Analytics-Based Enterprise Performance Management (EPM)
Author: Gary Cokins
||2 hours for CPAs
Many organizations are far from where they want and need to be with improving performance, and they apply intuition, rather than hard data, when making decisions. Enterprise performance management (EPM) is now viewed as the seamless integration of managerial methods such as strategy execution with a strategy map and its companion balanced scorecard (KPIs) and operational dashboards (PIs); enterprise risk management (ERM); driver-based budgets and rolling financial forecasts; product / service / channel / customer profitability analysis (using activity-based costing [ABC] principles); customer lifetime value (CLV); lean and Six Sigma quality management for operational improvement; and resource capacity planning. Each method should be embedded with business analytics of all flavors, such as correlation, segmentation and regression analysis, and especially predictive analytics as a bridge to prescriptive analytics to yield the best (ideally optimal) decisions. This presentation will describe how to complete the full vision of analytics-based enterprise performance management.
Publication Date: September 2016
CFO, financial controller, Accounting staff, CIO and information technology staff, Strategy and business planners, Marketing and sales managers, Budget managers, and Risk managers.
- How strategy maps and their companion balanced scorecards communicate strategic objectives with target-setting to help cross-functional employee teams align their behavior to the strategy and better collaborate.
- Why measures of channel and customer profitability and customer value are now superceding profit and service-line measures — and shifting from product to customer-focused organizations including future potential value — customer lifetime value.
- How activity-based cost management (ABC/M) provides not only accurately traced calculated costs (relative to arbitrary broad-averaged cost allocations), but more importantly provides cost transparency back to the work processes and consumed resources, and to what drivers cause work activities.
- Reforming the broken annual budgeting process with performance based budgeting that links strategy to operations and is process volume sensitive rather than simply incremental at each cost center.
- How EPM/CPM also applies to public sector government to understand their "output costs" and better serve citizens.
- Why business analytics, with emphasis on predictive analytics and pro-active decision making, is becoming a competitive advantage differentiator and an enabler for trade-off analysis.
- How all levels of management can quickly see and assess how they are doing on what is important — typically with only a maximum of three key performance indicators (KPIs).
- How to integrate performance measurement scorecards and ABC/M data utilizing:
- Strategy formulation
- Process-based thinking and operational productivity improvement
- Channel/customer profitability and value analysis and CRM
- Supply chain management
- Quality and lean management (Six Sigma, cost of quality)
- Differentiate enterprise and corporate performance management (EPM/CPM) as the seamless integration of managerial methods rather than as a process
- Recognize how business analytics is an advance over business intelligence and where Big Data fits in
- Identify and differentiate strategic KPIs in a balanced scorecard and operational performance indicators (PIs) in dashboards
- Recognize how to properly calculate product, service-line, channel, and customer profitability for analysis, insights and actions
- Illustrate "predictive accounting" for driver-based budgets / rolling financial forecasts, what-if analysis, and outsourcing decisions
- Recognize how to overcome implementation barriers such as behavioral resistance to change and fear of being held accountable
- Identify best practices for implementing the strategy map
- Calculate resource expenses by working backwards
- Utilize the EPM roadmap as a manager and identify where you would want to begin and end
- Recognize how to use enterprise risk management in your organization by budgeting for the risk assessment grid
- Identify how to get best results applying the discussion of forecasting to monitoring your business
- Differentiate levels of maturity in the costing continuum
- Recognize the intelligence hierarchy of the EPM model
- Identify the principle reason for organizations reluctance to adopt EPM
NASBA Field of Study
Finance (2 hours)