A new calendar year can be a great time to take a renewed, fresh look at your business planning and performance management. What has been working well? What hasn’t? Where to begin? Let’s go back to the basics for a few minutes: From the definition of Enterprise Performance management through its business value. How does EPM fit within a business’s existing technology architecture? Why are modern businesses seeking to improve their performance management capabilities?

Enterprise performance management (EPM) is the set of business practices, processes and tools that allow organizations to better plan and evaluate their strategic goals and their tactical execution to track performance and success of the organization. EPM is also known as Corporate Performance Management (CPM).

The scope of EPM

In a perfect world, we would like an EPM system that manages organization-wide planning, reporting and analysis.

Traditionally, organizations used to look at those processes as part of their “Office of the CFO” activities. With that approach, department managers such as sales, HR, and operations had to create their own subset or personal interpretation of the financial plan. As an example, sales managers have to take the revenue goals and split it between different revenue types: lines of business and quota carriers; HR and operations managers have to build their capacity planning, etc. EPM bridges the gap between these different planning silos and supports planning, analysis and reporting of business results, KPIs and more.

We can look at this as a process:  

  • Collection of organization-wide financial and non-financial data
  • Analysis and calculation of major KPIs
  • Set organizational, strategic, high level goals and targets
  • Cascade goals into functional areas of the organization
  • Target setting for select business drivers
  • Measurement of success and re-forecasting

Connecting the dots between EPM, ERP, and BI

Enterprise Resource Planning (ERP) and Customer Relationship Management (CRM) systems are primarily transactional systems. The primary role of these types of systems is to optimize and capture data from day-to-day processes and transactions to meet specific goals.

The name of Enterprise Resource Planning (ERP) may be misleading. Enterprise Performance Management (EPM) systems are different and are specifically designed to be complimentary to systems such as ERP and CRM.

An Enterprise Performance Management system’s role is to provide an overview of the entire organization’s performance based on the data that was captured using these other systems in a symbiotic relationship. In addition, EPM, in most cases, allows the updating of organizational planning data based on various business drivers and calculation of business rules (i.e. discounts, allocations, growth, etc.)

Business Intelligence (BI) systems offer some functionalities that can overlap with EPM systems. As an example, creating an “Actual vs. Budget” report is a functionality that may be supported both by BI and EPM systems. However, in order to support a fully unified planning process – create and collect the planning data, budgeting and forecasting, simulation and data entry of plan numbers and drivers, an EPM system should ideally be in place to take full advantage of the data this process offers.

Summary

Enterprise Performance Management is more than just a system. It is an organizational platform to manage and dynamically align strategic planning and goals with people and processes. EPM systems offer the opportunity to merge silos and disconnected planning processes together and allow more flexible, accountable, and transparent performance tracking and goal setting across the organization.