My first real posting on a blog! I’m very excited but my kids think this is very old news. First of all, some definition – there are a number of types of Performance Management discussions going on. We are mainly concerned with “Corporate Performance Management” – and to a great degree that subset which SAP has labelled “Financial Performance Management”. Our colleagues in the HR field also discuss Performance Management, but in the context of Human Performance. While these are linked, our discussion will focus more on the former.
So, on to “hot” topics. The cynical call these “fads”, but I tend to think of them as waves. The spectrum of Performance Management is quite broad, and the true value comes when all components are fully integrated (see Gary Cokins’ postings and articles on this topic). Over the years, the waves have peaked alternately around Costing, Profitability, Scorecards, Budgeting (or not), and others. From time to time they go dormant while something else takes precedence, only to come back again either when driven by user demand, the introduction of new methodologies (such as Time-Driven ABC), or a hot new book that the CFO reads.
I recently presented at a large seminar in California and the “hot” topic was Driver-Based Forecasting. In speaking with attendees, many had only begun to implement PM tools but were focused on Forecasting. They recognize that other tools – such as good cost information and analytics that help build these drivers – are required to enable these components, but look to put a toe in the PM water while there is organizational demand. Forecasting is critical – particularly when approached using sensitivity analysis to test out various scenarios that are appropriate in today’s highly volatile business climate.
Another “hot” topic is Capacity Management. It seemed like only yesterday when “Theory of Constraints” was the topic-du-jour, but it had difficulty making itself well used outside of academia. New ABC tools (such as Time-Driven Costing) are now allowing us to model and predict the use of both human and non-human capacity. As my friend John Miller points out in his One Eighty newsletter, managing capacity is critical in businesses whose costs are increasingly becoming more fixed in nature.
From my vantage point, it seems that whatever tool generates a company’s entry into PM, it invariably leads to a need to more deeply understand the underlying “atoms” of the business – the cost of processes and activities. Core costing systems are the tools that eventually enable us to reach for that Crown – integrated Performance Management.
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