While U.S. companies have spent billons on information systems in recent years, only now are they translating their IT capabilities into true performance management (PM) systems. They’ve discovered — the hard way — that although IT investment is essential, it is not sufficient alone. That’s because while transactional systems are necessary for the important tasks of recording and reporting transactions, they do not provide knowledge. The result: companies are awash in data, but thirsty for information to manage the business.
Finance organizations have vast technology assets to assist them with day-to-day operations, regulatory compliance, and financial reporting. Such systems record transactions and manage operational processes (e.g., point-of-sale activity, customer
relationships, inventory management, and distribution), automate compliance and controls, and roll up financial performance data. To varying degrees, these systems populate data warehouses that companies are beginning to tap with advanced business intelligence (BI) systems. The missing element — one that finance and IT teams are now pursuing — is the integration of these systems into a unified source of performance information and analysis capability.
“Performance management,” says Connie Winkler in the winter 2004 CFO IT special issue of CFO magazine, “is to performance data what ERP is to transaction data: a broad embrace of all relevant information, fully integrated and thus providing a single view tailored in this case to the needs of finance and operating executives.” The relevant information for performance management comes from both existing systems and from new measurements of operating activities; the integration, analysis, and display grow out of new applications and tighter integration of existing systems.
Senior finance executives say that to implement such systems, they are focusing on choosing the right metrics for managing performance and on improving both their processes (through regulatory certifications as well as more general process improvements) and their control over data. And they are implementing new performance management applications to deliver this new insight to finance and operating users.
Performance management implementations are well under way at several companies interviewed recently by CFO Research Services (a sister organization to CFO magazine and CFO.com). Senior finance executives identified a few broad themes that govern their implementation of performance management technology and its role in their organizations:
• Readily available, timely displays of performance information
• Close linkages between performance information, operating activities, and employee compensation
• Common, standardized databases to establish and maintain a single, unimpeachable version of the truth about company operations and performance
• Integration of unstructured text documents into performance management systems
Scorecards, Dashboards Show Performance, Not Just Data
Senior finance executives report aggregating and analyzing germane performance data into dashboards and scorecards — sometimes Web-based, sometimes client-server-based, sometimes using standard office productivity tools. Their objectives in doing so are both to analyze and to carry it to financial and operating managers to drive better decision making. Senior finance executives consistently call for PM systems that balance aggregated, analyzed data presented in a scannable, easy-to-read format, with “drill-down” capabilities that allow users to look not just at more granular information but at the analysis and assumptions that underlie performance metrics.