Interview With Gartner's Lee Geishecker

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Lee Geishecker is research director for Corporate Performance Management (CPM) and corporate financial applications in Gartner’s Enterprise Operations Applications practice, as well as research community leader and primary author of Gartner’s CPM initiative. In this exclusive interview, she explains how innovative organizations are deploying CPM solutions to add a new dimension to Business Intelligence efforts.

IB MAGAZINE: Let’s start with a general definition of CPM.

GEISHECKER: Corporate Performmance Management is an umbrella term that describes the methodologies, metrics, processes and systems used to monitor and manage an enterprise’s business performance. CPM is more than just systems. It also includes the processes used to manage corporate performance, such as strategy formulation, budgeting and forecasting; the methodologies that may drive some of the processes, including the balanced scorecard (BSC) and value-based management; and the metrics used to measure performance against strategic and operational performance goals, such as key performance indicators.

IB MAGAZINE: What are the current business drivers for CPM?

GEISHECKER: Different organizations are driven to CPM for different reasons. For example, some corporate finance departments are reacting to disclosure policy changes from the Securities and Exchange Commission (SEC), as well as more rigorous reporting requirements in compliance with International Accounting Standards. But CPM is not exclusively about finance or financial data. It pertains to any area of an organization where exposure and visibility to information needs to be more real-time, more accurate, more relevant, and more consistent.

IB MAGAZINE: We commonly hear the phrase “feedback loop” in the context of CPM. Can you explain this concept?

GEISHECKER: In broad terms, you can break down business information into three categories: strategic, operational, and transactional/tactical. Picture these categories as boxes or silos, separated from each other. At a strategic level, we might say, “Our mission is to grow the business by ten percent this year.” At the operational level, we get more specific: “How are we going to improve our sales? What kind of sales force should we use? What products should we sell?” On a tactical level, it gets even more granular: “Which products do I sell to which customers in which geographies?”

In the past, those three types of inquiry – those three business domains – were distinct and separate. Feedback loops connect the boxes, generating information that is fed back to the participants so they can adjust their behavior accordingly. The strategy loop typically operates on an annual, semiannual or quarterly cycle; the operational loop typically operates on a daily, weekly or monthly cycle; and the activity or processes loop operates on a real-time (or near-real-time) to daily basis. The loops are continuous, so as transactions occur at the tactical level, the information feeds back up to the operational level, which feeds back up to the strategy level. You might have corrections and improvements in place to keep the business in line with its strategic objectives, helping the organization move from a reactive to a proactive mode.

IB MAGAZINE: Is CPM the logical extension of business intelligence?

GEISHECKER: The technical aspects of CPM typically spring from a business intelligence infrastructure and its underpinnings, such as data warehouses, data marts, data extraction routines, data mining, etc. And business intelligence remains a great way to get at information – sorting, drilling down, filtering, translating...But there’s still that question of what are you going to do with the information. That’s where Corporate Performance Management comes in. Historically, BI applications have focused on measuring sales, profit, quality within an enterprise. CPM goes beyond these approaches to BI applications; it introduces the concept of “management,” embracing processes such as planning and forecasting as core tenets of a business strategy.

IB MAGAZINE: Can customers leverage existing BI strategies, or do they have to start from scratch when they create CPM solutions?

GEISHECKER: Every organization has some form of BI strategy in place. CPM does not require them to throw that strategy away. In fact, CPM is about leveraging the existing business intelligence strategy wherever it makes sense to do so. For example, the information delivery portion of CPM should be linked to the portal or presentation strategy of the enterprise.

IB MAGAZINE: What is the relationship between CPM and Balanced Scorecard initiatives?

GEISHECKER: Remember our definition of CPM, which includes methodology, metrics, processes, and system. We’ve talked about the system, which includes the BI infrastructure. The metrics of CPM are more tactical or analytic in nature, like key performance indicators (KPIs). And the processes are things like strategic planning, activity based costing, and balanced scorecards. So a balanced scorecard is a common CPM process, a formalized methodology that follows the disciplines of Kaplan and Norton in identifying strategies, drivers and so forth.

IB MAGAZINE: Is the success of a CPM solution more the result of the underlying technology, or the rigor with which it’s applied?

GEISHECKER: Success is predicated on the convergence of the two. Remember the original definition – CPM is not an application; it’s an umbrella strategy where BI meets business process, where IT meets users. Convergence is what this is all about. There is no single or “correct” combination of processes, methodologies and metrics. In many cases, they exist in isolation; but they are starting to converge in suites of BI applications that embody the functionality of multiple processes and link them to a number of methodologies. For example, some BI applications display the results of the budgeting process in economic value-add (EVA) format or link them to balanced scorecards, then track actual performance against targets in the scorecard.

IB MAGAZINE: How broadly are today’s CPM solutions deployed? Are they primarily used by executives? By line-of-business managers? What are you seeing?

GEISHECKER: CPM solutions involve users at all levels of the organization – from executives to administrators – as well as beyond the organization. For example, I know of a trucking company that is delivering CPM information to its fleet members, 80 percent of which are external contractors. The information allows them to monitor their performance for making deliveries – the times, the volumes, the routes, the commitments – so they can compare their individual performance to the rest of the fleet. This gives members a standard of comparison, so they know how they are performing as they go into contract negotiations.

IB MAGAZINE: What role should scalability play when you’re evaluating a CPM solution?

GEISHECKER: Scalability and interoperability are very large factors in any CPM evaluation. CPM solutions often necessitate broad deployment to different levels of the organization with varying levels of detail or granularity. Often, the solutions are rolled out in a phased or sequential fashion. They might begin in the financial department, then be applied to workforce management, and ultimately be exposed to the supply chain. Scalability definitely comes into play.

IB MAGAZINE: What are the primary challenges to getting CPM solutions online?

GEISHECKER: As acceptance of CPM gains prevalence, the biggest challenge involves deployment and execution. Once an enterprise identifies its CPM vision and strategy – and the corresponding BI strategy has been communicated enterprise-wide – the next major step involves identifying the appropriate CPM components and processes that can deliver CPM in a reasonable time frame. This is not always easy, and it comes with many potential hurdles. If analysis exercises are conducted in silos, users need to think carefully about how they can be integrated. That involves taking a look at the bigger picture, at how transactions, events, and workflows influence each other. Users need to understand the interrelationships between the CPM feedback loops to avoid a CPM initiative that is no more than a set of disparate tactical projects.

IB MAGAZINE: What will innovative CPM strategies look like in the future?

GEISHECKER: It’s all about addressing the question: “What do we do with all of this information? How do we make better business decisions, and strategically approach our market, our competitors, our customers?” Enterprises that measure, monitor and manage performance in a piecemeal fashion via a myriad of disparate business applications will more often than not fail to meet their strategic goals. Companies that can answer these questions in a cohesive fashion are going to have a competitive advantage.

CPM Glossary

CPM: The methodologies, metrics, processes and systems used to monitor and manage business performance.

Objectives: The strategic, operational, or tactical goals that define the business.

Strategy: The linking of objectives to determine cause and effect relationships.

Metrics: The units of measure used to evaluate progress.

Targets: Business goals or objectives, defined in measurable terms.

Processes: The actions taken by a business to execute its objectives.

Methodologies: Different ways to evaluate the metrics that define businesses performance.

Balanced Scorecard: A performance-measurement methodology that allows a business to weigh the relative importance of various objectives.

Key Performance Indicator (KPI): A formula comprised of multiple metrics and targets that is used to gauge progress toward particular objectives.

Analytics: The ability to track and evaluate metrics against different dimensions (time, external data, etc.).

By David Baum

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