GRC
HR
SCM
CRM
BI


Article

 

Your Competitors Are Taking Steps to Maximize Business Performance — Are You? Get Started with SAP Solutions for Performance Management

by Mindy Fiorentino | SAPinsider

July 1, 2007

Many barriers -- including the fact that 95% of employees do not understand their company’s overall corporate strategy -- keep businesses from successfully executing on its objectives. With a robust performance management plan, however, corporate strategy can guide employees in every decision they make and each action they take. Learn about SAP’s performance management offerings and how they can help your business consistently hit its strategic targets.
 

 

The demand on companies from both internal and external stakeholders is increasing, and chief financial officers are bearing the brunt of the pressure. As a result, the focus of the finance office has increasingly been going beyond the basic finance functions toward defining and managing business strategy and profitability. This makes sense; the CFO has a unique understanding of company performance, risk, and valuation and is already setting overarching goals, such as increase market share by 5% or reduce corporate spending by 10%. But where many companies seem to fall short is in successfully executing on that overall shared strategy. Although line-of-business managers are scrambling to ensure that their employees are maximizing productivity in their daily jobs, tasks are typically not aligned with the corporate strategy. In fact, according to Fortune magazine, 90% of companies fail to execute on their corporate strategy (see Figure 1).1

 

Figure 1
Ineffective performance management often begins with strategy management challenges

What causes these disconnects? Chalk it up to a lack of integration across operational systems running the business, inconsistent and difficult tools at the departmental level, or a lack of access to information for front-line managers and information workers who should be executing on strategy, but employees at all levels within the company often don't understand how their specific role relates to roles in other parts of the organization or to the overall corporate strategy — and therefore they don't recognize how their decisions impact those other parts of the organization or the bottom line. In addition, most management systems don't empower employees with access to quality information to make informed decisions independently, or don't provide a systematic approach to link the corporate strategy with planning, budgeting, or other key business processes. Ultimately, most companies are not managing their performance against corporate strategy as well as they should and are missing out on higher profits because of it (see sidebar).

 

The Challenges of Maximizing Performance
What Companies Are Telling Us

  1. Maintaining one accurate information foundation — Executives, managers, and information workers all rely on daily data to make their decisions. But this information isn't always integrated across business processes or consolidated into one set of consistent, accurate, and reliable data.

  2. Having an aligned approach to planning, budgeting, and forecasting in order to improve cycle times and reduce operational costs — Managers often don't have the ability to easily collaborate with appropriate colleagues to align their planned initiatives and find cross-organizational ways to cut costs and to realize what impact their plans and budgets have on other parts of their organizations.

  3. Developing effective strategies and aligning them with initiatives and daily tactics throughout the organization — Information workers are challenged to work accurately and quickly on tactical business issues, unfortunately with very little in-process guidance to align or measure their work to the overall corporate strategy. Likewise, managers struggle to forecast accurate initiatives in line with that strategy and to answer daily questions about whether they are on track.

  4. Being aware of red flags before they become compliance issues — Executives like CFOs are pressured to attain goals under strict corporate governance and tight government guidelines, but often find out about potential issues much too late in the process because they do not have access to one consolidated set of data. Often the touch points that have affected that information are not delivered in time to have an impact on the data that is used for regulatory and financial compliance or management reports.

  5. Measuring what matters and continuously monitoring results in order to adjust the strategy, reallocate resources, and capitalize on business opportunities — Each day, managers make operational decisions in hopes of achieving their committed initiatives, but often have no way of measuring their progress.

What Does Performance Management Really Mean?

Many people think performance management just refers to the tools — perhaps a dashboard or even a spreadsheet — that executives use to help them understand how a company is doing. Unfortunately, these tools don't always provide a reliable snapshot of current data, and they're simply not advanced enough to solve the real issues of how executives define a strategy, enable their employees to execute on that strategy, and ultimately drive performance.

Performance management is much more than a toolset. It is a set of methodologies and tools that enable a company to measure, monitor, and ultimately improve an organization's ability to manage performance across every part of the organization — not just the finance department — by way of example. It's a company's ability to link strategies to plans while ensuring compliance, and then to continuously monitor how well it executes against those plans to maximize profitability and improve business agility. Most companies start with initiatives to improve financial performance, such as increasing working capital, profits, and corporate governance. The larger category of performance management, however, also includes demand-oriented activities and processes, such as acquiring, retaining, and developing long-term, profitable relationships with customers, as well as improving efforts to source materials, make products, and deliver complete and correct orders from a supply-side perspective.

 

SAP's knowledge of industry-specific business processes means that we offer the critical metrics needed to successfully manage performance.

What Do Companies Need to Become Performance-Driven Enterprises?

To successfully execute on performance management, a company needs an integrated system that enables employees, at all levels within the company, to apply a unified strategy to day-to-day business. Remember that different roles within the company have different needs:

  • Executives need to define a strategy within one platform, based on one set of consolidated, accurate data

  • Managers need to collaboratively build and align plans and budgets to achieve this strategy

  • Information workers need to make daily, in-process decisions based on specific initiatives that ultimately help to successfully execute the strategy

Accordingly, everyone — not just executives — needs a solution to help accomplish his or her unique goals (see Figure 2).

 

Figure 2
A comprehensive performance management solution will empower all employees who work with it to hit their performance goals

The performance management system must also be flexible enough to shift course at any time in response to changing market conditions or new lessons learned from the front lines. To get started, companies should evaluate what, if any, performance management solutions they have in place today, and determine how well those solutions support their needs — and where they are falling short.

Ultimately, to optimize performance, companies need to answer "yes" to all the right questions:

  • Does our workforce fully understand the corporate strategy?

  • Is the corporate strategy linked to a set of aligned line-of-business plans and daily operations?

  • Are our goals, plans, and metrics based on one version of consolidated data?

  • Are we minimizing financial cycle times and maximizing profits?

  • Are we measuring the metrics that matter?

  • Are we able to respond to business changes and nimbly reallocate resources accordingly?

  • Does our workforce make daily, in-process decisions based on strategy?

So Why SAP for Performance Management?

SAP has redefined what people can do with performance management, evolving what the market offers from business intelligence tools, to analytic applications for domain-specific analysis, to performance management applications that provide domain- specific analysis in the context of strategic goals. With SAP solutions for performance management (see sidebar), organizations can capitalize on their data assets and realize the goal of "any-time" information for all stakeholders involved in driving enterprise performance from a single, integrated platform. From defining strategy and managing profitability, to planning, budgeting, and forecasting, to running consolidations, organizations can measure performance from a trusted data source with the goals of maximized business profitability, minimized noncompliance risk, and optimized operational efficiency.

 

What Comprises SAP Solutions for Performance Management?

SAP provides a performance management solution that integrates with the SAP Business Suite, governance, risk, and compliance (GRC), and analytic applications needed to provide a comprehensive and modular approach for the performance-driven enterprise. SAP solutions for performance management include:

  • SAP NetWeaver Business Intelligence (SAP NetWeaver BI), a business process platform in which you will find the tools needed to collaborate, integrate, and ensure consistent data and metrics and to deliver a single version of the truth.

  • A rich corporate performance management (CPM) portfolio of applications, including strategy management, planning, budgeting, forecasting, consolidations, and profitability
    management:
    • SAP Strategy Management allows managers and other stakeholders to define goals that are tied to operational objectives, initiatives, and metrics. Information is transparent, and stakeholders are able to visualize and understand the relative importance of projects prioritized according to strategic goals.

    • Business Planning enables organizations to improve productivity by simplifying and streamlining the budgeting, planning, and forecasting process. It also allows all stakeholders to collaborate in the process via business process workflows and a familiar Microsoft Office user interface that operates off a single enterprise-scale platform.

    • Business Consolidations enables greater transparency into transactions and improves accountability and the identification of potential risk exposure via its streamlined integration with the performance management suite. It enables organizations to close the books faster by harmonizing charts of accounts, automating manual processes, and embracing the use of Microsoft Office tools against a single version of the truth to get accurate financial information sooner.

    • SAP Business Profitability Management by Acorn Systems provides visibility into the revenue, cost, and net profitability of customers, products, suppliers, channels, orders, transactions, and any other dimensions that drive profitable growth, thus enabling users to focus on the areas of greatest profitability and providing a profit improvement opportunity ranging between 3% and 5% of costs, and 5% and 15% of revenues. It also maximizes business profitability by providing insight into the root causes of cost variability within the business processes that affect profit, hence improving decision making for the business user.

  • The embedded performance management solutions within the SAP Business Suite. With SAP solutions, analytics and decision-making functionality are included within the context of your business process. There is no artificial barrier between transactional tasks and decision making.

  • Industry-specific applications for retail price optimization, banking risk management, manufacturing shop floor analytics, and more.

  • Key horizontal applications for spend analysis, sales and operations planning, resource and portfolio management, and more.
SAP solutions for performance management stand apart in the market for several reasons:

1. They provide a single, centralized view of operational and financial performance data — at any time — from a single architecture. Based on SAP NetWeaver, SAP's performance management solutions take an innovative, unique approach to managing performance, enabling customers to have a single version of the truth throughout the complete business cycle — from strategizing to reporting. A single platform is the only way you can ensure that core transactions (the ones that take place in your ERP, CRM, and SCM systems) and analysis are harmonized to enable accurate data, common KPIs, consolidated planning, seamless collaboration, and in-process analytics across organizations. SAP's integrated, intuitive solution will minimize implementation time and risk and will maximize results.

Consider a process — the month-end close, for example — that would be under intense scrutiny if your corporate strategy was to increase revenues by 5% this month. SAP provides a faster and more reliable way to consolidate data across disparate systems and to automate the tasks and workflows involved in this complex process. SAP's automated, integrated solutions accelerate the closing process while ensuring greater transparency, conformance with internal controls, and risk mitigation. They also enable greater reporting reliability through more comprehensive issue detection and rapid resolution.

Operating from a single SAP platform enables an organization to feel more confident about the accuracy of reports delivered externally to investors, shareholders, auditors, regulators, customers, and partners. It also provides a stronger foundation from which to make internal management decisions that will ultimately shape business strategy and tactics.

 

SAP's solutions for performance management address the needs of both the organization and the individual user by delivering the first framework for making corporate strategy relevant to information workers.

2. They maximize operational efficiency and minimize noncompliance risk by functioning within SAP's core competencies — business processes and industry expertise — eliminating departmental silos and generic information. SAP is known for deep process and industry knowledge. Because of this, you can look at your business's complete picture, make informed decisions, and take action. If you were to manage your business based on the information captured in silos that standalone products provide, then you might make decisions that optimize locally but fail globally. If you rely on generic data instead of data tailored to your industry, you might miss out on best practices that your competitor is leveraging.

SAP is unique, with 35 years of experience in more than 26 different industries. Our knowledge of industry-specific business processes means that we offer the critical metrics and best practices needed to successfully manage performance for your specific industry so that you can see, conclude, act, and enforce in the manner that is best for your company.

3. They open up performance management to every stakeholder, no matter what role. SAP is the only vendor to offer users an array of interaction choices to dramatically increase the usage of performance management solutions.

Most companies believe performance management must start at the executive level. Sure, aligning your entire organization from top to bottom may seem logical. In practice, however, it is cumbersome and increasingly complex to gain alignment across the highest levels of all company divisions.

While top-down alignment can seem insurmountable, an incremental, middle-out approach makes alignment attainable. SAP Strategy Management, for example, helps companies align three cornerstones of a strong performance management strategy — goals, initiatives, and metrics. Rather than relying on an organization-wide, big-bang approach, you can focus on a division or functional area with a specific need and deploy a performance management foundation that covers a few goals or software components (see Figure 3).

 

Figure 3
SAP Strategy Management enables decision makers to focus on specific, relevant metrics rather than relying on a high-level, top-down performance management approach

By providing contextually relevant metrics in a highly collaborative user experience, SAP is making corporate strategy tangible and meaningful to every employee in a company. Once you learn what works well in your own environment, your organization can leverage these best practices and its investment in the technology foundation to easily roll out performance management to the rest of the enterprise.

4. They optimize planning, budgeting, forecasting, and consolidations in one product interface. SAP is the only vendor to provide integration of the planning, budgeting, forecasting, and consolidations functions in a single product instead of in multiple modules, with the added advantage of using familiar Microsoft Office products to access, view, manipulate, and present data. SAP is also the only vendor to provide predictive analytics.

Summary

To overcome the challenges of maximizing performance, SAP solutions for performance management use a single platform to drive financial performance and value to the business. By realizing the value of "any time" information delivery to all required stakeholders, organizations can maximize profitability, optimize operational efficiency, and minimize the risk of noncompliance.

The solutions provide streamlined consolidations, rich analysis, personalized reporting, and integrated processes across strategic and operational planning, budgeting, and forecasting. This integrated approach to performance management, unique to SAP, gives business users the ability to understand and improve their current performance, determine the impact each decision will have on their business, and more rapidly take action to turn information into value.

Managing performance and maximizing profitability go hand in hand. With SAP solutions for performance management, you can be sure that employees are guided by corporate strategy in every action, process, and decision they face. Visit www.sap.com/ solutions/performancemanagement to learn more about SAP's comprehensive, integrated solutions for real-time performance management.



1 Balanced Scorecard Collaborative, Strategy Focused Organization (2001).


 

Additional Resources

The Reporting and Analytics 2007 conference in Orlando, October 15-17, 2007, offering in-depth coverage of SAP performance management tools (www.reporting2007.com)

The Managing your SAP Projects 2007 conference in Miami, October 22-24, 2007, offering sessions to help you define strategies for optimizing business performance within your SAP solution environment (www.sapprojects2007.com)

CPM and Balanced Scorecard with SAP by Marco Sisfontes-Monge (SAP PRESS, http://store.sapinsider.wispubs.com)

 

Mindy Fiorentino is currently Vice President of Solution Marketing, focused on taking SAP's performance management solutions to market. She has 20 years of high-tech marketing, product, and sales management experience. Mindy previously worked as Vice President of Product Marketing for Hyperion Solutions, where she defined and drove awareness of Hyperion's position in the business performance management space; she also served as Vice President of Marketing for Hyperion's eCRM Analysis division. Mindy has also held senior roles at MarketFirst, Resumix, ParcPlace, and IntelliCorp. She can be reached at mindy.fiorentino@sap.com.

 

An email has been sent to:






More from SAPinsider



COMMENTS

Please log in to post a comment.

No comments have been submitted on this article. Be the first to comment!


SAPinsider
FAQ