EVALUATING CPM SOLUTIONS.

Michael Coveney - March 2012 Email: Michael@stw-consulting.co.uk Mobile: +44 (0) 7894 007996 In December 1999, Gartner introduced the concept of Corporate Performance Management (CPM), which they defined as the the processes, methodologies, metrics and systems used to monitor and manage an enterprise's business performance. Since that time the concept has been adopted by most major software vendors, although they may refer to it using other 3 letter acronyms such as BPM, EPM and so on. However the market is currently confused in that many offerings, although labelled CPM solutions, are only partial solutions and do not meet the needs of CPM. CPM has also become synonymous with planning, budgeting and forecasting, which only forms part of a true CPM offering. To address this confusion, this document outlines a framework through which CPM can be defined and evaluated.

1. 2.

THE NEED FOR A FRAMEWORK ......................................................................................................................... 3 CPM FRAMEWORK OVERVIEW ......................................................................................................................... 4 2.1 2.2 2.3 2.4 2.5 2.6 2.7 CONTENT............................................................................................................................................................... 4 CPM BUSINESS MODEL. .......................................................................................................................................... 5 STRATEGY .............................................................................................................................................................. 5 RESOURCES ............................................................................................................................................................ 6 MANAGEMENT PROCESSES. ...................................................................................................................................... 6 THE ROLE OF A TECHNOLOGY SOLUTION ...................................................................................................................... 8 IMPLEMENTING THE FRAMEWORK .............................................................................................................................. 9

3. 4.

DEFINING THE CPM BUSINESS / STRATEGY MODEL ........................................................................................ 10 WORKFLOW .................................................................................................................................................... 12 4.1 4.2 4.3 4.4 4.5 WORKFLOW OVERVIEW ......................................................................................................................................... 12 PROCESS PURPOSE AND THE DECISIONS TO BE SUPPORTED ............................................................................................ 12 PROCESS ACTIVITY: ................................................................................................................................................ 14 DATA ENTRY SCREEN AND REPORTS........................................................................................................................... 15 PROCESS TIMING................................................................................................................................................... 15

5.

EVALUATING CPM SOFTWARE ........................................................................................................................ 17 5.1 5.2 5.3 5.4 5.5 5.6 5.7 5.8 5.9 5.10 BACKGROUND ...................................................................................................................................................... 17 DATA MODEL ....................................................................................................................................................... 18 DIMENSIONS, MEMBERS AND STRUCTURES ................................................................................................................ 18 FUNCTIONALITY .................................................................................................................................................... 19 REPORTING CAPABILITY .......................................................................................................................................... 21 WORKFLOW ......................................................................................................................................................... 21 AUDIT CAPABILITIES ............................................................................................................................................... 22 AFFORDABILITY ..................................................................................................................................................... 23 VENDOR ABILITY ................................................................................................................................................... 23 DEMONSTRATION WORKSHOP ............................................................................................................................... 23

6.

SUMMARY ...................................................................................................................................................... 25

APPENDIX I: CPM FRAMEWORK EVALUATION CHECKLIST ..................................................................................... 26

1.
Imagine that the only way you could have a car was to buy the individual components from one or more manufacturers. Suppliers would be selling the power of their engines, dashboard vendors would wow you with their fancy dials and gauges, while those supplying the control mechanisms would impress you on the benefits of using the latest technology. As it would be up to you to put it all together, integration would be a key requirement for those with previous car-building experience. Also imagine if you then had to supply your own fuel to power the vehicle, which of course would need to match the engine or at least go through various transformations to make it suitable for its intended purpose. I wonder how many cars resulting from this process would fulfil the original vision that the user imagined? Something similar happens in the world of decision-support software. Managers are faced with a range of tools and technologies under various vague names, such as CPM, BPM, BI, OLAP all of which claim to be able to support organisational decision-making. But, as with the car analogy, it is up to the end-user to figure out how it all fits together. A Gartner survey1 showed that most BI applications are disconnected from the business process and the decisions they support, and that many decisions that are made have a negative or suboptimal effect on performance. In research for his book Transforming Performance Measurement, Professor Dean Spitzer found that todays reporting and analysis systems are used to create separate, disparate silos of information that tend to focus on the performance of individual departments. Because of this, the decisions that emanate can often undermine the performance of other departments as well as undermine the achievement of overall organisational strategy. Many organisations are confused as to the role of the different tools available to support decisionmaking. This is made worse by vendors claiming to support CPM when their definition of CPM is unclear, and the how of making their systems fulfil this task is completely absent. Because of this lack of clarity, a framework is necessary that will: Provide a clear holistic view of what CPM is by describing the processes involved and how they interact with each other. Help organisations to identify what systems they need and how to put them together to truly support CPM Assist organisations when evaluating software and service provider offerings Encourage software vendors to deliver more complete solutions

This document outlines such a framework that we will call the CPM framework.

Gartner Magic Quadrant for Business Intelligence Platforms January 2011

2.

CPM is concerned with the way in which an organisation manages its overall performance. As defined by Gartner it involves combining the methodologies used to manage strategy, the metrics that evaluate performance and the processes used to direct people within the organisation all of which should be supported by a technology solution. To support organisational decision-making the framework combines the following four areas:

Picture 1: Performance Management Framework

A business model that describes how value is created by the business. Strategic initiatives that are focused on improving parts of the business model. Organisational resources (money, people, assets) that can be applied to enable the business model to function and that allow strategic initiatives to be implemented. Management processes that direct and control planning, funding and monitoring of business operations.

All four components are intertwined and should operate within a CPM technology solution as a continuous approach to performance management. Around this core system will be a range of other Business Analytic solutions, such as BI and reporting / analysis applications, that directly support specific areas within the CPM model. Lets take a closer look at each of these areas.

At the heart of a CPM system is an organisation model containing the relationship of activities that lead to organisational objectives. Although this model will differ between industries, it will typically include how revenue/income is generated; how products/services are manufactured / created and distributed to customers; how employees are recruited, trained and assessed; and how the organisation complies with its legal responsibilities. These activities are linked to one or more organisation departments that determine those responsible for their execution. Some activities will have a one-to-one relationship with the organisation structure, but other activities will go across multiple departments. Quite often the relationships between activities can be built as a driver-based model where the value of an input such as the number of enquiries can be used to determine the volume of sales and hence revenue via a set conversion rate. These models can be used to plan or assess the operation of the business by entering a few key values or drivers. Business Model Metrics Each activity can have different sets of measures that include: KPIs that measure success of the activity (e.g. the number of new customers acquired) KPIs that reveal the state of implementation (e.g. the number of mailings made to the target customer base) The resources consumed by the activity (e.g. people time, costs, assets utilised) The risks involved in employing those activities

The second area Strategy typically has an emphasis on how performance of the business model can be improved. It focuses on one or more organisational objectives and details specific strategic initiatives that describe how that improvement is to be actioned and who is to be responsible for their delivery. The terminology involved depends on the management methodology being employed (e.g.

Balanced Scorecard) but most methodologies will show the relationship between the action and the objective being supported as a Strategy Map. Strategy Model Metrics The sets of measures associated with strategy includes: A set of targets that determine the improvement to be achieved for each supported objective. The resources that will be required to implement each associated initiative The status through which the implementation of initiatives can be monitored. Any business assumptions that were made when agreeing the initiatives and the value of improvement.

The third element of the framework relates to the resources (money, people, assets) that the organisation has at its disposal, with financial resources often being the focus of a budget.

These resources should be allocated to both sustaining the business model and in ensuring that the agreed strategic initiatives are properly resourced at the right time.

The final area of the framework are the organisations management processes that direct and control the way performance is planned, resourced, implemented and monitored. These are typically seen and often implemented as the six distinct processes of Strategic Planning, Tactical Planning, Financial Planning, Forecasting, Management Reporting, and Risk Management. However, on closer examination, these processes consist of a number of

interconnected activities that only together form the basis for managing performance. Consider the following schematic:

Even within each activity, there are interconnected tasks that each department has to perform, in a specific order and at specific times. For example, Budgeting may start off with the setting of a high level goal to which sales will decide on how this will be delivered throughout the year. To do this they may need to work in collaboration with marketing and production. Once this has been completed, other areas of the organisation can start allocating resources that fit in with the sales and marketing plan. There are three important

things to bear in mind when designing processes: Although these are often seen as discreet processes, in reality they are each comprised of multiple activities that have strong links with activities within other processes. For effective performance management, none of these processes can be left out. In todays volatile business environment these activities need to act as a single continuous process.

As a consequence, what goes on within these processes and how they are interconnected will determine whether performance actually gets managed.

As with a car, these four components need to be combined and operated as a single technology solution. It needs to support decision-making through the total integration of driver based business modelling (the engine) and strategy improvement plans (visual indicators showing the intended direction) with organisational resources (the fuel), all controlled through management processes (the pedals and steering wheel).

None of these components can be run in isolation - the degree of integration will determine how smooth the ride will be. Around this central CPM system will be a range of BI analytical applications that provide insight into particular aspects of each component. This insight is used to formulate plans to improve the operation of the business model.

The role of management reporting is to bring all relevant information together in context i.e. to link strategy with the business model and resources, in a format thats transparent and usable to motivate the many people involved to make the best informed decisions. Those decisions will typically lead to altering the business model; modifying or developing new strategic initiatives; and where necessary, the re-allocation of resources. All of which is performed under the control of management processes.

Performance management is all about taking decisions on the operation of both the business model and any associated strategy improvement initiatives. What goals should be set? What things have to be done to achieve those goals? How much will it cost? How much did it cost? What will it cost in the future? Is the outcome worth it? What changes should be made? Why has a past change been agreed? And so on. These decisions are typically made through a series of activities based on information that is presented to a user. Therefore, when implementing the CPM framework three things are necessary: The structure of the business model that holds information on its performance and the impact of strategy The associated workflow through which it gets updated and monitored and the data entry screens and reports given to users that directly supports the decisions to be made

The next sections takes each of these in turn.

3.
The central CPM business model requires multi-dimensional technology. Whether this is an OLAP or ROLAP database is irrelevant, however, the members that make up each dimension will need to be assigned attributes that will allow them to be reported and analyzed in ways other than their physical structure / hierarchy within the model. The CPM business model will typically consist of the following dimensions: Measures This is a traditional dimension containing the measures used throughout the application. Attributes should be assigned to each measure that denote what the measure represents. This could include: Resource attribute are for those measures consumed by an activity (e.g. travel expenses. This could also include people time) Success attribute are for KPIs that denote the success of an activity (e.g. the success of the marketing programs may be the metric number of leads) Implementation attribute are for measures that denote the status of an activity (e.g. The implementation of a marketing program could be measured by the number of mailings made to the target market.)

Later on these attributes can be used to define reports that show all measures designated as Resource or Success. Organisation This dimension contains the departments and how they consolidate into the total company. Given that hierarchies change over time, its important that these changes are tracked and are made available for reporting purposes. Activity This dimension is used to identify organisational activities and the relationship between them that lead to organisational objectives. E.g. how revenue/income is generated; how products/services are manufactured, etc.

Note that this is not a strategy map, which is typically used to show how improvements can be made to a business model. Activities within this dimension should show business as usual and denotes how the organisation currently operates. Some activities will have a one-on-one

relationship with the organisation structure, while others will go across multiple departments. The members of this dimension should be organised as a hierarchy. Strategy This dimension is used to hold the resources and relevant KPIs assigned to initiatives. It effectively turns the CPM business model into a combined business/strategy model. The members form a hierarchy synonymous with a strategy map. The different levels can represent the methodology being used for example the Balanced Scorecard calls these levels Themes, Objectives, and Initiatives. For this dimension to cope with those parts of the plan not covered by an initiative, which still need to aggregate with initiative data to give a total company position, the following structure can be used:

On each initiative its important to record its effective date and the people responsible for its implementation. Non- strategy information, e.g. overheads, are assigned to The Base member. Total Strategy will contain the aggregation of both strategy and the base members. Time This defines the years and periods to be covered by the model. Some data may be held at a day level and so these should be accumulated as appropriate Version This is used to separate actual, budget and forecast versions of data held by the model. It should also have members to hold benchmark data such as market and competitor statistics. Other Dimensions Other dimensions may be required to collect things such as sales by product group, customer type, etc.

It is the intersection of these dimensions that identifies the resources to be applied, by which departments, in order to deliver a particular activity. These resources are shown by time and can be separated into different versions such as budget, forecast and actual.

By using a multi-dimensional model, those same resources can be consolidated by both activity group and organisational unit, to give a total company position. A similar intersection with different measures (as selected by their attribute) can be used to monitor the implementation of those activities and the success those activities are achieving.

4.
Workflow is critical to a CPM application in the same way that it is critical to ERP. It is through workflow that users are directed and their attention focused onto their roles and responsibilities through the different performance management processes. The activities involved tend to be classified into the management processes outlined in 2.5. To construct the right CPM processes, which together should focus on achieving the organisations mission, the following needs to be determined for each: Process purpose: What is the purpose of each process and what decisions need to be supported? Process activity: Who is involved in those decisions and what information do they require? What input is expected from them based on the decision taken/to be taken? How is the decision validated / approved? Process timing: In what timescales should those activities be run and how are they triggered? What happens if an exception is detected that jeopardises the success of the plan outside of the normal planning process?

Each organisation needs to define the purpose of individual processes for themselves. Below are examples that are typically common for most organisations. Strategic Planning: To produce a long-term plan that identifies goals to be achieved within set resource constraints for a defined business environment. The decisions to be supported include: What are the overall goals to be achieved in the next 3-5 years? What are the resource constraints in which the organisation should operate in each of those years? What assumptions should be made about the business environment over that period? What are the broad strategies to be implemented (i.e. the way in which the organisation is to achieve the goals)? How is the success of each strategy to be measured?

Tactical Planning: To agree a set of improvement initiatives and associated costs for each strategy that ensures the organisation achieves its goals within the defined constraints. The decisions to be supported include:

What initiatives are required to implement each strategy? How much would each of these cost, who would be responsible and what measures best indicate that they are being implemented? Which combinations of initiatives give the best use of resources within the defined constraints? Which initiatives are to be approved that will then become the focus of the financial plan?

Financial Planning/Budgeting: To create a financial plan that represents how resources are to be allocated to both the main business model and the strategy model; and the financial results that are to be expected. It should also include how the plan and any capital expense will be funded. The decisions to be supported include: What resources should be assigned to the CPM Business model for areas not covered by strategic initiatives? What resources need to be assigned to the strategic initiatives (this may have been decided in the tactical planning process)? How does the total financial position compare to the strategic plan? Is the financial plan realistic and - how does this compare to last year and the current forecast? How will the plan be funded from which sources and at what time?

Forecasting: Unlike budgeting which seeks to determine what the future should be like, forecasting tries to predict the most likely results that may be achieved based on current understanding of the market and current/planned activities. The decisions to be supported include: What size will the market be in the short and mid-term future? What future revenues/income can we expect in the short and mid-term future? What is the status of that income (e.g. what % of certainty can be applied? What resources will be required to support that predicted future? What will be the likely values of KPIs connected with strategy and overall objectives?

Management Reporting: To allow management to review current and forecast results in order to make adjustments to Improve performance. The decisions to be supported include: Are we on track to achieve our objectives? Is the financial position of the organisation as planned? Are the strategic initiatives being implemented, and to what extent? How well are the strategic initiatives performing? Were the assumptions made about the business accurate? Are the costs of the initiatives supporting each strategy worthwhile? What things are most likely to deviate from plan, and what would be the impact on finances and long-term goals? How well does the forecast predict actual performance? Are there sufficient resources for each initiative? What, if anything, needs to change to achieve future success?

Risk Management: To assess risks and their impact on the current plan and to develop contingency plans that avoid or negate those risks. The decisions to be supported include: Where are the risks in the current plan? How likely are those risks to materialise? What warning signs can be put in place to highlight their status? What can be done to avoid them? What should be done if they occur?

As mentioned earlier, this part of the implementation details: The people involved in each of the decisions to be supported The information they require to support those decisions What output is expected from them based on the decision taken/to be taken How decisions are to be validated / approved

From the questions shown above in section 4.2, the information required and the people involved can be worked out. Much of the information given to users will come from the output of other users and so the best way to show this relationship is through an activity map of the different tasks involved, their dependencies, and the departments responsible. The following example shows how this can be applied to one part of the budgeting process, which has been designed to support the decision: What resources should be assigned to the CPM Business model not covered by strategic initiatives.

In the above schematic, the time line and order of the activities are shown: Task a description of the piece of work to be carried out as part of the process Department the people/departments involved in carrying out the task Information required what information they require that would help them in completing the task in accordance with the overall objectives Output required the information the department/user should provide as a result of completing the task Approval the person who should approve that the task has been completed successfully In the above example, the items are not in detail what is provided to give an idea of what needs to be defined. For example some of the information should relate to market conditions, and sales will probably be split into product groups or services. Similarly, there will be more feedback loops that are not shown, and all budgets will need to be combined to give a total budget situation. As mentioned this schematic is for one part of the budget process. All parts will need to be defined and linked to show dependencies and the order in which they are to occur. This provides the specification for the workflow software.

For each activity shown in the activity map, the slice of data that each user will need to make their decisions, and the slice of data they will need to complete as part of their response, will need to be defined. If the data cant be defined from the business model, then that model will need to be amended. Similarly, when presenting or gathering information, numbers dont tell the whole story. There will need to be provision for handling text that forms the basis of a two-way communication. The format and layout of these screens should provide the information in the context of the decision to be made. This will require data to be presented from all parts of the CPM model as well as summary analyses that may come from supporting BI models.

Most organisations have an internal management calendar that is used to trigger the different processes outlined for planning and monitoring performance. Therefore for each activity, defined in Section 4.3 there needs to be a timescale in which the user must respond. This will include when the activity can start (which itself may be dependent on the completion of another activity) and when it is to be completed. But what happens if something doesnt go to plan? What if the assumptions on the business environment are not right? Or if forecast expenses are going to be greatly over budget? What if a particular initiative is not achieving the right effect? Theres no point in waiting for the next planning round, which could be in a years time, in dealing with these issues. Research into high-performing companies found that: Best Practice companies decouple their internal management processes from the calendar and provide a set of planning and

reporting processes that utilize continuous processing and monitoring of activity. The passage of time becomes (just) one of many criteria for triggering the reporting of information or the initiation of planning or forecast activities.i The report goes on to say: Aspects of strategic planning are not once-a-year events but a continuous process. The pace of change is so great that management needs to monitor the strategic implications of new developments on a continuous basis. 2 To manage performance, organisations must take action as soon as potential issues arise. And that means triggering some or all of those activities defined in the activity map, but in the context of putting the plan back on track To do this a list of possible exceptions should be defined along with the activities to be triggered should those exceptions materialise. This should include: What exception should be detected? E.g. Forecast sales at the end of the year being under budget by more than 10% What activity not yet defined should be triggered? E.g. request sales departments supply more information on situation What existing activity should be triggered and for which departments? How long do they have to complete the activity? Who approves the output? Who or what decides that the task is complete? What task should be run after this?

Best Practices in Planning and Performance Management, David Axson

5.
There are many software products that claim to support CPM, but often they only support some aspects, for example financial planning and reporting. One of the issues is that the term CPM is synonymous with budgeting, forecasting and management reporting which by itself cannot provide a complete solution. Similarly, some vendors have multiple products covering different parts of CPM. For example, many have a scorecard application that they deem suitable for strategy management; a separate solution for collecting budgets and forecasts; and yet another for reporting and analysis. In the context of this framework, these multiple solutions can only work if they are truly integrated and can be made to operate as a single system. Without this level of integration system maintenance becomes an unbearable nightmare that cannot suitably adapt to the dynamics of the economic environment. It is worth pointing out that CPM from a vendors point of view is a mature market and most have similar capabilities. For organisations looking for discreet planning, budgeting, forecasting and reporting solutions, there is a wide range of choice with vendors offering good solutions. But for organisations wanting to implement a complete CPM solution it is easy to be misled on what product suites can and can't do. This evaluation section of the framework outlines the key areas to be investigated so that those evaluating solutions can accurately assess whether the products selected will meet their planned and future needs of CPM. One area not covered in this evaluation is a detailed assessment of the technology that underpins a CPM solution, whether that is SQL, OLAP, ROLAP, or In-memory BI. One of the reasons is that having a common technology platform or a system built on a leading open database is no guarantee that the vendor has an integrated solution or that it will perform. Solutions should be assessed on their ability to solve a business problem over a period of time. The choice of technology should be up to the vendor to provide the best application they can for the price being offered and that from a customer point of view gives the best return on its investment. The evaluation areas here are primarily concerned with a product's capability to meet the CPM framework discussed in this document. They include: Data Model the kind of data that the model can hold Structures the way in which dimensions and dimension members are managed Functionality the functions required to support each process within CPM Reporting capability the types of reports required to support decision-making Workflow how users are led and directed through CPM processes Audit capabilities how data and structure changes can be tracked and reported Affordability how to assess the cost of ownership Maintainability Vendor Ability how to assess the commitment and expertise of a vendor Demonstrations what things to look for and test in a workshop session

At the heart of every CPM system is a data model that stores information relating to: Strategy and the organisational objectives being supported The business environment in which it operates The way that business value is generated How financial resources have been allocated Forecasts on where the business is heading, and Financial results that have been/will be achieved

Each type of data is different and contains both structured (e.g. numbers) and unstructured (e.g. text) information that is held at different levels of granularity and for different time periods. Some data will be required on a monthly basis while other for example forecasts involving contracts are better handled by assigning a date. This means that if the date changes, then the system should know how to roll this up into the appropriate reporting time period. For organisations that deal in seasons, for example retail, the ability to define time as a span between specific dates is important, while results would still need to be accumulated on traditional monthly basis. All these requirements means that a single multi-dimensional model cannot (without serious compromises) meet the different needs of CPM, and yet this data still needs to be bought together if performance is to be planned and managed. Things to look for: Ability to hold multiple data sets with different levels of granularity, dimensions and member combinations to support strategy, tactical plans, budgets, forecasts, management reports and risk. Ability to define and accumulate time in multiple ways. Ability to store data at a day level, with the system aggregating data into the right time hierarchies for reporting. Able to define and hold individual initiatives with associated dimensions and members, along with flexible start and end dates. Ability to attach unstructured data comments, notes, documents, responsibility with any data item. Ability to combine different data types for reporting and analysis, along with any unstructured data. Ability to define financial accounts as to type e.g. Debit/Credit, Balance Sheet, P&L, Statistical, etc. This information is used to ensure data rolls up through time and other dimension hierarchies correctly and that variances respect natural sign conventions. Ability to define statistical accounts/measures so that any assigned calculations take place in the correct order and at the appropriate level in a hierarchy.

Much of the data within a CPM model will be organised as hierarchical structures e.g. organisation; strategy, product families. Many members will be common across different CPM data sets and so any change in definition should automatically be applied to related sets. Hierarchies change with time, but in order to preserve historic reports, original structures need to be retained. For assessing potential changes, the CPM system should allow alternative structures that can be used to report the impact of change, should that change be adopted.

Finally, hierarchies are not the only way to select and analyse data. The ability to use attributes where members are selected and grouped according to a range of tags assigned to them is an important capability. For example Members in the account dimension can have attributes that identify them as being measures of success, resource, risk, etc. Members in the strategy dimension can have attributes that identify whether they are objectives, themes, initiatives, etc. Product hierarchy members can have attributes that denote colour, or whether the product is new.

These attributes can then be used to create an alternative grouping of members, irrespective of where they fit in their respective hierarchy. Things to look for: Master data management of dimensions and members. It should be possible to apply a change in a member and have it automatically update any data set where it is used Ability to hold cause and effect structures for strategy modelling. These should allow data to be accumulated to multiple parents according to the methodology being used (e.g. what is the total cost of all initiatives supporting objective A), as well as by organisational unit, etc. Structure changes that are time stamped with previous versions being held Ability to consolidate and compare the impact of different structure versions for reporting and analysis purposes Ability to assign and analyse data by multiple attributes and not just by a dimensions physical structure.

Functionality can be split into two areas that which is common to all areas of CPM and that which is specific to a particular CPM process. With the latter, a capability to support a specific process may well be useful in other processes. Reporting capabilities are covered in section 5.5. Here are the things to look for in a CPM solution: Common functionality: Ability to convert local currency data into base currency(ies). This should be a true financial conversion supporting multiple rate types (e.g. opening rate, average rate, closing rate); detection and posting of exchange gain/losses; and the ability to choose from multiple rate versions (e.g. actual, budget, forecast) Consolidation of data from leaf-node members into hierarchical groups Ability to load data from external systems including the mapping of account and department codes into the appropriate CPM data set members Ability to delete data from a CPM data set Ability to copy data between periods, versions and other combinations of dimensions and members Full security system that automatically restricts users access to functionality and specific areas of data Ability to present data entry screens to users along with restricted areas that cannot be changed Ability to support multi-languages for both help and setup information Ability to support web, social media, and mobile access

Strategic planning specific functionality: Supports the methodology being used by the organisation e.g. Balanced Scorecard, Performance Prism, Six Sigma, etc. This means that the system uses the same terminology as defined by the methodology. Ability to set up strategy maps that show cause and effect and allows senior managers to define, for example, themes and objectives; to allocate measures of success, implementation and resources. Support for Driver-based planning where entering a few key data items generates related data such as a summary P&L. Tactical planning specific functionality: Ability for users to add initiatives that support defined strategies, comprising of combinations of dimensions and members that describe a course of action. Ability to assess combinations of initiatives in terms of resources consumed and their impact on corporate goals. Ability to Time shift initiatives i.e. to change their start and end data which then causes all associated data to be moved in time. Ability to approve and reject and lock initiatives from change Ability to select initiative combinations based on their ability to optimise resources to meet a specific goal Ability to hold combinations of initiatives as different versions of a contingency plan. These do not consolidate with other data and can be re-called as required. Financial planning specific functionality: Ability to perform a Top-down spread where a single number can be allocated back from a top-level node through to leaf-nodes in a hierarchy. It should be possible to exclude members during the spreading process. Ability to spread data across members of a dimension according to a range of profiles. It should be possible to exclude members when carrying out the spread. Ability to perform allocations according to set rules that can be invoked by an administrator Ability to define an approval process with appropriate levels of data locking. Forecasting specific functionality: Ability to hold data by contract, project and status Ability to perform time-series analysis and use results to predict future periods Risk Management specific functionality: Ability to hold 'risk' and 'impact' factors Ability to calculate risk profile Ability to conduct 'What if?' analyses without affecting data held Ability to hold contingency plans that can be invoked when risk materialises Statutory reporting specific functionality: Ability to collect, match and eliminate intercompany information Ability to store ownership data that can be used to adjust results for minority or joint ownership interests Ability to eliminate third party ownerships Ability to support ad-hoc and recurring journals that ensure Balance Sheet integrity Audit trail and reporting see section 5.7 Ability to analyse statutory impact over more than a one year time horizon. XBRL support

Reporting occurs throughout all CPM processes, while the Management reporting process brings together a range of information that determines whether the plan is on track and what decisions can be taken to improve performance. Audit report capabilities are covered in section 5.7 Things to look for: Ability to create dynamic Strategy maps. I.e. as initiatives are added, the system should be able to position that initiative within the strategy map without having to redefine the report. Interactive Dashboards / strategy maps. i.e. users should be able to select off-grid members such as the time period being shown or the department for which data is being shown. Ability to generate Financial statements and accepted layouts / formatting Ability to generate variances that respect Debit/Credit and account type (e.g. Balance Sheet, P&L, Statistical) assignments. Ability to drill-back to underlying detail/source systems from which the results were produced. Ability to automatically match common dimensions and members from multiple data sets for the purpose of generating a report. Ability to bring any information including unstructured data, from any data set and place it anywhere on a page. Ability to perform simple calculations between multiple data sets on a page. Ability to change common dimension member selections from one place where multiple data sets are on a page. Ability to generate charts that are linked to reported data sets. Ability to sort / group data according to content, dimension member and assigned attributes Ability to omit rows/columns where combinations return blank data. Ability to set up key-words that can then be used to drive the content of a report. E.g. Current Month, Current Year can be set in one place that is then used to generate report content for that setting. Ability to group different types of reports into books that can be run as a single action. These respect user security and will omit any data/pages the user is not allowed to access. Ability to access data securely from a spreadsheet Ability to create pdf, Word, Web and other output formats Ability to deliver content via Mobile devices Alerting capabilities Ability to alert users/managers when a specific variance has been exceeded Ability to request a response to an alert Ability to chase up users who have not responded to an alert Ability to review all alerts to determine: Which areas generate the most alerts, the status of response to alerts; how quickly users respond to alerts

Workflow relates to the way users are directed through the different tasks involved in a process. There are two types of process: Structured processes are those that are followed through a specific task e.g. budgeting. Its structured in that the activities, the people involved and the timescales are known in advance.

Unstructured processes are those that occur when an event or an exception are encountered. In this case the particular activities to be triggered and the people involved are only known when the exception occurs.

Structured processes can be dealt with through menus but it does requires users to know where to look and to choose the right option. This can make it hard in creating an efficient process as there is no way to prioritise options for specific users. Unstructured processes cannot be realistically handled by menus and will require dynamic workflow capabilities to trigger activities as and when they arise. As these activities are completed they themselves will trigger other activities to be carried out. For example, a sales forecast that is 10% outside of a limit, may trigger a request for more information and confirmation of the levels expected. When this is approved it could trigger re-planning by the factory, or an action by marketing to increase advertising spend. These will then have a knock-on effect onto other departments. Both types of process should be supported if CPM is to become a continuous, efficient process aimed at managing corporate performance. Things to look for: Ability to define tasks i.e. discreet pieces of work such as enter data, load data, run consolidation, run report, etc. Ability to combine tasks into sub-processes that are automatically configured for individual users Automatic generation of To do lists that are specific for each user and contains the work to be done, the deadline and any approval process Automatic warning of task deadlines Automatic escalation of non-action on a task Automatic triggering of tasks based on dates, an alert, exceptions or events Overview of active processes/tasks, highlighting deadlines and status Ability to unwind a task or series of tasks with full audit trails.

The ability to audit any plan or result is a key requirement of any corporate system if the numbers shown are to be trusted. This includes collecting comments on what the numbers actually mean as well as how they were gathered and transformed. Things to look for: Audit trail on structure changes. All changes should be date-stamped along with the user making the change. Ideally there should be provision for storing comments on why the change was made. Historic results should remain with historic structures for audit purposes, however it should be possible to consolidate historic data with newer structures for comparative purposes that do not overwrite historic results. Audit trail on processes. It should be possible to review all planning tasks and activities over a period of time. This can help identify bottlenecks that can improve process times in the future and help document the way in which decisions were made. Audit trail on all data changes. It should be possible to track how each number was entered; any adjustments and transformations it went through; and how it consolidated into any total. All changes should be time and date stamped, along with user details and the process

activity that changed it. As with structure changes, there should be a provision for storing comments on changes that are then available in reports.

This area of the evaluation considers all the costs involved from initial purchase, through implementation and to the resulting systems on-going cost. It also looks at the expertise required to setup and maintain the system, and what else an organisation may have to purchase in order to realise their vision for a complete CPM solution. Things to look for: The initial purchase cost The cost of increasing the number of users The length and cost of training for an administrator and end user Estimate of implementation cost On-going software maintenance cost Other things that need to be purchased to make the solution complete The level of expertise to use and maintain the resulting system. Does the system provide Best practice templates, to kick-start an application Can users extend the application for their own local reporting purposes.

This looks at the vendors commitment to CPM and the maturity of the product. Maturity can be both a blessing and a curse Mature products can offer a large reference base but also may be coming to the end of their life, which then may require an upgrade or redevelopment cost. Things to look for: How CPM fits into the future of the company The other products the company sells and supports, and how much is dedicated to the CPM application being sold. Other products the vendor may have that seem to compete with the solution being proposed How long the product has been around and where will it be in 5 to 10 years time. The level of business expertise they can offer in helping redesign processes and metrics The level of technical expertise to implement the solution The financially stability of the company providing the solution. The experience and capability of the company installing the system

So far the software evaluation has focused on capabilities that can be viewed in isolation to each other. However, to support CPM these capabilities must be delivered in a seamless way so that the solution operates as single application. The only way this can be properly evaluated is by performing a number of scenarios that cross different processes. This is the purpose of the demonstration workshop. It is unlikely this can be accomplished without some planning from the vendor and so the scenarios to be evaluated should be communicated in advance and covered in detail during an interactive workshop. The aim is to gauge the levels of integration that exist and the effort required to maintain them.

Strategic Planning scenarios Create a strategy map showing actual measures for the current and target measures for the next 3 years Define a new objective. Set targets for success and the limit on resources that can be consumed by supporting initiatives. Show how the new objective updates the strategy map Tactical Planning scenarios Combine a number of initiatives to review the resources they would consume if approved. Review initiatives by start date Delaying an initiative by 7 weeks: Show the impact of this delay on planned resources Financial Planning scenarios Show how the system directs departments through the planning process. Show how a top level strategic financial goal is spread down to individual departments as a target Move a business unit between divisions and compare the impact on plans. Show how a department has its plans approved. Show how to create an alternative version of the budget which has a different departmental structure Forecasting scenarios Show how potential sales contracts and/or projects are recorded. Change the status of a potential future contract (e.g. from tentative to approved) and how that updates the overall forecast Change the date of a potential future contract and how that updates the timing of the overall forecast Show how to add a new product, associated forecast data and how this updates the overall forecast Show how the system handles issues such as when a forecast misses a future target Management reporting scenarios Show how the system handles the mapping and import of actual data Show how actual results updates: o Comparison with strategic plan (i.e. updates the strategy map) o Comparison with tactical plan o Comparison with budget / forecast Show how to report the impact of initiatives on the achievement of strategic goals Show report that sorts initiatives according to overspend against budget Show how to create a report that combines strategic goals, initiative status vs. budget Show basic financial statements: Balance Sheet, P&L, Cash Flow

Appendix I contains a fictional company that can be given to vendors for the purposes of creating a demonstration. Using a single, consistent case study makes easier to compare vendors abilities and approaches to performance management.

6.
The aim of this framework has been to clarify the purpose of a CPM system; ways in which it can be implemented; how it relates to supporting BI/Reporting applications; and how to evaluate CPM software solutions. It outlines an ideal implementation although it is unlikely that a company will ever implement it in this way. However, it provides a goal for an IT systems strategy that will genuinely help managers and executives manage performance. By adopting such a framework, organisations will realise a number of high-level benefits it provides, including: A single, consistent framework by which the whole organisation manages performance Focus on the things that are critical to the organisation as a whole Reports and analyses that tells the story of what and why Information in context that links strategy with resources and monitors the effectiveness of processes A documented audit trail that shows the decision-making process A mechanism by which IT projects can be assessed and placed in the context of improving decision-making.

Key:

Supported Partial support Not supported Unsure

Importance Data Modelling: Hold multiple data sets with different levels of granularity Ability to define and accumulate time in multiple ways Ability to store data by date with automatic accumulating into periods Ability to hold initiatives/projects with flexible start dates Ability to hold unstructured data such as notes, documents Ability to combine any data and unstructured data for reporting Ability to define financial accounts with Dr/Cr and currency types Ability to define statistical accounts Ability to define calculations with control of where in a structure they are calculated Ability to set ranges for data validation

Vendor 1

Vendor 2

Vendor 3

Dimensions, members and structures: Master data management of dimensions and members Ability to hold multiple structures on any dimension Ability to hold 'cause and effect' structures for strategy modelling Date stamp on structure changes with details of who and why Ability to use any structure / any version to consolidate data Ability to define attributes for member analysis Common Functionality: Importance Vendor 1 Vendor 2 Vendor 3

Currency conversion to IAS Consolidation of 'leaf-node' members into hierarchical groups Ability to load data from external systems through mappings Ability to load data from spreadsheets Ability to delete data Ability to copy data Role based security Access security Manual data entry screens with restricted areas Multi language support Social media support

Strategic Planning functionality Support for methodology terminology and approach (e.g. Balanced Scorecard) Ability to setup dynamic strategy maps Support for 'driver-based' planning

Tactical Planning functionality Ability for users to add initiatives to support defined objectives Ability to assess combinations of initiatives in terms of resources and impact on strategic goals Ability to 'time-shift' initiatives Ability to approve. Reject and lock initiatives Ability to select initiative combinations to optimise resources in reaching a specific goal Ability to hold combinations of initiatives as a contingency plan

Financial Planning functionality Ability to perform a 'top-down' spread of an amount to leafnode members Ability to spread data across dimension members Ability to uplift selected data by percentage and absolute amoounts Ability to automatically change leaf-node data to reach a consolidated target Ability to perform multi-dimensional allocations on request Ability to define an approval process with appropriate levels of data locking

Importance

Vendor 1

Vendor 2

Vendor 3

Forecast functionality Ability to hold data by contract / project / status / date Ability to perform time-series analysis to predict future period results

Risk Management functionality Ability to hold 'risk' and 'impact' factors Ability to calculate risk profile Ability to conduct 'What if?' analyses without affecting data held Ability to hold contingency plans that can be invoked when risk materialises

Statutory Reporting functionality Ability to capture, match and eliminate Intercompany transactions Ability to store ownership data to calculate minority and joint venture percentages Ability to eliminate third party ownerships Ability to support recurring and ad-hoc journal adjustments, retaining Balance Sheet integrity Support for XBRL formats

Journal / adjustment set up reports Audit trail reporting - see below

Management Reporting functionality Ability to create dynamic Strategy maps. Interactive Dashboards / strategy maps. Ability to generate Financial statements and accepted layouts / formatting Ability to generate variances that respect Debit/Credit and account type (e.g. Balance Sheet, P&L, Statistical) assignments. Ability to drill-back to underlying detail/source systems from which the results were produced. Ability to automatically match common dimensions and members from multiple data sets for the purpose of generating a report. Ability to bring any information including unstructured data, from any data set and place it anywhere on a page. Ability to perform simple calculations between multiple data sets on a page. Ability to change common dimension member selections from one place where multiple data sets are on a page. Ability to generate charts that are linked to reported data sets. Ability to sort / group data according to content, dimension member and assigned attributes Ability to omit rows/columns where combinations return blank data. Ability to set up key-words that can then be used to drive the content of a report. Ability to group different types of reports into books that can be run as a single action. Ability to access data securely from a spreadsheet Ability to create pdf, Word, Web and other output formats Ability to deliver content via Mobile devices

Importance

Vendor 1

Vendor 2

Vendor 3

Alerting functionality

Importance

Vendor 1

Vendor 2

Vendor 3

Ability to alert users/managers when a specific variance has been exceeded Ability to request a response to an alert Ability to chase up users who have not responded to an alert Ability to review all alerts to determine: - Which areas generate the most alerts - the status of response to alerts - how quickly users respond to alerts

Workflow: Ability to define tasks i.e. discreet pieces of work such as enter data, load data, run consolidation, run report, etc. Ability to combine tasks into sub-processes that are automatically configured for individual users Automatic generation of To do lists that are specific for each user and contains the work to be done, the deadline and any approval process Automatic warning of task deadlines Automated escalation process through deadline violation Activity truggered by date/time Activity triggered by the completion of another activity Activity triggered by an exception Activity trigged manually Overview of active processes/tasks, highlighting deadlines and status Ability to unwind a task or series of tasks with full audit trails. Hierarchical approval process

Audit - ability: Ability to trace results through data transformation stages Ability to report data changes by person Ability to report data changes over time Ability to report data changes through a process Ability to report data changes through a journal

Importance

Vendor 1

Vendor 2

Vendor 3

Effort Required: The number of days for full administrator training Does the administrator need to write SQL / MDX or equivalent code Are there implementation templates to speed building?

Afford - ability: Purchase option available Cloud solution available Upfront fee Ongoing software maintenance cost 3rd party license requirements Other systems required e.g. reporting, end-user analysis Implementation rates

Vendor Ability: How long has the application been around? Published development plans for the next two years? Are alternative products available? What business expertise is provided What technical expertise is provided What is the long-term vision for CPM?