Performance management and EPM: how to improve your decision-making
Understanding your company's precise situation at any given time is the fundamental key to performance management, also known as Enterprise Performance Management (EPM).
Similarly, the company's past is of great importance. As a source of facts, it provides the experience to assess progress made, successes and challenges encountered, gaps and the return on investment of actions already taken. The past sheds light on the present situation. Analyzed in terms of the company's economic sector, it provides the basis for future projections.
What is corporate performance?
Performance management is a systematic process aimed at monitoring, evaluating and adjusting an organization's activities to achieve its strategic objectives. It involves projecting into the future to better anticipate and understand how to optimize its various activities. It relies on the use of key performance indicators to measure progress and identify areas for improvement.
Achieving operational excellence requires the involvement of everyone, from top management to managers to employees. It is this unified collaboration that will foster a productive environment, improving productivity while optimizing costs, resources and working hours.
Performance management: why is it essential?
In a volatile, uncertain, complex and ambiguous environment (VUCA), performance management is essential to ensure the survival and competitiveness of companies. The volatility of markets, the uncertainty of economic trends, the complexity of global interactions and the ambiguity of external signals make decision-making more difficult and risky.
To navigate in this unpredictable context, companies need to rely on high-performance management tools to monitor their key indicators in real time, quickly adjust their strategies and maintain their agility.
In this way, performance management transforms uncertainty into opportunity, providing greater visibility and the ability to respond rapidly to disruptions. Managing your company's performance involves sometimes significant adjustments, made possible by a high degree of agility, in turn enabled by total confidence in your data.
What are the objectives of performance management?
The aims of performance management are to clearly define the company's strategic objectives, and to ensure that all actions taken contribute to achieving them. It also aims to ensure that operational objectives are aligned with the company's overall strategy.
More precisely, corporate performance is when all the processes put in place enable an organization to achieve maximum effectiveness and efficiency while deploying the minimum of resources, whether human or material.
Corporate performance can be characterized in two ways:
- Financial performance, by reducing costs andincreasing margins
- Operational performance, through the organization of processes in the company's various departments. The objective: to be able to make effective decisions, corresponding to the challenges defined beforehand.
In order to benefit from the many advantages of performance management, it is essential to work on data quality. Indeed, data reliability is the key to successful management.
What are the benefits of performance management?
Setting up a performance management system will enable you to improve :
- Quick decision-making
- The confidence you place in the decisions made thanks to the control points that will have been deployed
- Flexibility of your actions, through the reinforcement of existing actions or the implementation of corrective actions
- Ultimately, cost reduction thanks to a global vision of your expenses and how to optimize them.
Performance management: the players involved
First of all, all company functions can be involved. Whether it's sales tracking, HR management, budget performance, management control or logistics monitoring, the objective remains the same: to project into the future to better manage the evolution of the business.
For example, a purchasing manager looking to optimize his processes has different expectations from an HR director looking to manage his workforce, or a CFO looking to optimize his company's cash flow. But an EPM tool can help.
More specifically, top management needs to be involved in steering performance. They are the ones who will define the investments around the project, the sponsor and the human resources who will lead the project. Ideally, we recommend including one employee per department involved.
Performance management puts tools at the service of a company's specific needs, and not the other way around. These needs can be articulated around the following functions:
Budget preparation, IT cost monitoring, P&L monitoring, overheads, fixed assets, pricing, monthly closing...
HR functions
Analysis of headcount and payroll, consolidation of annual reviews, analysis of average salaries, onboarding management...
Sales and marketing functions
Monitoring individual and collective performance, identifying growth opportunities, allocating resources...
Optimization of promotional campaigns, operational processes, customer satisfaction analysis, marketing reporting (conversion rate, cost of acquisition, return on advertising investment...)...
Distribution, production, assortment, sales forecasts, inventory management...
Risk management, regulatory compliance...
Assessment of environmental footprint, monitoring of ESG (Environmental, Social and Governance) indicators, promotion of diversity and inclusion...
Innovation functions
Competitive and technological intelligence, increased predictability made possible by the growing mass of available and exploitable data...
What is corporate performance planning?
Managing your performance means planning your activities and anticipating different business scenarios. Planning is an integral part of performance.
The challenge lies in setting up a system for retrieving data from the company's various departments. Automatic data feedback will enable us to define the actual budget in real time, rather than spending a lot of time consolidating data. In this way, a comparison can be made in real time between forecast and actual budgets. Forecasts can therefore be made more regularly.
Tools are available to support you in this process. It is possible to work with Excel files, but having a technological platform at your disposal will enable you to be more efficient and faster in the implementation. The tool features controls and facilitating functions (data harmonization, source reconciliation). Below you'll find an overview of the most powerful tools on theEnterprise Performance Management (EPM) market.
Performance planning can be implemented by any company. A company that is less efficient than another runs the risk of going into decline, because it will not have found the actions it needs to remain competitive, nor optimized its operations and costs.
Our partners in performance management
How do AI and machine learning optimize performance management?
The integration of artificial intelligence (AI) and machine learning (ML) in performance management enables more accurate predictive analysis. In particular, they are integrated into the EPM tools we mentioned above. These technologies exploit massive volumes of data in real time to detect trends, anticipate scenarios and propose optimized recommendations. ML algorithms can simulate various business scenarios, facilitating faster, better-informed decisions.
AI and ML offer more powerful tools for analyzing data and making informed decisions.
How can AI and ML contribute to performance management?
Advanced predictive analytics
Thanks to machine learning, companies can harness predictive models to anticipate market trends, customer behavior and financial fluctuations. This enables proactive rather than reactive planning.
Automation intelligence
AI and ML make it possible to automate complex processes, reducing human error and increasing operational efficiency. For example, automating performance reporting frees up time for teams to focus on strategic analysis.
Customize performance indicators
Machine learning-based EPM tools can adapt KPIs in real time according to the specific objectives of each department or project, offering a more accurate view of performance and enabling more effective forecast adjustment.
Anomaly detection
AI and ML can quickly identify discrepancies or anomalies in performance data, enabling rapid intervention to correct potential problems.
AI and ML use cases for financial performance management
- Automatic drafting of financial reports: AI can be used to automate the drafting of regular financial reports (balance sheet, income statement, management report) by generating descriptions and analyses from the company's accounting and financial data.
- Creation of financial summaries: it can produce clear, concise summaries for meetings with investors, boards of directors or internal stakeholders.
- Cash flow forecasting: AI can help anticipate future cash flows by analyzing historical data and taking into account factors such as market conditions, economic trends, and customer behavior.
- Forecast scenarios: AI enables the generation of multiple financial scenarios based on different economic assumptions, facilitating strategic planning and risk sensitivity analysis.
AI can automate recurring or complex accounting entries by analyzing financial documents such as invoices, receipts, or bank statements, reducing the risk of human error and speeding up the accounting process.
Thanks to simulation and modeling, AI can help anticipate the risk of financial loss and suggest preventive measures or hedging strategies to minimize these risks.
It can also create sophisticated models to assess and quantify financial risks, such as credit risk, market risk or liquidity risk, and generate extreme risk scenarios to test the company's resilience.
By analyzing market trends, consumer behavior and competitive data in real time, AI can help define dynamic pricing strategies to maximize revenues and margins.
How do you set up a performance management process?
Identify problems rather than expected objectives
The bias introduced by the desire to identify objectives is to erect solutions, whereas problems open up a wider field of reflection.
From this phase onwards, the support of an expert in strategic consulting is a guarantee of success.
Assign a priority to each of them
During this stage, it is essential not to focus on the potential cost of resolving each of the issues listed, but rather to build a process of prioritizing the issues via a SWOT analysis, for example, in order to identify those that have the greatest negative or positive impact on the company's performance.
Identify potential obstacles
During this stage, the support of an expert is also recommended. Its neutrality and external vision enable a more factual analysis of the obstacles to the implementation of an EPM tool, which by its very nature leads to non-performance or a lack of performance. This is why any EPM tool can be perceived as a threat.
Define a few relevant use cases
Carry out a benchmark based on a number of use cases representative of the issues at stake
This final stage will enable the tools to be compared via POCs. The selected POC will form the basis of the MVP, which can be implemented rapidly, enabling short, regular deliveries.
What are the pitfalls to avoid when implementing performance management?
1. Roll out your project alone, without the help of experts
It's also not a good idea to hire a pure player, as they'll only know one tool and won't be able to give an objective opinion on it, nor have full knowledge of all existing functions.
2. No framing
Framing the project (preferably with an expert) allows you to identify areas of concern and risks. It also gives visibility to the project without launching all projects at once.
It's also an opportunity to launch a POC: choose one or two functionalities and develop them to completion in order to verify feasibility. If you're not sure which tool to choose, you can develop them on two different tools.
3. Failure to implement thorough change management
Many changes occur when new tools are introduced, and resistance often goes hand in hand with them. Change management isn't enough, because it's not enough to get people on board, or to reassure those working with the tool. Certain functions may feel threatened, and the aim is to remove their obstacles.
To remedy this, a structured approach is required. This includes clear communication of expected benefits, stakeholder involvement from the outset of the project, and ongoing training for end-users. Flexibility to adapt tools to specific user needs is also essential, to promote adoption and minimize friction.
4. Not clearly defining roles
The RACI matrix (Responsible, Accountable, Consulted, Informed) can be used in a project of this type, as it defines task levels and provides guidance to the employees involved.
They trust us
"Over the past 30 years, we have seen the emergence of new challenges for business departments. Firstly, the need to accelerate decision-making based on reliable data. But also the need to be able to measure company performance and adapt forecasts to an uncertain environment. To this end, we are convinced of the importance of deploying a performance management system adapted to the issues at hand, in order to be more competitive and develop your business on a long-term basis."
Micropole
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FAQs
Your questions about performance management
What is performance management?
Performance management refers to all the tools, methods and processes used to measure, analyze and optimize a company's results. It makes it possible to monitor key performance indicators (KPIs) and adjust strategies in real time to achieve set objectives.
What are the 3 types of performance for an organization?
The three key types of performance for an organization are :
- Financial performance: measures the profitability and management of financial resources.
- Operational performance: this assesses the efficiency of internal processes and the quality of products/services.
- Social and environmental performance: this encompasses commitments to corporate social responsibility (CSR) and sustainability, taking into account the impact on society and the environment.
Why is performance management important for companies?
Performance management enables actions to be aligned with strategic objectives, resources to be optimized and decisions to be made based on reliable data, thus improving operational efficiency and competitiveness.
What functions are involved in performance management?
Performance management covers several key corporate functions, including :
- Finance: for budget management and cost optimization.
- Human resources: for performance monitoring of team-related costs.
- Marketing and sales: to analyze sales results and adjust strategies.
- Production: for optimization of operational processes, inventory management and product quality.
What are the key stages in performance management?
Steps include :
- Defining objectives (KPIs)
- Data collection and analysis
- Adjusting actions according to results
- Ongoing monitoring and continuous improvement.
How do you choose the right performance indicators?
KPIs must be aligned with the company's strategic objectives, and be specific, measurable, achievable, relevant and time-bound (SMART). Stakeholder involvement is crucial to ensure that KPIs reflect priorities.
What role do technologies play in performance management?
Technologies such as EPM tools integrate machine learning and predictive analysis. They automate data collection and enable real-time analysis, facilitating decision-making.
How are AI and machine learning transforming performance management?
AI and machine learning analyze vast volumes of data, anticipate trends and automate decision-making processes. These technologies help to continuously optimize strategies, detecting anomalies and providing personalized recommendations.
What's the difference between reporting and performance management?
Reporting involves collecting and presenting data on past performance, while performance management aims to analyze this data in order to make proactive decisions and adjust future strategies.
How can performance management contribute to sustainability (CSR)?
By integrating KPIs linked to ESG (Environment, Social and Governance) criteria, performance management helps companies to monitor and improve their environmental and social performance, while reinforcing their commitment to sustainability.
EPM demonstration video - Budget construction: automation, AI and predictive budgeting
Replay Board Beyond - Harmonize, centralize and manage the performance of a pool of companies
