Every company wants to improve their business performance in order to grow. One way is to follow the success story of top-performance companies. In our previous posts, we have discussed about actions to improve business performance for laggard, average and even best-in-class organisations. To add more in-depth information about how top-performance organisations grow their business through agile enterprise performance management (EPM), we will look at Aberdeen’s recent research. It is shown that top performance organisations (Leaders) are 44% more accurate in their financial forecasts than other companies (Followers).This enables them to reduce the time spent on data analysis and drive the decision-making process faster. There are three must have capabilities, reviewed by Aberdeen, that leaders carry to enhance their EPM system flexibility for better results.
1. Monitoring performance carefully and regularly
“Almost all Leaders have the ability to track their actual performance against budgets compared to 72% followers” It is important to have an EPM system to help inform exact data and necessary information to easily conduct suitable business strategy and simplify the analysis process. By checking on the performance information provided by EPM system, managers are enabled to keep an eye on the progress, make timely decisions and guarantee the results of the processes. Research shows that top-performance companies are more accurate in tracking actual performance against budget due to regularly scrutinising performance, which enables them to identify any problem occurred earlier than followers and have timely intervention to the process and improve it.
Knowing what metrics are most relevant to the current situation and where to find performance data are also essential for companies in order to have full control on their performance improvement. Choosing the right metrics and KPIs plays an irreplaceable role in the management process, because wrong applied metrics will drive the project going in the wrong way and produce unsatisfactory results. Hence, there is no surprise that almost all leading companies have a library of standardise metrics and KPIs in their EPM systems to select the best metrics for their performance analysis.
2. Easy access to the source of information
“Leaders are 46% more likely than Followers to integrate external information into their EPM solution”
The ability to access the information easily and quickly allows organisations to have faster and timelier reforecasting and planning process in case anything occurs that interfere the business process. This allows companies to reduce the opportunity costs as well as produce consistent performance reporting for greater good. Furthermore, by putting all performance data within your EPM system in central repository, stakeholders will have full access on the necessary data, which leads to faster decision-making process as well as higher utilization of the EPM process.
Aberdeen also indicates that Leaders are 46% more likely than Followers in terms of external data integration. Having superior access to external information allows organisations to have closer relationship with its partners, suppliers as well as clearer point of view about the surrounding business environment to overcome its peers in the market. Overall, easy accessing to the source of information enables companies to make more preciseand relevant decisions and regain the ROI of its EPM investment faster.
3. Flexible approaches to financial planning, budgeting and forecasting process
“Leading organisations are 87% more likely than Followers to have the ability to perform “what if” scenarios and change analysis”
Companies need to have the ability to evaluate the impact of external changes or a particular business strategy and tactical move to determine optimal plans to achieve organisational objectives and goals in the shortest time possible. Top-performance organisations are more flexible to adjust their business plans based on what-if scenarios and change analysis. Flexible budgeting enables them to have deep views in changes in the environment, picture beforehand possible outcomes and produce the best ways to achieve their targets.
Agile EPM also allows the top managers and stakeholders to develop corporate strategies while still receiving reports from the front-offices such as sales, marketing… etc. in a daily basis. This helps organisational strategy, in any circumstances, can flexibly go along with the reality and ensure the performance of the company as a whole.
In short, to become agile in its performance initiatives, companies must aid employees with necessary tools to make performance management as easy as posible.
EPM, along with the 3 capabilities listed above, can assist companies to align strategies and plans with reality. Specifically, agile EPM application helps leaders to:
- Reduce the amount of time to change plans: leaders are faster in accessing information about external environment and this allows them to make more accurate and flexible planning, budgeting and forecasting
- Update financial plans more regularly: constantly updating financial plans in a period of time means leading corporations have more opportunity to revise actual costs against forecasted budget and thus, allow them to have timely intervention on the management process to increase profits.
- Increase accuracy in tracking actual performance against budget than followers: Accuracy in tracking actual performance enables managers to save time in decision making, identify employees’ performance and thus increase the productivity of the company as a whole.
- Increase forecast and planning capabilities: leaders canperform top-down budgeting process as well as bottom-up budgeting process and combine these two approaches together to have a more complete and well-rounded view on the current situation. Additionally, flexible EPM can also help improve the ability to apply ‘what-if’ scenarios and change analysis to produce better planning budgeting and forecasting process.
Find out more the full report ‘Enabling more accurate forecasting through agile EPM’.