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The Big Picture
How to connect the dots to reveal a complete image of new corporate performance management software solutions.
For the rest of the May 2007 issue of CRM magazine please click here
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Companies have long intoned a mantra about only managing what can be measured. A metric by itself, however, is only as good as the metric one cubicle over, because a mishap or delay in the performance of one department can affect results throughout the business. Corporate performance management (CPM) enables enterprises to link the processes, methodologies, metrics, and systems needed to measure the performance of an organization. Its precursor catchall, performance management (PM), says Phil Wilmington, CEO of PM vendor OutlookSoft, is "a set of processes that consolidate and analyze financial and operational data to enable organizations to make actionable business decisions." Trevor Walker, CMO at Cartesis, has another way of putting it: "It's a set of integrated processes that define activities from goal setting through operational activities like planning and forecasting, and the manifestation of that back to the masses via dashboards and scorecards." Whether it's called PM or business process management, the dissimilarity between definitions and nomenclature exists for good reason: Historically, the value that PM has brought to an organization, or to a department within that organization, has differed. While finance has focused on budgeting and financial forecasting with its own solution, supply chain and ERP managers have looked to fine tune the operations surrounding the company's manufacturing and logistical base. These differences have left businesses operating in PM silos, unable to link finance to operations, and lacking the technology to bond the things they have in common. Enter CPM solutions, whose development has mirrored in many ways the development of CRM systems. "They're breaking down the silos of information," says Gary Cokins, a strategist for SAS. "Performance management isn't new, it's simply the integration of existing methodologies companies are already familiar with." Like the cog gears of an engine, a mistake in operations can lead to a fallout in finance. CPM solutions look to solve these problems by giving corporate hierarchies the tools necessary to monitor and manage their well-oiled corporate machine.
Operations...Meet Finance, BI...Meet CPM Despite varying PM requirements of any one line of business, the common denominator of all CPM initiatives continues to be finance. CPM traces its origins to the finance department, and was associated with analytic applications for budgeting, finance, statutory reporting, and planning. Simultaneously, BI emerged as the tool of choice for reporting operational metrics for departments like HR, sales, and operations. It was only a matter of time before C-level execs realized the synergies between the two, says OutlookSoft's Wilmington: "CEOs realized they had two good things going. The next logical step was to link them." Now, BI and PM have become two sides of the same coin, and should be executed in one broad strategy. Companies are realizing the advantages of putting financial intelligence into the hands of line-of-business managers, and vice versa, a realization that has been a recent one, says Tobin Gilman, senior director of product marketing at Hyperion. "Four or five years ago, we would sell packaged financial applications to finance, and our BI tools to line-of-business, such as sales, customer service, and operations. Today we've seen those lines blur as companies have realized the strategic importance of bringing the performance of those departments into the big picture." Part of that big picture is sales, the primary touch point between CRM systems and CPM due to its strong tie in with financial reporting and impact on the bottom line. The ability to draw sales cycle data, product line performance feedback, and customer profitability enables companies to create more accurate financial reports and operate in near-real time. With these new capabilities comes increased accountability, enabling corporate watchdogs (government regulators and shareholders) to set compliance and reporting standards. Inability to execute corporate strategy is also a big motivator. This past year was a record one for CEO firings, according to a study by outplacement consulting firm Challenger, Gray, and Christmas. The failure to get employees on the same page is to blame, according to Cokins. In recent years, customer centricity has made its way to the top of the CEO's strategy short list, and CPM solutions are to thank. Relegated to the vice president of service or CCO for years, customer satisfaction scores, service levels, and common service quandaries are now commonplace on PM scorecards, and giving other C-level executives and management in departments like finance, supply chain, and operations the ability to correlate service issues with other operational aspects of the enterprise via analytics embedded in CPM solutions. "For the first time you're seeing customer retention and satisfaction levels residing alongside supply chain info, using analytics to compare the two, then dropping that into finance to understand its impact on a company's bottom line," Cartesis's Walker says. Still, there's no place like home: Implementations of CPM suites have been, and still are, typically led by the CFO and the finance department, according to Nigel Rayner, a research vice president at Gartner. But the most successful CPM implementations are now extending beyond a pure financial focus to link to other operational aspects of performance management, and are supported by a suite of analytical applications that provide the functionality to support the processes, methodologies, and metrics inherent to any CPM initiative. The Benefits With the increased emphasis on embracing operational data has come an increase in the number of users of CPM within an organization. Just like its analytical brethren, BI is bringing PM to the masses. "A few years ago a typical implementation for us was 500 to 600 users," Walker says. "Today, we're seeing rollouts in the thousands, and one customer is looking to take it over 10,000 users. That's big." One organization that is leveraging this concept is Maine Medical Center, though the hospital's motivation for implementing a CPM solution went far beyond the importance of improving the bottom line. After a hospital patient in a double room changed beds when her roommate was discharged, miscommunication and the ensuing misinformation led to an unnecessary blood transfusion for the patient, who died as a result. After Maine Medical Center's George Higgins, MD, FACEP, recalled hearing about this incident occurring in another U.S. hospital, he felt it was the sort of tragedy that a CPM solution might have prevented. Higgins, interim chief medical officer/vice president for medical affairs, and a professor of emergency medicine, headed his hospital's implementation of SAS Strategic Performance Management (SPM) for Healthcare. Using SAS, the 606-bed tertiary care and teaching hospital in Portland, ME, now has an automated system to measure clinical and business performance with the end goal of enhancing the quality of patient care. "We've always had lots of information about finance and operations, but our board of trustees wanted to hear more about outcomes, quality, safety, satisfaction, and adverse events." Maine Medical uses SAS (implemented four years ago) to measure, report, and monitor 50 KPIs like length of stay, patient satisfaction, physician satisfaction, patient falls, and direct computerized physician order entry rates. At the heart of the new system is a Web-based 24/7 scorecard system that nearly all of Maine Medical's 3,000 nurses and 1,000 doctors use. SAS SPM builds customized scorecards for various hospital units by pulling data from seven different systems, with each scorecard being divided into four quadrants that represent quality of care, financial performance, patient satisfaction, and research and education. These are then compared with national benchmarks and/or other metrics from other quadrants on the scorecard, allowing hospital personnel to see their performance against national standards or other hospital units. The initiative represents a dramatic improvement over procedures the healthcare industry has typically used, says Doug Salvador, associate chief medical officer and patient safety officer at Maine Medical. "Many places still use paper scorecards and Excel files that need to be updated manually. Implementing CPM systems to the extent that hospitals have done in recent years is a dramatic improvement." Scorecards are tailored for each unit, giving nurses in the ICU, for example, the ability to check their performance in one of dozens of related criteria. Salvador says just making hospital staff aware of the scorecard indicators influences their practices, improving the quality of care. Gleaning intelligence from various data points has led to fewer patient falls. Nosocomial--meaning hospital-acquired--infection rates have also fallen because SAS enables the staff to see correlations between specific diagnoses and nosocomial infection rates, allowing the staff to take preventive actions. Additionally, analytics allows staff members to link quality of patient care concerns to financial metrics, enabling the hospital to do more with less. "Just because a patient's length of stay increases doesn't mean Medicare will foot the entire bill," Higgins says. "Using the Web interface, anyone can forecast how a change in one quadrant of the scorecard will affect another." Maine Medical has been recognized for its efforts. In 2006 the hospital was named to the Leapfrog Top 50 hospital list for patient safety, and also achieved Magnet Status for nursing excellence, an honor bestowed on just 3 percent of U.S. hospitals, Salvador says. "You can't improve what you don't measure. And in our line of business, that's pretty important." Contact Assistant Editor Colin Beasty at cbeasty@destinationCRM.com. CPM for the Call Center Executives have always focused on the financial well-being of their company, but rarely has the voice of the call center pierced the hallways of corporate America via a corporate performance management (CPM) solution. Primarily focused on sales, these solutions have typically ignored the performance of a company's most trusted customer touch point. When used in the context of the call center, the term performance management (PM) brings another meaning to the already jam-packed list of definitions for PM described here. Call center PM solutions typically pull data from call distributors, workforce management software, and IVR systems to provide metrics like customer satisfaction, hold times, and CSR performance for managers and CCOs, supplying them with an overview of the call center in their efforts to balance customer satisfaction with costs. But within these systems are buried tidbits of invaluable customer metrics that belong on the CEO's desk, according to Mark Selcow, president of call center PM provider Merced. Selcow cites one Merced customer, a financial services company that uses Hyperion for its CPM reporting and Merced for its call center PM. Upon installation of Merced's solution the bank linked the two, enabling Hyperion to pull customer satisfaction scores and postcall survey results for computing scorecards, and for specific viewing by the CEO and COO in reports. Integrating a CPM system with a call center PM solution to pull data relevant to the corporate hierarchy is where Selcow sees call center PM and CPM intersecting. "I don't think a CEO wants to know if Bill-the-CSR has completed 90 percent of his calls. But customer satisfaction scores, feedback on products, and speech analytics have slowly begun to creep into CPM systems," though he acknowledges that CPM "will continue to focus primarily on metrics such as sales, finance, and HR." Combined with sales and marketing metrics, Selcow says that C-level execs are getting a "360-degree view of the performance of their company," and thus, are helping make good on CRM's promise. "What are customers saying about my products, my services, my company? Those are the critical pieces of information that can be drawn from a contact center PM system, loaded into a CPM solution, and placed alongside sales and marketing data on a scorecard for executive viewing." Nigel Rayner, a research vice president at Gartner, agrees:"Now the CEO can leverage the synergies between sales, marketing, and customer service to drive the company's performance. --C.B. CPM Leaders The vendor market for these solutions remains a diverse one, but for how long? With the convergence of PM and BI, industry pundits are predicting plenty of acquisitions as CPM vendors look to fill out their BI functionality, and as suite providers look to gobble up niche players. It didn't take long for 2007 to see its first big acquisition in this market, as Oracle announced in March its intention to acquire sector-leader Hyperion for $3.3 billion. John Hagerty, a vice president and research fellow at AMR Research, says SAP, IBM, and HP might be "likely acquirers in this market space. Business Objects, Cognos, MicroStrategy, and Information Builders are potential targets, among a host of smaller players." That between 50 percent and 60 percent of large enterprises use Excel as their primary budgeting solution bodes well for a market that is expected to reach $900 million by 2009, according to Gartner. Cognos and Hyperion Solutions are setting the vendor standards in CPM; Cognos was recognized as a leading CPM vendor and is appearing in more midmarket opportunities, where the combination of CPM functionality and underlying BI platforms is appealing to CIOs, according to Nigel Rayner, a research vice president at Gartner. The company has focused on augmenting its solutions through performance customizable "blueprints" that provide predefined models for functional and vertical CPM and performance management processes. Hyperion has high brand recognition among CFOs and finance professionals. The company is currently offering version 9 of its applications, of which the System 9 BI platform is impressive . It has an underlying BI solution for the company's main CPM applications, Hyperion Planning and Hyperion Financial Management. Hyperion also launched BPM Architect, enabling users to create custom CPM applications and process flows. Rounding out the quad Board International, Clarity Systems, CorVu, and Lawson Software were listed as niche players, or those providers that tailor their solutions to a specific segment of the CPM market. Applix, Business Objects, Cartesis, Longview Solutions, Oracle CPM, OutlookSoft, and SAS Institute encompassed the visionaries, those vendors that offer depth of functionality in the areas they address, but have gaps relative to broader functionality requirements. --C.B.
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To contact the editors, please email editor@destinationCRM.com
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