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Performance Management Imperatives for 2005

Align business and IT to improve performance for a competitive advantage.

Adopting performance management as a management process will enable the alignment of business and IT to improve performance. Focusing alignment of people, processes and technology will assist in realizing the value of BI investments and specific business imperatives. Ventana Research has outlined specific business imperatives in compliance management, profitability management, process improvement, cost management, performance improvement and business innovation. Any organization looking to drive alignment and address these imperatives will need to adopt the methodology of performance management to achieve the highest levels of success.

Ventana Research defines performance management as a methodology and process of managing performance of an organization and its business processes to achieve a commonly understood set of goals and objectives. Ventana Research has defined six business challenges, which we refer to as imperatives that are critical for all organizations to address to remain competitive. These business imperatives are cross functional in nature and will help finance, operations and IT organizations focus their resources and investments effectively.

Compliance Management. Regulatory compliance brings new pressure to find better methods to assess policies and processes from finance to operations. Compliance assessment requires systems that automate the manual reviews and analysis and are proactive in monitoring business activities and processes to reduce audit costs. Efficient links between people and processes need to be adopted in the enterprise for compliance, new information technology and systems.

Profitability Management. The push for managing costs and optimizing revenue streams is sharpening the focus on profitability across the enterprise. The influence of finance beyond the budgeting process is creating new rigor in different forms of profitability, including customers, products, operations and financials. Organizations need to build a BI foundation to support applications and systems for profitability management. Process Improvement. Despite the increased buzz around business process management, organizations need to focus on assessing and improving their existing operational processes before automating and controlling them with new ERP or CRM systems. Most organizations and IT suppliers have failed to take this easier path to process improvement. Measuring, monitoring and improving processes is not as easy as it seems, but it is essential for enabling performance management.

Cost Management. Avoiding and reducing costs to meet the corporate and financial requirements of your organization should be part of your standard operational processes. Business must streamline operational processes for efficiency improvement and IT must continue portfolio and vendor consolidation to meet cost management objectives. Leveraging existing investments in CRM and ERP and accessing and integrating data assets into timely, relevant and contextual information is critical for enabling performance management.

Performance Improvement. The underlying theme of performance management is improving business results, and, while it seems obvious, management has not adopted the performance management process as part of their daily operations. Assessing and refining processes to the next level of efficiency and effectiveness requires a much closer alignment of information and systems. Lack of support for linking strategy, planning, and execution in most organizations is still a major barrier to realizing optimal performance improvements.

Business Innovation. Transforming or applying innovative processes and methods to gain a competitive advantage should be a top priority. Unfortunately, the assets and ideas in organizations aren't fully leveraged to improve the value of the organization. Organizing a process to take advantage of information technology and systems for business innovation should be part of every organization. One of the largest unrealized opportunities in organizations today is fully leveraging ideas and knowledge to transform business processes into continuing innovation.

Investing in BI is an important step toward improving information visibility and ultimately performance, but is only one piece of the larger performance management program that organizations need to undertake to achieve superior business results. The six business imperatives outlined here drive the need for rigorous performance management processes. How organizations apply performance management to their business will determine their competitive advantage. Ventana Research recommends that organizations that want to address these challenges leverage existing investments while examining new ones to bring innovation and performance improvement to the enterprise.

Mark Smith is CEO and Senior Vice President of Research at Ventana Research.

Ventana Research is the preeminent research and advisory services firm helping our clients maximize stakeholder value with Performance Management throughout their organizations. Putting research in a business and IT context we provide insight and education on the best practices, methodologies and technologies that enable our clients to leverage assets to understand, optimize, and align strategies and processes to meet their goals and objectives.