The business environment is changing at an unparalleled pace. Disruptive technologies are giving rise to product and service innovation. New business models are intensifying competition, just as business leaders express unease about prospect for a softer global economy and rising materials and labor costs. To thrive — or even remain relevant — in this increasingly unpredictable environment, it’s critical for companies to evolve their enterprise performance management (EPM) acumen.
The Hackett Group defines enterprise performance management as “the organizational competency to dynamically manage execution of the business strategy through improved management decision-making, the alignment of behaviors of stakeholders with the organization’s strategic objectives, dynamic measurement of goals and performance, and the leveraging of analytical and modeling capabilities.”
How to Realize EPM’s Benefits
EPM is a foundational capability in a digital world. Business leaders must have the right information at the right time to effectively respond to fast-changing market and customer expectations. High-caliber EPM empowers executives to make data-driven decisions regarding resource allocation, define strategic objectives, and set annual targets with strategies for achieving them.
It’s intuitive that first-rate EPM is good for business. However, The Hackett Group’s 2018 EPM Performance Study reveals this is more than a “gut feel.” Our proprietary analysis shows that EPM top performers earn a higher return on equity vs. industry average while peer underperform their industry. EPM top performers also have superior gross margins, whereas peers fall short of their industry average.
Being better at EPM pays off. But what does “better” mean? In our research and work with clients we find EPM leaders eclipse peers across four critical dimensions:
- They integrate the planning process across the enterprise. EPM top performers act as the “design authority” and “orchestrator” of all planning activities. They synchronize the organization’s planning cadence and link disparate data sources to combine financial and non-financial KPIs. They also help clarify accountability across the organization, and are better at securing top-management support for evolving the company’s collaborative planning process.
- They have superior forecasting processes. EPM top performers complete the forecast 3.5X faster and are also more accurate than peers. They use a small team and look at high-level information. And they forecast on a rolling basis, deploying driver-based modelling, to produce future insight to guide executive decisions.
- They provide more analytics-driven insight. EPM top performers support management with sophisticated analytics. They deliver their insights into current and future performance via multiple channels that are suited to the requirements of different stakeholders. They also report faster and anchor their insights in the KPIs that matter the most.
- They effectively collaborate with business partners. Last but not least, EPM top performers embed collaboration with the business into their daily work. Their analysts have greater business acumen. They also dedicate almost twice as many staff to full-time partnering roles, so they can support business strategy formulation and provide actionable, value-creating insight.
EPM coalesces strategic and annual planning, forecasting, reporting, and business and performance analysis to enhance enterprise performance. Typical organizations significantly lag EPM leaders, which implies they can vastly improve.
To catch up, they need to
- Synchronize disparate planning activities;
- Speed up and extend their forecast horizon;
- Augment their analytics savviness; and
- Collaborate more effectively with their internal stakeholders.
They should learn from the experiences of EPM top performers to augment their own capabilities, for example through peer benchmarking or working with a third-party provider. Once executives identify gaps, they can establish a transformation roadmap, and prioritize initiatives based on how best to meet customer needs and create enterprise value.