Reserach study that gauges the level of integration and maturity of management processes used in large and complex organizations

1. Enterprise Performance Management
ReseaRch RepoRt
EntErprisE pErformancE managE-
mEnt in complEx organizations

2. Research Report – Enterprise performance management

3. coNteNt
4 About This Report 11 Detailed Survey Results
11 more than 50% of respondents
5 Executive Summary Had significant capability gaps
5 Why this study focused on 18 Key capabilities for full
management processes management process integration
5 the nature and importance Hadn’t fully matured
of management processes 24 improving flexibility, agility, and
5 changing Definition of leading profit and cash-flow forecast
management process practices accuracy are Key issues.
6 Key capability gaps in participant 27 large and complex organiza-
management processes tions Value management process
6 starting to address capability maturity more
gaps in less than one Week 30 management process strate-
7 How recommended actions gies are important to large and
Benefit organizations complex organizations
32 more mature management
8 Perspectives About Greater processes are integral to
Management Process Maturity achieving finance objectives
8 gauging management process
maturity with four Questions 34 Summary: Applying Research
8 a source of competitive Insights
Differentiation
9 tangible Value sources
9 fundamental cost reduction
9 multiple applications required
10 Effective finance transformation
Research Report – Enterprise performance management

4. about this RepoRt
all told, 166 responses to the survey
were gathered across multiple indus-
tries. the following is a summary of
those participating:
• 51% of respondents were from com-
panies with over Us$5 billion in annu-
al sales, with 49% coming from com-
panies with between $1 billion and
$5 billion in annual sales.
• 57% of respondents held the position
of cfo or executive vice president or
vice president of finance, with the
remainder holding positions such as
controller, director, or treasurer.
the premise for this research study
is based on a white paper called the
ten Day plan. this paper argues that
emerging planning and budgeting
practices comprise continuous and
fully integrated strategic, financial, and
in november 2008 sap and column 5 the hypotheses for this research operational management processes
consulting llc commissioned cfo were developed by Dean sorensen that can be executed on a monthly
research services (a unit of cfo of column 5 consulting, who jointly basis. it is available for download at
publishing corp.) to conduct research developed the questions and survey www.column5.com.
on the views of finance executives of structure with peter lull and sam
larger and more complex organizations Knox of cfo research services. if you have any questions or comments
on emerging planning and budgeting scott leatherman and patricia faissol about this research study, please
practices. the study sought to deter- of sap provided editorial and analytical contact Dean sorensen at
mine how executives are using or con- contributions. dsorensen@column5.com or directly at
sidering using more mature planning, +1 425-260-6817.
budgeting, forecasting, reporting, and
measurement tools as a strategy for
improved organizational performance.
4 Research Report – Enterprise performance management

5. executive summaRy
this section provides a high-level over-
view of the logic behind the research, Business Intelligence
along with the resulting conclusions
tr a
and recommendations. io
n ns
e ct la
process Balanced
te
ir
Why This Study Focused on
tD
and quality scorecard
Di
Management Processes manage-
se
re c
ment
tio n
Budgeting
one of the most important leading planning portfolio
indicators of the effectiveness and or- consolidation
Business
management
ganizational performance of the finance activity based outcomes governance,
team is planning and budgeting cycle costing and risk, and
planning compliance
time. Why? Because long and highly
pr io
ce
political planning and budgeting pro-
an
riti
sales and asset and
cesses are symptomatic of manage- operations investment
rm
ze
planning management
fo
re
ment process capability gaps that po
er
p
s
impede organizations from achieving ns ge
e a
aspirations of being more flexible, re- m an
sponsive, cost-effective, and customer
focused. large and complex organiza-
tions are especially susceptible to im- Figure 1: Processes and Tools That Comprise Enterprise Management Processes
paired performance caused by these
gaps. these organizations and capability the term “management process” is Changing Definition of Leading
gaps are the focus of this research not a universally defined and acknowl- Management Process Practices
study. edged one, like budgeting, reporting,
or performance measurement. conse- the following describes insights that
The Nature and Importance of quently, organizations don’t always provide a context for the conclusions
Management Processes think about management process included this report:
development at such a broad level. • recent developments in manage-
this report collectively refers to plan- as a result, strategic, financial, and ment process applications are rede-
ning, budgeting, forecasting, reporting, operational management processes fining leading management process
and measurement capabilities as “man- are often fragmented, resulting in key practices.
agement processes”: the means by capability gaps. • these developments are taking
which organizations define, adapt, de- place outside traditional financial
ploy, resource, and execute strategy to such capability gaps are less likely to applications.
create business outcomes. they com- interfere in smaller, less complex orga- • the management process maturity
prise a number of component process- nizations, since their ability to work models used in this study reflect
es and tools (such as those illustrated around them manually is often a viable these developments.
in figure 1) that together provide the option. However, larger and more com- • larger and more complex organiza-
means to optimize performance and plex organizations often outgrow the tions stand to benefit most from more
stakeholder value. ability to effectively execute this manual mature management processes.
work-around strategy. this results in a • further details of the perspectives
number of common challenges, which that underlie them are presented in the
are the focus of this research. “perspectives about greater manage-
ment process maturity” section.
Research Report – Enterprise performance management 5

6. Key Capability Gaps in Participant business process orientation also val-
Management Processes ued greater management process ma-
turity more than others, thereby provid-
the overarching conclusion from this ing evidence of the value stemming
research is that the majority of larger from greater cross-functional
and more complex organizations have coordination.
management process capability gaps,
relative to the practices described Complex organizations are taking
above. Below are the supporting steps to address these gaps and real-
conclusions. ize this value. larger and more com-
plex organizations are almost twice as
Most respondents had management likely to spend significant time develop-
process maturity levels indicating ing a strategy for management pro-
potential capability gaps. the majority cesses as well as the finance function,
of respondents were large and complex compared to others.
organizations having low to moderate
levels of management process maturi- Greater management process maturity
ty. such situations are characteristic will enable finance organizations to
of management process capability play more strategic roles. to enable
gaps that don’t fully support the ability Identified management process organizations to more effectively exe-
to execute strategies and optimize per- priorities and benefits provide further cute strategy, finance organizations
formance across functions, business evidence of these gaps. the majority require more mature management pro-
units, and legal entities. of larger and more complex organiza- cesses that readily adapt to change
tions seek to establish greater flexibility while also providing consistent informa-
Key capabilities hadn’t matured, indi- and agility while improving the accuracy tion across organizations. such man-
cating that management processes of profit and cash-flow forecasts. fully agement processes also equip finance
weren’t fully integrated. complex or- achieving these objectives can be diffi- to fulfill one of its most important self-
ganizations hadn’t fully developed four cult for such organizations because it described roles – to help organizations
key capabilities that are fundamental to requires a level of sophistication that reduce costs.
more mature and fully integrated man- comes from very mature and highly
agement processes. moreover, there integrated management processes. Starting to Address Capability
were inconsistencies between the re- Gaps in Less than One Week
ported maturity of these capabilities The value of addressing these gaps
and participant evaluations of manage- is well recognized in more complex actions taking just one week can start
ment process integration and effective- organizations. larger and more com- to address management process capa-
ness. a potential cause for this is that plex organizations place a higher value bility gaps. adopting more mature man-
organizations are using outdated defini- on more mature management process- agement processes is an opportunity
tions of what constitutes “full integra- es than smaller or less complex organi- for organizations to more effectively
tion” and leading practices. zations do. organizations having higher manage complexity. However, many
6 Research Report – Enterprise performance management

7. often lack meaningful focus on man- Define the Value to address these gaps. in so doing, it
agement processes to capitalize on this getting traction on any initiative is con- will drive the type of cross-functional
opportunity. this is because they focus tingent upon the value it creates. in the changes that are required to achieve
on point solutions that meet the needs early stages, the process of quantifying other objectives, such as greater accu-
of individual functions, rather than management process value should be racy of cash-flow and profit forecasts.
those of the organization as a whole. focused on key areas, most of which
were identified in this research study. provide clear Direction
this approach can result in automated the purpose of this “rough cut” analy- “integration” is a term often used
but disjointed processes that lack the sis is twofold: when describing management process
sophistication to be relevant, while con- • to determine if the value is significant applications. However, the term is often
tinuing to drive excessive cycle times. enough to reprioritize the organiza- defined from technical perspectives,
the result: management processes tion’s investment portfolio not from a business standpoint. to ad-
that leave organizations unable to react • to identify the specific management dress this, executives should define the
to changing market conditions soon process capabilities that are driving requirements for key integration points,
enough to avoid dangerous perfor- this value some of which are addressed in this
mance issues. study. this will provide the direction
Establish a champion required to focus management process
Business leaders can address this by to establish greater management pro- evaluations and design decisions on
taking the following steps. cess maturity, organizations should those things that are critical to capitaliz-
identify a management process cham- ing on identified value opportunities.
identify the gap pion. the champion’s role is to solve
to the extent that this research study business problems by leveraging lead- How Recommended Actions
reveals potential management process ing practices and applications that are Benefit Organizations
capability gaps, organizations should relevant to the organization. this entails
confirm them with further analysis. ensuring that process design and appli- By undertaking these steps, organiza-
this should involve a more detailed cation decisions benefit the organiza- tions will be in a better position to es-
gap analysis that is based on a shared tion as a whole, not just individual func- tablish more effective and integrated
understanding of two things: tions. Examples of these management management processes, while also
• How management process capability process applications can be found at capitalizing on the value opportunities
gaps are contributing to recognized the beginning of this report. they present. from a more pragmatic
business issues that are important to perspective, a holistic approach pro-
key stakeholders create focus vides the means to make process and
• How leading applications – those the most obvious symptoms of man- technology design decisions that:
underlying the management process agement process capability gaps are • result in greater user acceptance
maturity model – provide the means long and highly political planning and • avoid performance issues and rework
to address these gaps budgeting processes. setting aggres- • minimize software integration
sive cycle-time reduction targets (for • minimize implementation time
example, less than 30 days) will prompt • reduce overall implementation costs
the “out of the box” thinking required • achieve benefits and value faster
Research Report – Enterprise performance management 7

8. peRspectives about GReateR
maNaGemeNt pRocess matuRity
EstaBlisHing prioritiEs, Balancing
conflicting oBjEctiVEs
this section provides a context for the
Typical Issues Arising When Information Is Lacking
research by identifying the underlying
perspectives and related hypotheses Issue Potential Implication
that shaped it. for further information it takes too long to obtain and analyze opportunities are missed or diminished.
about these perspectives, please refer information to answer the questions.
to the white paper titled the ten Day
plan, available at www.column5.com. the information used to answer questions Decisions are delayed and disagreements
isn’t always complete and accurate. lead to a lack of commitment once they
Gauging Management Process are made.
Maturity with Four Questions overly simplistic models are used to the wrong conclusions are reached,
conduct analysis needed to answer causing organizations to select the wrong
as organizations grow larger and more questions. projects or set inappropriate targets.
complex, it often becomes increasingly the analysis is narrowly focused on parts the performance of functions, business
difficult to establish targets and allocate of the organization and doesn’t consider units, and legal entities is improved at the
resources while balancing conflicting the impact on the whole. expense of organizational performance.
objectives across multiple functions,
business units, and legal entities. such
organizations often lack readily avail- for larger and more complex organiza- A Source of Competitive
able information to answer four key tions, these manual work-arounds tend Differentiation
questions: to be less effective. in fact, the inability
• are revenue targets supported by to make significant improvements to organizational complexity makes it
realistic volume, mix, and pricing the following three metrics are leading increasingly difficult to coordinate busi-
assumptions? indicators of management processes in ness outcomes horizontally across
• are organizational objectives and key need of more advanced and effective functions, business units, and legal
performance indicator (Kpi) targets capabilities: entities. alleviating this complexity is
realistic and adequately funded? • cash-flow forecast accuracy crucial. the value associated with many
• Does sufficient capacity exist to exe- • planning and budgeting cycle time of the strategies organizations pursue –
cute projects and achieve revenue • actual to planned investment roi operational excellence, competitive
and Kpi targets? cost structures, customer focus and in-
• Do revenue and Kpi targets optimize the ability to produce planning-risk timacy, and employee empowerment,
organizational performance? information on demand related to these for example – are all founded upon
metrics is a leading indicator of the such coordination.
leading organizations incorporate presence of such advanced capabilities.
integrated business models (strategic, producing information on demand is the problem is that organizations don’t
financial, and operational) into their also a leading indicator of “full manage- always plan, manage, and govern this
management processes to answer ment process integration” – from both way. rewards and decision rights often
these questions. (Examples of the out- a business and a technical perspective. follow functionally based planning, bud-
puts are contained in the ten Day plan for these reasons, this survey incorpo- geting, and reporting processes. the
white paper noted above.) While manu- rated these questions to gauge the result: these process-based strategies
al work-arounds can be useful, they presence of advanced capabilities and don’t realize their full potential. this is
typically give rise to four fundamental integration levels. the “alignment paradox” facing today’s
issues and related implications. organizations and represents the key
challenge facing cfos who seek to
8 Research Report – Enterprise performance management

9. transform the finance team into more- as enterprise resource management, Fundamental Cost Reduction
effective business partners. supply chain management, six sigma,
total quality management, and continu- Volatility in today’s economic climate
addressing this alignment paradox ous improvement. it is this logic that has heightened the need for more
requires the ability to more effectively contributes to the following sources effective management processes to
plan and manage business process of value addressed in the survey: reduce costs and preserve cash. one
performance, while maintaining tradi- • Process cost reduction – coordinat- of the most significant benefits of
tional views of spending and perfor- ing resource allocation and perfor- greater management process maturity
mance. such management process mance management across functions is the ability to maintain competitive
maturity is a source of competitive and business units to optimize overall cost structures that can naturally self-
differentiation because it supports organization performance correct to changing market conditions.
superior strategy execution. • Purchase cost reduction – coordi- rather than across-the-board cuts,
nating decisions about product de- more mature management processes
the maturity models discussed in the sign and component sourcing, based enable organizations to more effective-
first part of the survey results section on the impact on overall organization ly align service levels (a key driver of
incorporate this perspective. these performance costs) with revenue streams while also
five-stage maturity models converge • Margin improvement – coordinating establishing more effective accountabil-
at stage 4, where business processes the development of quality and ity for gross and net profits. “funda-
become a focal point of planning and service-level targets (across func- mental cost reduction” is a term that
performance management. these ma- tions and business units) so that they describes this approach.
turity models provide insight into those are consistent with margin objectives
organizations that have reached stage and cost expectations of internal and as organizations pursue cost reduction
4 across both dimensions. external customers opportunities, they would be well
• Investment optimization – priori- served to understand how the tools
this section summarizes findings and tizing, selecting, and sequencing enabling greater management process
conclusions relating to levels of organi- investments on the basis of specific maturity also support a more effective
zational complexity, management pro- evidence about how potential invest- and informed approach to cost
cess maturity, and business process ments affect performance in the reduction.
orientation. “Business process orienta- short, medium, and long term across
tion” expresses the degree to which functions, business units, and legal Multiple Applications Required
organizations plan, measure, manage, entities
and govern the performance of busi- traditional financial planning, budgeting,
ness processes. the survey asks participants to quanti- and reporting applications will always
fy the likelihood of value, and not the lie at the core of any management pro-
Tangible Value Sources degree of value itself. our perspective, cess design. of equal importance are
however, is that complex organizations process-driven business intelligence
in more complex organizations, invest- with larger management process capa- tools that provide the means to inte-
ments supporting management pro- bility gaps have significant value oppor- grate other leading applications into a
cesses pay off when greater cross- tunities. in fact, we believe that more cohesive management process. the
functional coordination is institutionalized. effective management processes are a following are examples of such tools,
such maturity levels enable organiza- competitive differentiator, in that they along with the potential roles they play
tions to optimize the value from invest- enable superior strategy development in an integrated management process:
ments in process-based initiatives such and execution.
Research Report – Enterprise performance management 9

10. • Activity-based costing – the impor- these specialized tools play an essen-
tance of activity-based costing tools tial role in an integrated management
is reemerging as organizations under- process. However, decisions about
stand the need for accurate process which ones to use should not be under-
costs, in total and expressed as a taken individually. rather, the decision
cost per unit of output. this is espe- needs to be made in view of key capa-
cially true of organizations seeking to bilities that are created through integra-
manage customer value propositions tion and that aren’t available from these
across legal entities. applications individually.
• Sales and operations planning –
sales and operations planning has Effective Finance Transformation
evolved from simply a tool that sup-
ports supply chain management to finance transformation is the process
one that can be extended across the equipping finance functions with the
entire enterprise. this continuous processes, tools, and skills to more
process, which has been used so effectively protect and enhance share-
successfully in manufacturing for the holder value. at the heart of this trans-
past 20 years, can now be leveraged formation lies the development of an
in other functions and industries to organization’s most important source
fundamentally reshape the budgeting of competitive advantage: its ability to
process. quickly, cost-effectively, and profitably
• Integrated business planning – inte- adapt to change.
grated business planning provides
the means to dramatically improve greater management process maturity
prioritization, target-setting, and capi- is central to fully developing this capa-
tal allocation processes. advanced bility. therefore, it is also a central
modeling and logic helps identify Kpi component of strategies aimed at
targets and select investments that establishing finance functions that
optimize profitability and roi respec- can play a more strategic role in
tively, while also minimizing the risk organizations.
of unforeseen capacity constraints or
funding shortfalls. the implication is that “real” finance
• Business intelligence (BI) platform – transformation cannot be fully achieved
Bi platforms provide interoperability by finance organizations alone. it re-
and support collaboration required quires coordination with functions to
to achieve rapid planning cycles. develop management processes that
leading tools provide both data and brings together strategy, finance, sales,
process management capabilities and operations to meet the needs of
that are fundamental to integrated the entire organization. this more holis-
management processes. tic approach to management process
design is fundamental to more strategic
approaches to finance transformation.
10 Research Report – Enterprise performance management

11. DetaiLeD suRvey ResuLts
insigHts anD conclUsions
this section comprises the details process maturity. such situations are
of the survey results. reading the characteristic of management process
“perspectives about greater manage- capability gaps that don’t fully support
ment process maturity” section is a the ability to execute strategies and
way to better understand the conclu- optimize performance across functions,
sions reached herein. business units, and legal entities.
Detailed findings supporting this
More than 50% of Respondents include the following:
Had Significant Capability Gaps • more than 50% of respondents were
complex organizations having low lev-
this section summarizes findings and els of management process maturity.
conclusions relating to levels of organi- • these capability gaps varied by
zational complexity, management pro- industry, with some being much
cess maturity, and business process larger than others.
orientation. “Business process orienta- • more than 50% of respondents
tion” expresses the degree to which also exhibited low cross-functional
organizations plan, measure, manage, coordination capabilities.
and govern the performance of busi-
ness processes. Key insights
the data supporting the detailed find-
conclusions ings was further combined and ana-
the majority of respondents were large lyzed to produce the graphs noted on
and complex organizations having low the pages that follow.
to moderate levels of management
Research Report – Enterprise performance management 11

12. More than 50% of respondents Data from questions 10 and 11 was combined to produce the graph in figure 2.
were complex organizations What it shows is that the majority of respondents are represented in the top left
having low levels of management corner of the graph. given the level of complexity, these organizations appear to
process maturity. have management process capability gaps.
Circle = Average
Organizational complexity
High
>50%
medium
<10%
low
low medium High
Management process maturity
Figure 2: Management Process Maturity
These capability gaps varied by industry, with some being much larger than others.
Data from questions 10 and 11 was combined by industry to produce the graph in
figure 3. it shows that these capability gaps vary significantly by industry, with the
highest ones being reported by wholesale and retail, pharmaceuticals, and media
and entertainment.
5.0
financial services, 4.5 other
real estate, and insurance 4.0
3.5 telecommunications
Healthcare
3.0
chemicals, 2.5 media and
energy, and utilities 2.0 entertainment
1.5
transportation 1.0 aerospace
and warehousing
0.5 and defense
0.0
public sector and Hardware, software,
nonprofit and networking
auto, industrial,
food, beverages, and manufacturing
and consumer goods
Business and
construction professional services
pharmaceuticals, Wholesale and
biotechnology, and retail trade
life sciences
Complexity and capability gap Reported capabilities
Figure 3: Capability Gaps by Industry
12 Research Report – Enterprise performance management

13. More than 50% of respondents Data from questions 11 and 14 were combined to produce the graph in figure 4.
also exhibited low cross-functional What it shows is that the more than 50% of participants had achieved only moder-
coordination capabilities. ate levels of both management process and business process management matu-
rity. organizations exhibiting these characteristics typically have planning and
performance management approaches that continue to be functionally or vertically
dominated. as a result, they don’t fully support the type of superior strategy exe-
cution that comes from more horizontally based approaches. a minority of partici-
pants, on the other hand, exhibited such characteristics, as illustrated by the 8%
in the top right-hand corner of the graph.
Circle = Average
Business process orientation
High
8%
medium
>50%
low
low medium High
Management process maturity
Figure 4: Business Process Orientation
Detailed findings
the following are the responses from the survey questions, together with
the key findings, that support the conclusions reached above.
Research Report – Enterprise performance management 13

14. Q10: Complexity – participants participants were asked if the following complexity characteristics strongly applied
exhibited characteristics of highly to their organization:
complex organizations. • large scale: many products, services, customers, employees, and vendors
• significant variability in pricing, volume, product and service mix, customer
support, and input costs
• change: frequent change to products, services, processes, projects, and
organizational structures
• organizational structure: large number of business units, legal entities, and
many geographic regions
• interconnectivity: business units share customers, production, services,
outsourcing vendors
the following insights were revealed from the survey and are illustrated in figures
5 and 6:
• 39% of respondents said all five complexity characteristics apply to them.
• the majority of participants (107 out of 166, or 65%) were categorized as being
highly complex organizations that exhibited four or five of the complexity
characteristics.
• Each respondent was assigned a complexity score on a scale of 1 to 5, based
on the number of characteristics applying to their organization. the average
score for all respondents was 3.8.
14 Research Report – Enterprise performance management

15. large scale: many products, services, customers,
employees, and vendors Yes = 86% 14%
significant variability in pricing, demand volume, product and
Yes = 82% 18%
service mix, customer support, and input costs
interconnectivity: business units share customers,
Yes = 80% 20%
vendors, production, services, or outsourcing vendors
complex organizational structure: large number of business
Yes = 71% No = 29%
units, legal entities, and many geographic regions
change: frequent change to products, services, processes,
Yes = 61% No = 39%
projects, and organizational structures
0% 20% 40% 60% 80% 100%
Figure 5: Organizational Complexity – Characteristics
Number of Complexity Characteristics
Five = 64 organizations representing 39% of respondents 17 36 11
Four = 43 organizations representing 26% of respondents 22 10 11
Three = 33 organizations representing 20% of respondents 21 11 1
Two = 18 organizations representing 11% of respondents 14 2 2
One = 8 organizations representing 5% of respondents 8
0% 10% 20% 30% 40%
Sales Dollars < US$5 billion $5 to $10 billion > $10 billion
Figure 6: Number of Complexity Characteristics
Research Report – Enterprise performance management 15

16. Q11: Management process maturity participants were asked to identify one of the following statements that best
– Despite relatively high automation describes their organization’s current practice for planning, budgeting, forecasting,
levels, management processes and broader enterprise management:
exhibited only moderate maturity. • Basic: spreadsheets are our primary tool for planning, budgeting, and forecast-
ing and for measuring results. maturity score = 1.
• Formalized: planning, budgeting, and forecasting process is automated and
some other elements of enterprise management (for example, pricing, grc,
business intelligence) are automated as well. maturity score = 2.
• Coordinated: planning, budgeting, and forecasting process is automated and
most elements of enterprise management (for example, pricing, governance,
risk and compliance, business intelligence) are automated as well. maturity
score = 3.
• Integrated: one single system and process is used for planning, budgeting,
forecasting, and measuring sales, operations, finance, projects, and business
processes. plans are based on one set of explicit and shared assumptions and
data that are available upon demand. maturity score = 4.
• Dynamic: planning, budgeting, forecasting, and measurement mature into one
continuous, monthly process. annual budgeting is abandoned. maturity score = 5
.
the following insights were revealed from the survey and are illustrated in figure 7:
• two-thirds of respondents had automated aspects of their planning, budgeting,
and forecasting processes, while only a third was still using spreadsheets to
support these processes.
• fewer than one in seven say their company runs integrated systems for these
activities, and very few (3%) have a dynamic, continuous monthly process
where annual budgeting is not necessary.
• of the 13% of respondents indicating that their management processes were
integrated, more than half didn’t have key information available upon demand –
a key feature of integration that is addressed in the next section. the implication
is that the reported 13% should actually be 5% and the coordinated score
should be 27%, not 19%.
• respondents were assigned a maturity score on a scale of 1 to 5, based on
their selection. the average score for all respondents was 2.2.
1. Basic 31%
2. formalized 34%
3. coordinated 19%
4. integrated 13%
5. Dynamic 3%
0% 10% 20% 30% 40%
Figure 7: Stages of Management Process Maturity
16 Research Report – Enterprise performance management

17. Q14: Business process orientation participants were asked to identify one of the following statements that best de-
– on average, process management scribes their organization’s current capability for driving performance improvement
capabilities were moderately across functions, business units, and legal entities:
developed. • Informal: our business processes are not formally defined, and formal process
and quality management approaches (for example, total quality management
and six sigma) are not used.
• Some: formal process and quality management approaches are used to im-
prove cross-functional performance, but efforts are often undermined by a lack
of accessible and accurate cost and performance data.
• Considerable: We have deep process and quality management expertise and
readily available process cost and performance data to drive strategically signifi-
cant process improvements.
• Significant: our process-based approach to planning, budgeting, and measuring
and rewarding performance has institutionalized “process thinking” throughout
the organization.
• Complete: Business processes are the basis for governance and decision rights.
the following insights were revealed from the survey and are illustrated in figure 8:
• 88% of respondents report basic processes and quality management
capabilities are in place to drive performance improvement across functions
and business units, but it is very rare to see complete process capability.
• only 1 in 25 (4%) says the company has a complete process as the basis
for governance and decision rights.
• respondents were each assigned a maturity score on a scale of 1 to 5, based
on their selection. the average score for all respondents was 2.7.
1. informal 12%
2. some 33%
3. considerable 32%
4. integrated 18%
5. complete 4%
0% 10% 20% 30% 40%
Figure 8: Stages of Business Process Orientation
Research Report – Enterprise performance management 17

18. Key Capabilities for Full Manage- Key insights What this means is that the capabilities
ment Process Integration Hadn’t answers to the survey questions con- represented by questions 3 to 6 were
Fully Matured tained in this section revealed three not weighted heavily in the answers to
things: questions 1 and 2. the implication is
this section summarizes the conclu- • complex organizations lacked readily that (for more complex organizations)
sions drawn from the information pro- available information about four the level of effectiveness and integration
vided by survey respondents about measures that gauge the level of is probably lower than that reported by
management process integration and “planning risk” in their business plans. participants.
effectiveness. • Despite a lack of on-demand access
(to this “planning risk” information), Detailed findings
conclusions management processes were rated organizations reported that manage-
complex organizations hadn’t fully de- as effective. ment processes were effective and
veloped four key capabilities that are • Despite a lack of on-demand access integrated, with key information readily
fundamental to more mature and “fully (to this “planning risk” information), accessible. provided below are the re-
integrated” management processes. management processes were rated sponses to the survey questions that
moreover, there were inconsistencies as integrated. support this finding.
between the reported maturity of these
capabilities and participant evaluations What these findings also reveal is an
of management process integration inconsistency between how organiza-
and effectiveness. a potential cause tions answered questions relating to
for this is that organizations are using the first point and how they provided
outdated definitions of what constitutes answers to the last two. this inconsis-
full integration and leading practices. tency is represented in figure 9.
1 average level of reported management process
effectiveness and integration
High
Gap
1
Level of integration
2 Weighted average of responses related to the
medium
2 availability of key information about revenue,
key performance indicator target, capacity, and
project portfolio risk
low
Gap Difference between 1 and 2:
low medium High inconsistency between measures
Management process
effectiveness
Figure 9: Management Process Integration and Effectiveness
18 Research Report – Enterprise performance management

19. Q3 to 6: Data availability – participants were asked about how available accurate “planning risk” information
complex organizations lacked is to determine whether:
on-demand access to key • revenue targets are consistent with demand forecasts
information. • Kpi targets are adequately funded by the budget process
• functions and business units have sufficient capacity to achieve Kpi targets
• revenue and Kpi targets optimize organizational performance
participants were asked to categorize their answers as follows, with values
assigned for indexing purposes as indicated:
• information available with substantial manual effort (index value = 1)
• information available with some manual effort (index value = 2)
• information available upon demand – no manual effort (index value = 3)
the following insights were revealed from the survey and are illustrated in the
graph in figures 10 and 11:
• responses to these questions are consistent with one another across most
dimensions.
• the major differentiator was level of complexity, with the median response for high-,
medium-, and low-complexity organizations being 2, 1.7, and 1.0 respectively.
the key conclusion is that the level of information availability is likely not sufficient to
meet the needs of complex organizations. refer to the “perspectives about greater
management process maturity” section for the rationale behind this conclusion.
Average
Organizational complexity
High
revenue targets are consistent with
2.0 51% 51% 33% 15% 1.7
demand forecasts.
medium
1.7 Key performance indicator (Kpi) targets are
49% 35% 16% 1.7
adequately funded by the budget process.
1.0 functions and business units have capacity
low
to achieve Kpi targets. 46% 34% 19% 1.8
1=low 2=medium 3=High
revenue and Kpi targets optimize organizational
Median information availability 50% 29% 20% 1.9
performance.
Figure 10: Information Availability Compared 0% 20% 40% 60% 80% 100%
to Organizational Complexity
3 = no effort – on
1 = substantial effort 2 = some effort n/a or don’t know
demand
Figure 11: “Planning Risk” Information Availability – Effort Required
Research Report – Enterprise performance management 19

20. Q1: Management process effective- participants were asked how effectively the finance function executes the
ness – despite a lack of on-demand following planning, budgeting, and forecasting activities:
access, management processes • operational and capital budgeting
were rated as effective. • planning and target setting
• p and l (revenue and expense) forecasting
• Balance sheet and cash-flow forecasting
the following insights were revealed from the survey and are illustrated in figures
12 and 13:
• on average, 90% of respondents say their company is either effective or very
effective in executing the above activities.
• these activities were more likely to be effective at organizations with higher
revenues and greater complexity.
• organizations that categorized their processes as being very effective only had
“planning risk” information available on demand between 20% and 24% across
all processes.
the implication of these findings is that, while respondents rated the level of
effectiveness high, compared to leading practices, the actual level of effective-
ness is lower than that reported by complex organizations.
20 Research Report – Enterprise performance management

21. Average
p and l (revenue and expense) forecasting 51% 42% 50% 8% 2.3
Balance sheet and cash-flow forecasting 40% 47% 13% 2.3
planning and target setting 36% 56% 9% 2.2
operational and capital budgeting 28% 61% 11% 2.1
0% 20% 40% 60% 80% 100%
1 = Not very effective 2 = Effective 3 = Very effective
Figure 12: Process Effectiveness – Responses
p and l (revenue and expense) forecasting 20% 80%
Balance sheet and cash-flow forecasting 20% 80%
planning and target setting 24% 76%
operational and capital budgeting 24% 76%
0% 20% 40% 60% 80% 100%
Degree of effectiveness Available on demand Manual intervention
Figure 13: Process Effectiveness – “Very Effective” Responses Adjusted for
Planning Risk Availability
Research Report – Enterprise performance management 21

22. Q2: Management process integra- participants were asked the degree of integration of their financial planning,
tion – despite a lack of on-demand budgeting, and forecasting processes with the following management processes
access, management processes and methods:
were rated as integrated. • Business intelligence
• sales and operations planning
• governance, risk, and compliance
• project and portfolio management
• Balanced scorecard and performance measurement
• activity-based costing
• operational planning optimization
• portfolio and capital planning optimization
the following insights were revealed from the survey and are illustrated in
figures 14 and 15:
• two in five say there is tight integration between financial planning, budgeting,
and forecasting and the six management processes and methods.
• greater integration was found in organizations with higher revenues and
greater complexity.
• organizations that categorized their processes as being tightly integrated
only had “planning risk” information available on demand between 20% and
25% across all management processes and methods.
the implication of these findings is that, while respondents rated the level of
integration high, compared to leading practices, the actual level of integration
is lower than that reported by complex organizations.
22 Research Report – Enterprise performance management

23. sales and operations planning 51% 52% 40% 7% 2.4
governance, risk, and compliance 45% 39% 14% 2% 2.3
activity-based costing 42% 35% 15% 8% 2.1
Business intelligence 40% 50% 10% 2.3
project and portfolio management 40% 46% 13% 2% 2.2
40% 47% 13% 2% 2.2
Balanced scorecard and performance management
0% 20% 40% 60% 80% 100%
2 = some
1= little integration 3 = tight integration 0 = Don’t know
integration
Figure 14: Process Integration – Responses
sales and operations planning 23% 77%
governance, risk, and compliance 22% 78%
activity-based costing 21% 79%
Business intelligence 20% 80%
project and portfolio management 21% 79%
Balanced scorecard and performance management 25% 75%
0% 20% 40% 60% 80% 100%
Integration level On demand Effort needed
Figure 15: Process Integration – “Tightly Integrated” Responses Adjusted for “Planning Risk”
Availability
Research Report – Enterprise performance management 23

24. Improving Flexibility, Agility, and conclusions cation that comes from very mature
Profit and Cash-Flow Forecast the majority of larger and more com- and highly integrated management
Accuracy Are Key Issues plexorganizations seek to establish processes.
greater flexibility and agility while im-
this section summarizes participant proving the accuracy of profit and Detailed findings
management process improvement cash-flow forecasts. fully achieving provided below are the responses
priorities and expected business bene- these, as well as related management from the survey questions, together
fits associated with more effective process improvement objectives, can with the key findings, that support the
planning, budgeting, forecasting, and be very difficult for such organizations conclusions reached above.
performance measurement. because it requires a level of sophisti-
Q7: Business benefits – 75% of participants were asked to identify three of the most important business benefits
larger organizations sought great- that their companies could realize from more effective planning, budgeting,
er flexibility and agility. forecasting, and performance measurement. the following graphs summarize
responses:
• figure 16: shows results from all respondents
• figure 17: identifies differences in responses by company size
• figure 18: identifies differences in responses by industry
the following are the key insights taken from these responses:
• nearly two in three respondents say greater flexibility and agility would be
the leading benefit.
• this flexibility, along with greater customer focus, is prized more by larger
companies.
• the primary focus of organizations with less than $5 billion is driving greater
operational excellence.
• in some industries, there was complete consensus about the relative impor-
tance of these benefits.
• there were significant differences in responses between sectors, further
reinforcing the relevance of these benefits.
greater flexibility and agility 63%
greater customer focus 51%
Drive operational excellence 51%
more consistent strategy execution 50%
promote a business owner mentality 31%
none of these
other
0% 20% 40% 60% 80%
Figure 16: Business Benefits – Results from All Respondents
24 Research Report – Enterprise performance management

25. greater flexibility and agility 50% 75%
greater customer focus 45% 57%
Drive operational excellence 46% 56%
more consistent strategy execution 50%
promote a business owner mentality 31%
none of these
other
0% 20% 40% 60% 80%
> US$5 billion < $5 billion
Figure 17: Business Benefits – Responses by Company Size
flexibility and agility greater customer focus operational excellence strategy execution
F&PG 83% TEL 100% PUB 100% M&E 100%
T&W 80% CON 73% M&E 100% T&W 80%
H&S 75% PUB 67% A&D 75% PHM 75%
A&D 75% W&R 71% W&R 71%
F&PG 67% HTC 71%
F&PG 67%
AVG = 63% AVG = 51% AVG = 51% AVG = 50%
t&W = transportation m&E = media and entertainment con = construction
and warehousing W&r = Wholesale and retail tEl = telecom
f&pg = food and packaged goods pHm = pharmaceuticals pUB = public
a&D = aerospace and defense Htc = Healthcare aVg = average
H&s = Hardware and software
Figure 18: Business Benefits – Responses by Industry
Research Report – Enterprise performance management 25

26. Q12: Improvement priorities – participants were asked to identify the three most important business benefits
55% sought to improve the their company could realize from more effective planning, budgeting, forecasting,
accuracy of profit and cash-flow and performance measurement. the responses are shown in figures 19 and 20.
forecasts. the following is a summary of the key insights:
• improving the accuracy of profit and cash-flow forecasts resonates with more
than half of respondents as a company priority in the next two years.
• responses were balanced across organization size, complexity, and manage-
ment process maturity.
• there were significant differences in responses between sectors, further
reinforcing the relevance of improvement priorities.
improving accuracy of profit and cash-flow forecasts 55%
reducing planning and budgeting cycle time 36%
linking financial and operational plans and forecasts 35%
tying budgets to key performance indicator targets 35%
greater forward visibility into market conditions 32%
aligning financial and operational information 25%
greater collaboration among functions and business units 23%
ability to audit budget variances 22%
none of these or other 2%
0% 20% 40% 60%
Figure 19: Improvement Priorities – Results from All Respondents
profit and cash- reduce budget link financial and tie budgets and link financial and
flow accuracy cycle time operational plans Kpi targets operational info
PHM 100% PUB 67% M&E 100% TEL 80% FPG 50%
TEL 80% PRO 53% FPG 67% M&E 50% W&R 53%
T&W 75% M&E 50% TEL 60% A&D 50% TEL 50%
A&D 75% A&D 50% W&R 60% PHM 50% T&W 50%
AVG 55% 36% 35% 35% 25%
t&W = transportation m&E = media and entertainment con = construction
and warehousing W&r = Wholesale and retail tEl = telecom
fpg = food and packaged goods pHm = pharmaceuticals pUB = public
a&D = aerospace and defense Htc = Healthcare aVg = average
pro = professional services
Figure 20: Improvement Priorities – Responses by Industry
26 Research Report – Enterprise performance management

27. Large and Complex Organizations practices in planning, budgeting, fore- greater return on investments and
Value Management Process casting, and performance measurement projects or higher revenue or margins
Maturity More would lead to the following outcomes as very likely; in addition, nearly half
at their companies. three response of respondents see such results as
this section summarizes the conclusions choices were given: not likely, likely, likely.
drawn from the information provided by and very likely. the following graphs • the percentage of respondents indi-
survey respondents about management summarize responses: cating that the value was very likely
process value opportunities. • figure 21: shows results from all was higher in organizations with
respondents by value source greater revenues, complexity, busi-
conclusions • figure 22: identifies differences in ness process orientation, and infor-
larger and more complex organizations responses by size and value source mation availability.
value management processes maturity • figure 23: identifies differences in • the percentage of respondents
more than others. the same is true of responses by industry and value indicating the value was very likely
organizations having higher business source varied significantly from one sector
process orientation, thereby providing • figure 24: identifies differences in to another.
evidence of the value stemming from overall value responses by level of • there was a direct relationship
greater cross-functional coordination. business process orientation between higher levels of business
process orientation and responses
Detailed findings the following are the key insights iden- indicating that value was very likely.
in question 8, participants were asked tified from these responses:
how likely it was that more advanced • more than two in five participants cite
Research Report – Enterprise performance management 27

28. greater return on investments and projects 51% 44% 49% 7%
Higher revenue and/or margins 43% 48% 9%
lower costs for business processes 35% 56% 9%
lower costs for purchased goods and services 33% 47% 20%
0% 20% 40% 60% 80% 100%
likelihood of
Very likely likely not likely
significant value
Figure 21: Value Creation
greater return on
investments and Higher revenue and/or lower costs for business lower costs for
projects margins processes purchased goods
36% 50% 37% 54% 24% 47% 20% 45%
36% 47% 23% 51% 21% 42% 20% 39%
36% 51% 34% 51% 30% 39% 26% 39%
37% 58% 36% 57% 30% 49% 31% 45%
44% 43% 35% 33%
High business
Revenue > US$5 B Very complex Info not available
process orientation
Low business
Revenue < $5 B Less complex Available info
process orientation
Figure 22: Likelihood of Value – Responses by Company Size and Complexity
28 Research Report – Enterprise performance management

29. greater return on
investments and Higher revenue lower costs for lower costs for
projects and/or margins business processes purchased goods
W&R 86% W&R 100% OTH 67% OTH 67%
A&D 76% OTH 67% T&W 57% W&R 57%
CON 67% CON 67% M&E 50% M&E 50%
OTH 67% TEL 60% AUT 46% AUT 46%
44% 43% 35% 33%
aUt = automotive m&E = media and entertainment tEl = telecom
t&W = transport and warehousing W&r = Wholesale and retail otH = other
a&D = aerospace and defense con = construction
Figure 23: Likelihood of Value – Responses by Industry
1 2.8
2 2.5
3 2.2
Business
process 4 2.2
orientation
levels 5 2.1
median likelihood of value on a 3-point scale
Figure 24: Likelihood of Value – Median
Responses by Level of Business Process
Orientation
Research Report – Enterprise performance management 29