Investor’s Business Daily
September 30, 2022
Business Performance Management Rises Amid Accounting Scrutiny. By J. Bonasia
Financial reporting is getting a boost from a new trend in corporate computing. It’s called business performance management, or BPM.
BPM uses analytics software to compile key performance measures about a business. Managers use these reports to constantly update and revise sales forecasts and spending plans. Until recently, they had to wait for the end of the month or quarter to do so.
Now, with a glance at desktop scorecards and dashboards, managers can quickly pinpoint problems and growth areas. This lets them shift business priorities on the fly.
This week, 300 managers and executives plan to converge on San Francisco for an inaugural BPM conference. And more than 175 firms banded together in July to found the nonprofit BPM Forum.
A recent survey of nearly 500 executives by Meta Group shows that 85% of large companies expect to implement some kind of BPM plan by late 2004. AMR Research expects BPM spending to grow 23% per year and reach $12.2 billion by 2006.
Why so much hype? Because BPM’s improved forecasting speed is more important than ever.
Because of recent changes in accounting law, notably the Sarbanes-Oxley Act, bosses have grown especially concerned about the accuracy of their numbers, says John Koepke, chief technology officer of Hyperion Solutions Corp. Hyperion, a maker of analytics software, is a founding member of the BPM Forum.
"It’s a big motivator to change an organization when going to jail is a real option," said Koepke.
Yet many companies still use spreadsheet programs, such as Microsoft Excel, to gather sales data and other key metrics from business units. BPM seeks to replace those error-prone systems with a more centralized, dynamic planning process, says Koepke.
"BPM is all about measuring performance within the organization to understand insights into what affects performance," he said.
By gauging performance across a whole company, executives can ensure greater alignment between business units, says Koepke. One client of Hyperion, the Norwegian Post Office, had used 6,000 spreadsheets to manage its operations. That meant a lot of budgets and plans were stored in separate data silos that didn’t connect.
"This creates a huge problem around data management and keeping a consistent, single version of the truth across an organization," said Koepke.
BPM is a more integrated approach that rolls up all the data in one format. It aims to fix internal performance while improving external reports to regulators and investors, says Jim Bramante of IBM Business Consulting Services. He’s on the advisory board to the BPM Forum.
Bramante points out that having a solid strategy is more important than a good software program.
"Problems typically are not just technological," he said. "You need to get people to adopt new processes in a consistent way."
The BPM Forum was created as a way for companies to share ideas about best practices. The group convenes round-table meetings, conducts research and publishes new findings.
Members of the forum are moving away from calendar-based budgets to event-based planning, says Koepke.
This means companies can reset their business plans at any time, based on shifting markets or competitive demands.
"Companies can’t take two months for a change anymore," said Koepke. "They need technology in place that lets thousands of people participate in the planning process in days, not months."
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