Business is booming at Erickson Retirement Communities Inc. Or, to be more precise, baby-booming. With an aging population about ready to bid farewell to the three-bedroom colonials of their middle years and take up residence elsewhere, the company anticipates substantial growth to its nationwide network of retirement “campuses” during the next decade.
In just 20 years the company has grown from a single campus (literally — its first facility was the former campus of St. Charles College & Seminary) to 20 such facilities in five states, providing homes to 10,000 people and jobs to 5,500. Unfortunately, Erickson has grown in other respects, too. “We found that we had 30 separate accounting systems and two different general ledgers,” says CFO Bernard Hirl. “We realized that was not a basis for us to move forward.”
There are any number of ways to consolidate accounting and other finance systems, of course, but Erickson opted for an emerging concept known as “corporate performance management” or “business performance management” or “enterprise performance management.” Call it what you will, this software can be thought of as balanced-scorecard-and-then-some. Essentially, CPM (we threw a dart) puts a set of integrated software modules to the task of aligning an organization’s strategy with the tactics taken by its discrete parts and then measuring that alignment or lack thereof. But whereas balanced scorecards quantify a range of financial and nonfinancial data points, CPM measures those items in the context of business-strategy execution and management. “It’s part quantitative and part qualitative,” says Mike Schroeck, partner in charge of the global integrated analytics practice at IBM Business Consulting Services.
One driving force behind the CPM concept is the quest for “alignment” and “transparency,” two inescapable corporate buzzwords that can prove difficult to achieve — largely because there is often no vantage point from which the entire organization can be clearly viewed. Until recently, for example, Targus Group International Inc. was unable to tell whether its business strategy was being properly executed. The Anaheim, California-based designer and marketer of mobile computing accessories — it pioneered the computerized notebook carrying case — was growing fast, but it could not objectively measure how it was performing. “I didn’t know if we were really doing as well as things looked,” says John McAlpine, CFO of the privately held company.
Targus has a long-term strategy and a senior-level group that, McAlpine says, is articulate and knowledgeable about where the company needs to go. But that doesn’t mean, he adds, that “everyone in the organization was lined up and making sure that what they were doing wrapped back to our overall mission.” In procurement, for example, the company wanted to be sure that it had the right amount of materials inventory in the pipeline, given its customer and manufacturing needs. But sales, manufacturing, and the procurement department weren’t aligned in a way that optimized materials requisitions. Even if they had been, there was no way to really measure the outcome.
CPM is not brand new, but it represents an evolutionary advance over earlier (and still-dominant) software that addressed budgeting, planning, forecasting, analytics, and related functions. The same companies that pioneered those applications are now leading the CPM charge, seeing value for both customers and themselves in uniting a group of disparate financial applications into a suite of products that can serve as a sort of mini-ERP for finance.