Measuring What Drives Value Holistically

July 14, 2010
Beyond budgeting and planning, corporate performance management consolidates data, measuring value in a company from the top down.

In a world that often measures the value of companies, products and even people, in dollars and cents, measuring performance isn't so simple. It's for this reason that corporate performance management (CPM) software has taken a foothold in areas such as budgeting, planning and forecasting.

Too often, according to several experts, the size and scale of companies lends itself to fractured sets of measurements: Different departments will use different formats. CPM addresses this by determining measurement in a holistic fashion, one that is easily accessible from the top on down.

VF Corp., a U.S. apparel manufacturer that produces jeans, sportswear and outdoor accessories, adopted CPM several years ago to address its global growth. Too many departments, spread across too many locations, had made accurate, consolidated financial data a challenge.

"We had so much data coming in, from all these locations, and we needed an application that everyone could use that was user-friendly and easy for management to review," says Scott Cassell, manager for corporate accounting at VF.

Scott Brennan: "Just because it can be measured doesn't mean it's important."CPM is valuable in that it allows management to set precise criteria for what to measure. In recent years, CPM has evolved to include balanced scorecards, value-based and metric-driven management, and business intelligence. VF has begun adopting supply chain and customer metrics within its system, measuring average dollar sale retail and sales per square foot.

Companies have increasingly taken on suites to gauge strategic growth, such as management and profitability modeling. Auto club AAA's west/central New York division, for example, began using the software to project optimum locations for opening new offices.

"We're able to provide our executive team with business information faster than ever before and do analysis on the information so they can see why something is up or down," says Kristy Chapman, the auto club's financial-planning and reporting manager. Chapman says her office will begin building online analytical processing cubes using its CPM tool for faster analysis of data, all without having to call the IT department for help.

But according to Gartner's latest research report on CPM suites, Magic Quadrant, nearly 50% of large enterprises and 75% of midsize businesses continue to use spreadsheets or legacy applications to handle their core management process for budgeting, planning and forecasting.

"Just because it can be measured doesn't mean it's important," says Scott Brennan, a partner with technology and management consultancy group Accenture. "A company has to take a holistic view of what drives value. It has to have a few measures that it is focused on and rally its resources around them. That's what successful companies do."

See also: Nissan Cracks Down on Server Sprawl

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