February 1, 2024
Business performance management (BPM) encompasses the methods and tools organisations need to monitor progress towards goals and continually improve.
It covers everything from an organisation’s finances to marketing efforts and employee performance, helping ensure the entire business is aligned on a common strategy and vision.
With the help of tools like business performance management solutions, BPM provides critical insights to ensure your organisation is travelling in the right direction, offering visibility of your business’s strengths, areas of improvement and potential challenges.
In this guide, we cover all you need to know about BPM to help you implement the framework in your organisation. Read on to learn why BPM is so important, its key components, best practices and how to overcome common challenges.
The importance of performance management in business can’t be understated. It allows you to understand how your organisation is positioned on the road to success, what needs to be done to get there, and helps ensure everyone in the business is working towards common goals.
BPM is crucial because it helps organisations:
A successful BPM framework that allows for continuous measurement and optimisation of business performance consists of four primary processes. The core business performance management processes include:
Business performance management starts with setting goals and devising strategies for achieving them. On an organisation-wide level, goals can include the company’s vision and values, which are then cascaded down to departments, who each create their own specific goals.
When it comes to goal setting, one of the most widely used and effective methods is the S.M.A.R.T methodology. This entails creating goals that are:
Once your goals are set, you need to track business performance via a variety of data sources. This can encompass financial, sales, marketing and human resources data, in addition to customer feedback.
Analysis of this data allows an organisation to spot trends, identify areas for improvement and gauge the effectiveness of strategies and tactics. Many organisations use business performance management tools like analysis and forecasting software to streamline the process of collecting, consolidating and analysing key performance data.
Setting and monitoring key performance indicators (KPIs) is central to business performance management. They help organisations gauge the effectiveness of specific strategies and progress towards goals, whether from a business-wide standpoint or for specific business units.
KPIs can include such quantitative metrics as revenue growth rate, profit margin, customer retention rate or monthly website visits. By tracking such metrics regularly and comparing actual performance against targets, organisations can identify growth areas, diagnose performance gaps and spot trends.
BPM is a continuous process of improvement. Your KPIs provide the yardstick by which progress is measured, allowing you to identify areas for improvement and determine whether strategic or operational changes are required. Insights from this stage of the BPM process can also feed back into earlier ones; for instance, to amend goals or create new ones in line with business performance.
Once the fundamental processes of BPM are in place, your organisation will benefit from a constant cycle of measuring performance, making iterative changes and reevaluating goals as needed.
Best practices to ensure this cycle of measurement and improvement is as effective as possible include:
Organisational goals that cascade down to each business unit, team and individual help ensure everyone is working toward the same strategic objectives and isn’t operating in silos. To ensure the entire organisation is aligned around a common purpose, it’s essential to gain buy-in from divisional leaders.
Once organisational goals are set, it’s important they’re communicated to department heads by the business’s leaders. This communication is a two-way street – leaders should take on feedback and address any questions or concerns to ensure goals will be fully embraced. Organisational goals should then be translated into specific objectives and metrics for each department.
Clear and consistent communication at every level of the organisation is key to aligning performance with organisational goals. Goals should become a regular part of leadership meetings, team meetings, employee one-on-ones and performance reviews.
A business performance measurement framework provides the structure and guidance to effectively implement a repeatable process for assessing business health and adjusting operations when required.
Let’s explore some of the common frameworks used by organisations to drive this process:
The balanced scorecard is a strategic planning and measurement system that offers a holistic view of organisational performance across four perspectives – financial, customer, internal processes and organisational capacity.
This business performance management framework aims to provide a balanced view of organisational performance to support continuous improvement.
Management by Objectives (MBO) involves setting clear and mutually agreed-upon objectives for employees to improve performance. It involves a five-step process: setting organisational objectives, cascading objectives to employees, monitoring performance, evaluating performance and rewarding achievement.
This business performance management framework promotes alignment, communication and employee engagement in goal setting and performance improvement.
Objectives and key results (OKRs) provide a framework for defining goals and tracking outcomes in a clear and measurable manner. It involves a business’s leadership defining goals as statements that describe what should be achieved or improved. The business’s different divisions then use these statements to set quarterly objectives that align with the wider organisational strategy.
Six Sigma is a methodology focused on process improvement and reducing defects by applying statistical techniques and tools. Initially developed to enhance manufacturing quality, Six Sigma is now used in industries like finance and healthcare.
The methodology aims to help organisations increase efficiency, reduce waste and enhance customer satisfaction by systematically identifying and eliminating defects or errors in processes.
Total Quality Management (TQM) is an approach that aims to achieve long-term success by focusing on customer value and satisfaction. This business performance management framework impels all employees to continually enhance product quality, customer service and organisational performance.
Given the complex constellation of people, processes and tools required to implement BPM, there are of course challenges. Three of the most notable include:
Ensuring data accuracy, completeness and accessibility is a key challenge in business performance management. Data accessibility refers to how easily individuals within an organisation can access, understand and use data. However, this is if often impeded by:
Resistance to change is a common hurdle organisations face when introducing business performance management initiatives. Fear of the unknown, specifically how changes may affect their role, can see employees or even entire business units resist new processes or strategies.
This resistance will need to be addressed with effective change management strategies that clearly communicate the reasons behind BPM initiatives and the expected benefits they will deliver. Providing transparency throughout the process can help alleviate concerns and build trust among employees.
By involving key stakeholders in the decision-making process and seeking their input, organisations can ensure their concerns are addressed and that they feel valued and heard. This collaborative approach helps foster a sense of ownership and commitment to the BPM initiatives.
Organisational silos can lead to fragmented efforts and duplication of work across different business units. This is where organisation-wide goals are critical; to provide all departments with overarching objectives and a shared vision.
A culture of transparency and accountability is also essential in addressing the lack of alignment between departments. When employees understand how their work contributes to the organisation’s overall goals, they’re more likely to align their efforts accordingly.
Regular communication and alignment sessions can ensure everyone is working towards the same strategic objectives. This can also encourage information sharing and promote a culture of teamwork and cooperation.
An array of business performance management tools exists to help organisations simplify the process of monitoring and analysing key metrics. Two of the most critical tools include:
Business intelligence software is designed to collect and consolidate data and present it in easy-to-understand ways via dashboards, charts and reports. It helps you make sense of data from a variety of sources – whether historical or current, unstructured or semi-structured – to extract key business performance management insights.
Some of the most beneficial ways business intelligence software can help you include:
Another critical tool for understanding how your organisation is tracking towards goals is a cloud-based business performance management solution. Accessible from anywhere, at any time, these systems leverage the power of cloud computing to provide the real-time, data-driven insights needed to make better decisions.
With a cloud-based business performance management tool like Fathom, you can benefit from:
Trusted by over 80,000 organisations worldwide, Fathom provides the analysis, forecasting and reporting capabilities you need to gain invaluable insights into your business’s performance.
See for yourself how Fathom makes tracking your business’s progress intuitive and simple with a free 14-day trial that’s completely credit card-free.
Fathom is a cloud-based financial intelligence and management reporting app trusted by more than 50,000 companies worldwide.
