasizes defined goals for individual managers and differs from management by results (MBR).

Drucker later taught at New York University until the 1970s and moved on to teaching at Claremont Graduate University until 2005.

The performance management system is developed to enhance productivity, efficiency, and profitability.

However, it is never as simple as just a set of software applications that will always work on its own, but it is highly dynamic and requires close supervision by employers.

Suppose employees start to question the fairness of the system. In that case, such doubt will impede the effectiveness of the system -- for instance, if the internal competition within the performance management system is high, those who did not get rewards will likely lose faith in the system and get demotivated.

Therefore, managers must keep track of the system and its implementation in the firm and make adjustments based on the results.