Executing business strategy remains a challenge for businesses, in fact, an estimated 67% of corporate strategies fail due to poor business execution.
For many businesses, this comes down to the fact that strategy and operations simply don’t align. This disconnect means the strategy is often forgotten about, operations are not monitored to see how successfully they’re delivering the strategy targets and overall, business performance is poor.
Business performance management can help companies of every size, from giant corporations to SMEs, better execute their strategy.
BPM Definition: What is Business Performance Management?
So you have a business strategy, with clear goals in it. But how are you executing that strategy? How are you reaching those goals and is there a better way to do so?
Business performance management (BPM) is a process that allows businesses to monitor the methods used to reach strategy goals, so that they can continuously develop those methods to become more efficient and effective and ultimately increase business performance.
There are many aspects of business performance to manage, from people to processes to financial performance. However, for all business performance management processes, they all involve three main activities:
- Goal selection
- Information monitoring and consolidation
- Managerial adjustments
These three activities work together to improve efficiency and performance, but it begins with goal selection. You can’t improve performance if you don’t have a clear goal in mind.
Setting your goals helps businesses determine the exact methods and processes that will help achieve those goals.
Once the methods and processes are determined, data is used to monitor them. This information should be monitored both in real-time to allow for any adjustments necessary and consolidated for regular review. The consolidated metrics let businesses analyse the methods and processes to identify strengths and weaknesses, so they can figure out better methods and processes and continuously improve.
After the data has been consolidated, teams led by management can figure out which measures to take that could improve efficiency. These changes are charted and analysed again to ensure success and in turn, inform the new goals set as the last goals are achieved.
As you can see, these three activities create a process of continuous improvement for business performance, allowing companies to increase their efficiency, productivity and profitability to create more competitive and resilient companies.
Different Categories of Business Performance Management
As we mentioned above, there are many different aspects of performance businesses can manage. The simplest way to break this down is to categorise business performance management according to its objective. For example:
- Team performance management
- Department performance management
- Organisation performance management
- Individual performance management
- Business unit performance management
- Product performance management
The Business Performance Management Cycle
The three activities we mentioned above create a clear BPM framework for businesses to follow, known as a business performance management cycle. They’re as follows:
- Evaluate and plan
- Monitor performance metrics
- Review and analyse
- Improve and repeat
1. Evaluate Current Strategy and Goals and Plan Accordingly
Your business performance management process needs to align with your business strategy and the goals within it. This all starts with evaluating your current goals to ensure they’re realistic and attainable. For a continuous process, setting SMART goals are a great way to achieve this:
Goals without specifics are impossible to track and measure. If your goal is growth, but no specific amount of growth, you’ll struggle to create a process in which you create sustainable growth long-term.
Your goals should be specific, but also align with different departments to ensure business performance is being measured across the entire business and that all performance targets are relevant to the larger business strategy.
Once you’ve got specific goals, you need to figure out how they’ll be measured. What performance metrics will you use to measure each method and process?
Goals also need to be realistic and attainable. Setting goals far out of reach means you’ll not give enough thought to the processes and methods to achieve them. For example, if you want to increase year-on-year revenue by a substantial amount, you’ll likely need to invest heavily in marketing and sales to do so. Without a realistic foundation for these goals, you’ll struggle to figure out where resources can be best placed to actually reach these goals.
You also need to set a date for when you will achieve said performance targets. This can be monthly, quarterly and annually. The best bet is a mix of all three to ensure performance is being continuously monitored and reviewed.
2. Utilise Business Intelligence to Continuously Monitor Performance
With your performance goals set, your business performance management process is underway.
The next step is to monitor business performance metrics continuously. This means you need to have dedicated leaders of performance management within each department. They should be regularly reviewing real-time metrics using business intelligence solutions. This regular review allows businesses to better react and adapt. Goals can be adjusted to changing market conditions and internal challenges can be addressed quickly, as opposed to after the fact
3. Review and Analyse Performance Methods and Processes
As well as continuous monitoring, a business performance management process needs a set interval where the methods and processes are reviewed and analysed. This allows leaders to spot opportunities for improvement.
Utilise a larger collection of performance metrics to gain insight into where improvements can be made. Any planned changes should be recorded so businesses can identify the impact specific changes made.
4. Improve and Repeat for a Continuous Business Performance Management Process
Changes shouldn’t be made ad hoc with no planning. What are the specific changes and what do you expect to see from them? How will you make the changes to the specific process? Who will lead these changes?
This final step actually takes you back to the first step, evaluating and planning. It is this step that makes the business performance management process one that is continuous and creates long-term improvement.
Why is Business Performance Management Important?
Businesses are facing an increasingly difficult landscape which has real impacts on viability, resilience and market share.
Markets are more competitive. There is always a competitor doing what you do for the same price or even less. Battling it out over who can offer a product or service the cheapest only results in slimmer and slimmer margins for the industry. It’s bad news for everyone involved.
Businesses instead need to compete on the customer experience. Research shows that the customer experience has overtaken price and product as the key brand differentiator for consumers and consumers are willing to pay more for a great customer experience. This means businesses need to improve their efficiency and productivity across all departments to compete.
As if this wasn’t enough of a challenge, globalisation has brought its own challenges. Not only are there more competitors, but operations have become more complex to manage due to outsourcing, remote working and more.
Globalisation also means businesses are contending with a variety of economic challenges. We’ve all learned just how interconnected the global population is over the course of the last couple of years. But for businesses, this means markets are increasingly volatile and there is increased uncertainty.
Consumers also demand more from businesses, not only in terms of the customer experience, but in terms of social and environmental responsibility. Brands that cannot keep up with the changing demands of consumers struggle to remain competitive and create sustainable long-term growth.
These challenges are creating yet another challenge in that they’re stifling innovation. Many businesses are so swept up in the current vast and complex issues that they struggle to manage their future. There is a constant need for innovation to remain competitive in today’s market.
So what businesses need then is to rethink business and implement more agile and innovative management processes to navigate this challenging landscape.
Business performance management is an effective response to these obstacles. It ensures companies are actively working towards current and future goals by continuously improving the unique methods and processes involved.
From Strategy to Effective Business Execution: The Benefits of BPM
Business performance management brings many benefits to businesses when it’s implemented successfully.
By far the largest benefit is creating a sustainable framework for business execution. Instead of a static strategy document unaligned with the operations of the business, there is an active process in place to ensure the execution of strategy to reach larger business goals.
Increasing efficiency in processes can also help lower costs for businesses. This in turn, can help businesses increase their margins and profitability.
A huge amount of business performance management is linked to the performance of people. After all, it is people behind the methods used to achieve business goals. Improving the performance of teams and individuals helps create a more productive workplace with a stronger company culture and ultimately, a more resilient and profitable business.
The Role of Business Intelligence in Business Performance Management
The role of business intelligence in business performance management cannot be understated. There are a huge wealth of metrics to track to ensure performance is successfully monitored and tracked.
Leveraging business intelligence solutions can help leaders and management better manage, consolidate and analyse data. It takes away a huge amount of the administrative data tasks involved in collating performance metrics. This time can instead be better spent on analysing the data available to gain better insights and come up with more innovative and creative ideas for improvement.
Additionally, business intelligence technologies have come a long way over the last decade. Previously, performance tracking was based on existing data to predict future performance. Now, solutions can provide real-time data. The best solutions are even able to contextualise this data against external sources so it can be better understood.
These technologies mean businesses have better adaptability to whatever unexpected changes or challenges they face. They’re able to use the data to react in real-time, as opposed to after the fact.
Overall, utilising business intelligence in performance management helps improve decision making for companies through data-led insights.
Characteristics of a Successful Business Performance Management Process
Organisations that get business performance management right are competitive machines. Microsoft, Deloitte and Adobe have all adopted continuous business performance management processes and have enjoyed a wealth of success in part because of this.
While the exact process will come down to the unique needs of your business, many of these BPM processes share some key characteristics that contribute to their success besides a robust business intelligence solution.
The importance effective goal setting cannot be overstated. Clear goals that are meaningful and understood are vital to a successful business performance management process. It allows everyone across the business to align and understand how their tasks and responsibilities contribute to wider business goals.
This alignment is important, because a great business performance management process is collaborative. While leadership may turn the initial cogs to implement a BPM process, the best performance goals are strategised between teams, departments and leadership.
To achieve this collaboration, there needs to be transparency about the business strategy and performance. Conversations held behind closed doors between leadership will not help staff understand their responsibilities, nor will it empower them to hit performance targets.
Common Issues in Business Performance Management
Just as successful business performance management processes share key characteristics, unsuccessful business performance management processes also share some common traits.
First, bad performance metrics. The performance metrics you choose to monitor need to promote the desired performance. This is why so many businesses opt to use a balanced scorecard to ensure performance goals align and create the desired results.
Similarly, poor targets are a surefire way to create chaos in a business performance management process. Set them too high and you’ll demotivate the entire business when they can’t reach them. Set them too low and there is little motivation for improvement as the status quo suffices.
A lack of transparency around performance targets can create similar issues. Departments, teams and individuals need to know targets have meaning. They’re not a random number pulled from a hat. Performance targets should be based on data and this should be transparently communicated with teams.
Even with transparency, if teams feel there is a lack of relevance to performance targets. This often happens when performance metrics are dictated from the top-down. Increased collaboration around setting performance targets and metrics can help avoid this issue, as well as encourage departments and individuals to take ownership over their performance.
Business Performance Management Consulting
Implementing a business performance management process has great benefits for businesses, increasing their competitiveness and resilience. As it is a process of continuous improvement, BPM can help create sustainable long-term growth for businesses of many sizes.
However, if you’ve never implemented a business performance management process previously, it’s a daunting task. This is why many companies opt to use business performance management consultants to help implement the necessary changes successfully and guide them through the resulting business transformation.