What Is Corporate Performance Management? A Complete Guide
Updated 26 October 2022
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Corporate performance management (CPM), or business performance management, comprises the strategies and activities that enable an organisation to manage its success. Effective management of an organisation's collaborative efforts and achievements helps to identify gaps and develop systems that satisfy consumers and employees. Understanding how to put this method into action can help a company cut costs and improve its organisational strategy. In this article, we discuss CPM and its importance, list important metrics, differentiate between business performance and human performance management and show steps to use CPM in a business.
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What Is Corporate Performance Management?
Corporate performance management, or financial planning and analysis or financial close, refers to an organisation's attempts to monitor and improve its business operations. It entails the integration and optimisation of several business intelligence approaches. Businesses can build CPM plans to improve performance and operations by examining key business strategies, metrics and processes. It is important for any business, but it is especially significant for companies trying to remodel their budget, reduce expenditure, better align key performance indicators (KPIs), upgrade their organisational strategy and improve their financial planning process.
Companies use CPM software to manage strategies to monitor the effectiveness of their operations. The development and application of processes using CPM software enable businesses to monitor KPIs concerning corporate business objectives. Managers and executives who oversee a company's financial performance use this kind of software throughout the enterprise. Occasionally, accounting departments alone use this software to evaluate financial performance.
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Importance Of Corporate Or Business Performance Management
CPM is important because it enables companies to conduct a comprehensive examination of their operations, which can enhance the performance of their various business units. The following are some reasons CPM is significant for organisations:
Insight: Organisations can provide projections and useful business intelligence by examining budgets, procedures and scenarios. These outcomes can give them valuable insight into their current performance and help assess the viability of particular tactics.
Integration: Organisations can connect their goals and strategies to their plans and execution by integrating business planning, sales, marketing, forecasting and budgeting for finance, human resources and operations.
Strategy: Leadership teams are better able to advance a company's values and improve performance through forecasting, planning and an awareness of many operational factors. Management can develop plans to support a company's long-term objectives by coordinating various business divisions.
Business alignment: CPM combines initiatives with supply chain and risk management procedures to assist businesses in aligning their strategic priorities. Companies can develop effective business strategies and improve their operational procedures when all three business segments combine.
Financial soundness: CPM reporting can assist businesses in reviewing their budgets and identifying cost-saving measures. Companies can adopt a structured and efficient approach to financial management by modernising their financial planning procedures to include CPM.
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Performance Management Metrics
The metrics companies use in performance management procedures can vary based on a business's objectives and perspective. Companies typically aim to employ metrics that provide information about their finances, operations, strategies, customer satisfaction and compliance initiatives. Using these metrics, businesses may assess the effectiveness of their existing tactics and make necessary adjustments. Here are some worthwhile metrics to consider:
Acquisition costs: the amount of money a business invests in marketing to acquire a single customer
Conversion rate: the efficiency with which salespeople convert qualifying leads into paying customers
Sales growth: the company's advancements in marketing and selling its goods or services that show how well the sales methods are working
Sales revenue: monthly sales figures that show whether a company's marketing initiatives are successful, whether customers want to buy the good or service and whether the business is still competitive in the market
Customer retention: the capacity of a business to retain current clients
Budget variance: how actual outcomes compare with projected budgets
Gross margin: the revenue of an organisation after deducting all expenditure
Net profit margin: forecasts long-term company growth and determines whether generated revenue outweighs operating expenses
Employee retention: the capacity of a company to retain staff and reduce turnover
Employee satisfaction: employee productivity and engagement levels that professionals measure through surveys or HR systems
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CPM Vs Human Performance Management (HPM)
HPM and CPM have different monitoring areas even though both focus on performance management. HPM is a subcategory of human resources that aims to raise operational capacity, staff satisfaction and productivity. Companies might use HPM to gauge the effectiveness of employee evaluations or turnover rates. In contrast, CPM is a subset of business intelligence that deals exclusively with how companies convey, align with and carry out their plans. It has nothing to do with employee evaluations. This is possible with the use of CPM frameworks, which are typically subsets of methods for business intelligence.
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How To Use CPM
Companies predominantly use CPM software to help them track and analyse data. This usually involves the following process:
1. Select goals
Establish the organisation's objectives and performance standards to get the most out of CPM strategies. This stage can assist in selecting trustworthy KPIs that can inform business intelligence and help achieve company goals. Companies can use it to better align the goals of several departments, such as risk management, finance and sales.
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2. Consolidate data with software
Find the software that is best suited to the organisation's requirements while being cognisant of the company's goals. Make sure the software can provide relevant data and KPIs that a company wants to monitor. Software is not mandatory for CPM, but it can help integrate results, make forecasts, and provide insightful data. Additionally, it gives companies access to a single information source for more efficient reporting and analysis. Companies can reduce operational costs and streamline management strategies by automating the manual components of CPM.
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3. Intervene and incorporate a framework
A CPM framework can help companies concentrate their performance strategies and make strategic business alignments with their objectives. Here are some CPM frameworks to consider:
Balanced scorecard: To help businesses achieve their objectives, balanced scorecards combine a variety of business viewpoints. Companies may better understand their main business sectors and synchronise their operations by considering the perspectives of their customers, employees, financial performance and internal processes.
Six Sigma: The Six Sigma model is a data-driven framework that helps businesses streamline processes and reduce production variations by locating and removing weak points.
European Foundation for Quality Management (EFQM) Excellence Model: The EFQM framework develops strategies based on the ideal operations of a competitive organisation. It is a framework for self-evaluation that identifies an organisation's strengths and potential areas for development across all its activities.
Marketing Process Outsourcing (MPO): MPO highlights a business's best course of action for adapting to the rapidly changing nature of the global marketplace.
Performance management framework: By assessing a company's business model, strategies, resources and management practices, the performance management framework provides insight into the value the business generates. The framework combines all four areas and works with other business intelligence initiatives and technological solutions to help businesses continuously enhance their performance.
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4. Set expectations
It is important for a company to communicate its plans to the entire organisation to align its business areas and help everyone in the organisation understand its goals. Organisations can ensure all stakeholders support the suggested tactics by communicating expectations, goals and performance targets. Successful communication between leadership teams is important for CPM to be ongoing and effective.
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5. Study data
Consider gathering information about KPIs using software or other preferred methods. Create reporting procedures that can help a company better understand its existing operations and enable it to assess the effectiveness of its strategies. By doing so, it can compare the outcomes with the formal expectations.
Assess the effectiveness of the processes and tactics based on a company's findings and framework. Find areas for optimisation by using business management tools. This can help develop solutions to reduce costs, improve productivity and guarantee the quality of goods and services.
Please note that none of the companies, institutions or organisations mentioned in this article are associated with Indeed.
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