Few today dispute the need for Enterprise Performance Management solutions - with greater than 65% of US companies and 62% plus European companies deploying Balanced Scorecard or strategic EPM systems within their organizations. As with all enterprise systems solutions however, the hyperbole from consultants on value add has been prodigious and at times stupefying.
What really matters for new investors in Asia, and for SMEs throughout the world, is understanding what evidence there is of the ROI, of these, oftentimes, significant systems infrastructure investments?
PERVASIVENESS - IT COSTS, BUT IT DELIVERS
A 2007 survey of 200 large companies by the Hackett Group of Atlanta, found that organizations deploying 'world-class' EPM systems (defined as companies in the top quartile for efficiency and effectiveness) enjoyed equity market returns of 2.4 times of their peers in their industry (including stock price and dividends). This study also revealed a critical success factor in successful deployment was 'pervasiveness' - that is to say, many more operations managers had access to the online reporting tools that in their peers in the industry. It is thus where PM permeates throughout the organization that we see the real business performance gains (equity and value).
Pervasiveness comes with a cost. Many organizations have driven PM from the ERP or from the Finance systems, often drowning their Reporting systems in data and remaining 'information poor'. In so doing, mid to large sized companies across the USA, Europe and Australia continue to spend heavily in re-aligning, simplifying and consolidating their EPM models. In so many cases, implementation has failed, due to both 'poorly-planned deployments' of simplistic Balanced Scorecards, and as a result of monumental complexities imposed by 'poor-fit' EPM systems invariably add-ons to major ERPs (they shall remain nameless). Thus knowing what to measure from the inception is vital - get it right at the top and build the 'decision architecture' from the top down.
Pervasiveness does not mean saturation. Making the right data available at the right level will require the construction of individual dashboards for each 'entity' in your measurement hierarchy - it must also mean additional costs in both selecting the best 'dashboard' software, and in acquiring the expertise to oversee and control the deployment. Targeting the decision makers - not the analysts is vital - put information into the hands of those have the power and influence to enact change.
GET THE CULTURE RIGHT BEFORE YOU BEGIN
Another key variable in determining the potential ROI of EPM initiatives is the 'Culture' of the organization. A 2007 BRWS survey found that the two largest obstacles to successful EPM deployment were; (a) lack of accountability, and (b) lack of readiness to support a measurement driven system of management. Ironically, it is very often for these reasons that organizations attempt to introduce EPM systems, and in so doing bury themselves in internal conflict and significant IT and consulting costs overruns. Therefore, it's vital to know your limitations before you invest - to build the foundations for accountability before investing in the technologies.
LEARN HOW TO USE INFORMATION
As important as the availability of the right data at the right level, is learning how to use data to effect decisions. Will your dashboard system enable a hierarchical view of your business? Will it enable 'drill through' to key performance drivers at operational, financial and market - sales levels? Do you meet regularly (virtually or otherwise) to review key data? Are workers at all levels aware of 'performance data' which is relevant to work they control? Is your EPM system linked to your performance appraisal and rewards systems? Without consideration of how you will use your EPM system prior to your investment, there will be no ROI - but there will be ever increasing costs.
BUILDING ON SOLID GROUND
The implications? We suggest before you invest, you consider the following:
1. READINESS - Conduct a 'EPM or BSC Readiness Assessment' - know where you have weaknesses, and do not invest until you have established the right foundations;
2. CEO COMMITMENT - ensure you have the buy in off the Senior Executives before you begin - no buy-in is a RED LIGHT;
3. ROAD MAP - clearly map out the pathway to deployment over a 18 month to 3 year horizon - know where and when you need to invest, and who to involve at different stages;
4. BUSINESS CASE - invest time in understanding the total spend and the potential 'total cost of ownership' of this system - and quantify the benefits before you begin;
5. MAP THE INFORMATION ARCHITECTURE BEFORE YOU INVEST - know what information key decision makers need before you build your system;
6. MAKE IT PERVASIVE - know that for this to deliver real ROI, you will need to make it pervasive - making meaningful data available at all decision making levels - plan for these costs;
7. MANAGE IT - Reporting without an effective Performance Management Process is worthless - structure and control your management processes to fully align with and support EPM deployment.
In articles to follow, I will review some of the technology options and considerations, to ensure the optimal ROI on your EPM investment.
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