Strategy Management can yield rich rewards

In today's competitive business environment, simple budget or forecast-based planning is insufficient if corporations are to survive and prosper. Instead, they must engage in strategic planning that defines objectives and assess the internal and external situation to formulate and implement strategy, evaluate progress, and make necessary adjustments to stay on strategy. Execution is the key to success, and many viable business strategies fail because they are not properly evaluated and managed - so remember: if you fail to plan, you’re planning to fail! Strategic planners must set specific, numerical targets and measurements against which results can be compared; so it’s essential to identify which key measurements will indicate whether the strategy execution is succeeding or failing, and whether the operations are working toward the desired results. Specific measurements must be directly related to strategic goals and will vary from business to business, depending on the type, size and purpose of the business, and the details of the strategic plan.

Incentivising stake-holders

Stake-holders can be engaged in strategy execution by being incentivised to deliver on aspects of the plan for which they are responsible, so communication is vital to ensure that incentives match behaviours that they are designed to reinforce - and without an integrated view of the plan, it can easily go wrong. Target setting is key to the strategic planning process, though research indicates most plans focus on easy-to-collect data. So targets typically monitor internal indicators rather than external market conditions, via numerous financial measures and just a few non-financial parameters. They also tend to report historical performance rather than forward-looking indicators; and whilst financial measures provide an excellent transactional view of past activities, long-term corporate viability often depends on prediction of non-financial measures such as staff retention and learning, customer satisfaction and product reliability.

CPM - targeted at decision-makers

Corporate Performance Management (CPM) encompasses a set of solutions that are targeted at those decision-makers responsible for coordinating budgeting, reporting and consolidation activity. CPM solutions provide insight into budgets and actuals as well as facilitating complex variance analysis through easy to use reporting and analysis tools. They also act as an extension to business intelligence platforms and leverage OLAP technologies, with tools for effective budgeting, financial consolidation and reporting, profitability management, strategy management and decision support. Specifically, CPM applications can:

  • Treat the planning cycle as a closed-loop process, so strategic targets are integrated into high-level budget targets and actual data flows through the system to monitor progress. The resultant feedback loop allows for tailoring of organisational behaviour to take advantage of changing market conditions.
  • Provide a centralised data repository which functions as a single version of the truth with consistent and focused business rules.
  • Provide strong forecasting and predictive facilities to counter the historical bias of existing reporting solutions. The ability to simulate Balanced Scorecard analysis, effectively presents decision-makers with financial and financial measures essential for long-term corporate viability.
  • Provide strategy mapping and workflow management that allow strategy to be segregated into tactical components that can be communicated quickly and clearly to stakeholders.
  • Allow effective plan monitoring through advanced exception reporting facilities enabling progress to be easily measured.
  • Ensure that stakeholders have a clear sense of what is expected of them by tracking responsibilities, individual targets and monitoring performance against them.

Ensuring corporate agility

CPM applications provide a centralised, holistic planning framework to ensure that all strategy execution participants are aware of how their day-to-day activities affect the planned delivery. Use of CPM systems converts strategic planning from a calendar-driven event into a continuous cycle of planning, delivery, monitoring and feedback. Plans can then incorporate new economic assumptions, competitor products and unexpected events, as well as fostering innovation from business units. Moreover, corporate strategy can be transformed from a static glimpse of executive thinking into a fundamental aspect of each employee’s daily decision-making processes.