Questions abound. Many of the answers, however, are being provided as companies come to understand and adopt business performance management (BPM).

 

At its core, BPM is designed to engender a "performance accountable" mindset in an organization. BPM is focused on creating an enterprise in which all managers work toward common goals via systems and metrics that increase each manager's knowledge of what drives optimal strategic and financial performance.

 

More broadly, however, BPM exists as a contributory cure to what's now commonly referred to as "Enronitis." BPM represents a critical methodology and discipline that helps lessen the likelihood of managerial malfeasance and heightens business results.

 

BPM: The New Framework of Internal Controls
Certainly there were many factors sparking the scandals at Enron, WorldCom -- and more recently -- Parmalat. The reported breaches include accounting fraud, falsified corporate profits, and concealed debt. But, in short, these companies’ missteps can be attributed to two things:

Businesses must have appropriate internal controls in place to survive. Controls are necessary to effectively direct business activities and safeguard assets. Enterprise-wide checks and balances minimize fraud, while enabling management to quantify losses and prevent future financial setbacks.

 

The absence of adequate internal controls -- along with the greater visibility that comes with financial reporting transparency -- was apparently one of the key determinants of the aforementioned companies' complications. Their fate might have been different had BPM been in place. This is because BPM measurements and systems are, by nature, internal control mechanisms. BPM creates operational and financial systems that enable a wide range of managers -- and, potentially, boards of directors -- to monitor performance and execution … broadly and in real-time fashion across the enterprise.

 

From a controls standpoint alone, BPM is needed now more than ever. The growing complexity of national and multinational business is why.

 

Large companies are often geographically dispersed. They typically have complex organizational architectures. Moreover, many firms have extended operations involving multiple supplier relationships, partnerships, and strategic alliances. With more complex organizational structures come the heightened challenge of translating corporate strategies into tactical plans -- and evaluating those plans quickly and accurately. BPM directly addresses these challenges. It also ties to the necessity and unique challenges of increasing system-wide communication and monitoring business practices and employee activity.

 

Empowerment … Without Chaos
Large and diversified firms require empowered employees who can function with minimal managerial oversight. Senior executives cannot -- nor should they -- micromanage the knowledge workers who populate today’s companies. Unfortunately by broadly delegating managerial responsibility, organizations leave themselves open to risk engendered by unsupervised supervisors.

 

Senior managers must closely monitor their people and operations to ensure accountability by all employees; the CEO’s attestation signature as mandated by Sarbanes-Oxley necessitates this. The downside is that with strict managerial oversight comes the potential for rigidity and bureaucracy. Organizations cannot afford such organizational restrictions if they are to function as nimble enterprises that can quickly shift strategic gears in response to changing market and competitive conditions.

 

Here is where BPM offers its most compelling benefits.

 

BPM systems have as their foundation real-time reporting systems, net-based information-sharing mechanisms, and strategic communication linkages between senior managers and their knowledge workers. BPM uniquely provides a system of checks and balances by delivering the data senior managers need to monitor business progress and effect employee accountability.

 

An empowered employee base is crucial. But with empowerment comes the potential for unmonitored actions that, at best, may be counter-productive to the company's strategic goals and, at worst, may spawn tomorrow's corporate scandal headlines. BPM offers a timely solution. It delivers numerous and relevant metrics without engendering bureaucratic rigidity.

 

Information Technology: Enabler of BPM
BPM introduces systems that can effectively measure business performance vis-à-vis strategically relevant standards and criteria. BPM provides a comprehensive approach to continuous planning, monitoring and reporting.

 

The growing complexity of business processes and the attendant need to continually gauge performance highlight the need for advanced and integrated systems support. New IT solutions are now available that directly support BPM implementation.

 

BPM-specific information technology enables managers to amass data from existing transactional systems. This gives managers "transparent" access to performance information on a real-time basis. The resultant integrated and accessible financial and operational information allows executives to confidently certify business results -- again, as dictated by Sarbanes-Oxley, but also because it simply makes good business sense. 

 

Certainly, without today's advanced IT tools and techniques, the wide-ranging applications of BPM could never be actualized. Thankfully, IT has become the essential enabler of BPM planning and execution.

 

Few business observers could have foreseen the evolution and ancillary benefits of business performance management. It has moved from a process driven by regulatory compliance to one that now exists as a powerful means of measuring performance in highly dynamic and volatile global markets. Add to that the benefit of increased organizational information-sharing and communication, and BPM represents a managerial mindset whose time has come. And none too soon.

 

BPM was initially viewed as a contributing remedy for "Enronitis" -- a medication for managerial malfeasance. In the broadest sense, however, BPM has become a proven prescription for profitability for companies worldwide.

 

PAUL TIFFANY is an Adjunct Professor of Management at the Wharton School and a Senior Lecturer at the Haas School of Business, where he teaches courses in management and public policy. He is also an author and consultant, and serves on the advisory board of the Business Performance Management Forum (http://www.bpmforum.org), an independent organization helping to advance the understanding of business performance management techniques, technologies, and processes in global enterprises.