Corporate Performance Management, or CPM, is a broad term that encompasses a variety of business activities. It is unique in the sense that the definition of the term the is somewhat evolutionary.
As technology advances and business analytics become integrated with processes and controls, the term acquires new meaning. This CPM FAQ will act as a guide to get you acquainted with all of the aspects of CPM that you need to know.
The FAQ will answer what CPM is, how it relates to accounting and finance, what corporate performance management software is and how it helps organizations, the common features of a good CPM software, the performance management process, G2 requirements, and finally how CPM differs from BI.
What Is CPM?
CPM is an acronym that stands for Corporate Performance Management. According to Gartner, CPM is “an umbrella term that describes the methodologies, metrics, processes and systems used to monitor and manage the business performance enterprise”.
This is a somewhat broad definition that can be difficult to understand. This is because CPM attempts to broadly group a wide variety of activities into one bag.
Simply put, CPM is a collection of processes used to monitor a business’s performance. The business has a set of methodologies it uses to monitor certain key performance indicators, or metrics, that help business leaders manage effectively.
In many cases the enterprise utilizes a system, or series of systems, to enhance its ability to monitor these key performance indicators in real time.
This is not to be confused with Human Performance Management which is a practice of Human Resource professionals that attempts to improve employee productivity, satisfaction, or capabilities.
CPM is a subset of BI (business intelligence) and is a major practice that senior executives focus their energy on. This is because integrating planning, sales, marketing, and FP&A for the various departments links the organization to the goals and strategic plans created by leadership.
This creates an environment where the organization is aligned around strategic objectives and allows for operations to become focused.
What Is CPM in Accounting?
The accounting function in any enterprise is not only critical, it creates a useful data set by which to benchmark business performance. It does this by providing relevant, historical data to guide the FP&A process. Accounting as a business practice is “backward” looking as it records the activity of the organization.
The financial statements do two things that help shape the FP&A process: 1) they communicate historical data, and 2) they provide information for leaders to define goals and objectives.
For example, a business could have great sales and great margins but the business could be cash starved. Reviewing the financial statement reveals an issue that management wants to address in the coming year and simultaneously creates a benchmark to measure future performance.
Accounting processes are also an important part of the CPM environment. Transaction monitoring, regular account reconciliations, and monthly closings are all aspects of CPM. Each of these activities also has its own set of key performance indicators that managers track and benchmark to identify potential internal control conflicts or to reveal process breakdowns.
What Is CPM Software?
CPM software solutions attempt to help define and manage the strategic objectives of the organization. It is used to develop and implement methodologies and processes which allows business leaders to monitor and track key performance metrics.
Historically, CPM software applications were used primarily by finance and accounting departments. In fact, some CPM solutions are created with accounting departments specifically in mind.
These systems are typically used to analyze financial performance. Over time, advancements in software solutions made CPM applications more relevant to other departments but they are still primarily used by financial professionals.
One of the primary functions of CPM software is to assist in building forecasts, value proposition budgeting, and drafting financial plans. Modern systems have customizable dashboards and display graphical “scorecards” that deliver pertinent KPIs to the business’s management.
What Is the Process of Performance Management?
The process of performance management can be summarized as moving through the stages of planning, implementing, and monitoring.
In the planning stages of the process management analyzes the businesses financial performance.
Then a set of goals and objectives is defined and passed along to the FP&A team which works to create a budget that will be used as a guide for the coming period. The budget is used by various departments to generate key performance indicators that will be used to monitor the groups performance.
Once all of the departments are clear on their objectives they begin to implement plans of action to achieve them. Finally, adherence to the budget and the plans are monitored against forecasts and budgets and analyzed from breakdowns in the process. Feedback is then given and used to dictate further changes.
What Are Common Features of CPM Software?
Most modern software solutions create a more streamlined workflow for employees. The most common features include:
● Ability to create budgets
● Ability to create various plans
● Ability to generate forecast
● Automated GL closing
● Analytical reporting
● Costs management capabilities
● Modeling capabilities
● Dashboard and Scorecard monitoring
Good software solutions should provide useful analytics tools that allow users to create personalized dashboards. The environment should also be familiar and easy-to-use. Any CPM software application should be able to integrate with the organization’s business intelligence system.
The BI system should provide the CPM system performance data and the CPM system should be able to link that performance data to strategic and financial data.
G2 Requirements For CPM Software
G2 is the largest technology marketplace and allows businesses to search, review, and manage a variety of tech solutions. It is a unique marketplace in the sense that it uses peer-to-peer reviews to give buyers better guidance than traditional analyst firms which can take years to analyze solutions and publish research findings.
G2 has strict guidelines that a software solution must meet in order to be included in their marketplace. In order for CPM software packages to be listed on the G2 marketplace they must meet the following requirements:
● Deliver standard KPIs for different departments
● Align corporate objectives with operational plans and business processes
● Provide strategic planning and management tools such as balance scorecards
● Forecast changes in operational metrics and suggest corrective actions
● Automate the collection and management of the data needed to monitor performance
● Include workflows to automate tasks and processes for business performance tracking
● Generate and distribute reports and dashboards on key corporate KPIs
Without meeting these standards a CPM software product cannot be offered on the G2 marketplace, meaning only the best solutions are recommended to users seeking out these types of products on their platform.
CPM vs BI
CPM and Business Intelligence (BI) are in many ways intertwined. There is some confusion when it comes to the two terms and oftentimes their activities tend to cross over into one another, somewhat blurring the defining characteristics between the two categories. Many software solutions bundle the two capabilities together creating further convergence of the terms.
CPM is a subset of BI and relies on data provided by BI in order to create a path to achieve strategic objectives. The end product of BI systems are metrics and scorecards which is the beginning input in the CPM process. A CPM system links the metrics provided as a result of BIs outputs to the strategic goals of the enterprise.
BI has the primary goal of aggregating siloed data and organizing it in a way that is easy to understand, often generating reports, visuals, and dashboards. While BI systems do create useful reports, they are not linked in any way to the overall strategy of the business.
BI is not concerned with marrying the data outputs to goals and objectives and does not create plans, implement controls, or provide a means to manage KPIs.
CPM converts the data provided by BI systems into useful plans, performing analytics and making recommendations on how to manage KPIs. CPM systems also have the ability to enhance the control environment and create financial reports that take raw data organized by BI and convert it into useful models.
Using DataRails as a CPM Software Solution
DataRails can help your company implement automation that can help your FP&A team operate more efficiently and effectively. DataRails is helping FP&A teams all over the globe reduce the time they spend on traditional reporting and planning.
By replacing manual spreadsheet work with automated real-time data and integrating fragmented workbooks and data sources into one centralized location, you can work in the comfort of excel with the support of a much more sophisticated data management system behind you.