Enterprise Performance Management (EPM)
Enterprise performance management (EPM) is a set of processes that help organizations optimize their business performance. It enhances processes by creating better feedback loops. Continuous and real-time reviews help to identify and eliminate problems before they grow. Its forecasting abilities help the company take corrective action in time to meet earnings projections. Forecasting is characterized by a high degree of predictability which is put into good use to answer what-if scenarios. It is useful in risk analysis and predicting outcomes of merger and acquisition scenarios and coming up with a plan to overcome potential problems, EPM provides key performance indicators (KPIs) that help companies monitor efficiency of projects and employees against operational targets.
For business data analysis to become a useful tool, however, it is essential that an enterprise understand its goals and objectives essentially, that they know the direction in which they want the enterprise to progress. To help with this analysis key performance indicators (KPIs) are laid down to assess the present state of the business and to prescribe a course of action. More and more organizations have started to speed up the availability of data. In the past, data only became available after a month or two, which did not help managers react swiftly enough.
Metrics / Key Performance Indicators
With EPM, data will be available at shorter intervals and have reduced delays. A large multi-national bank makes KPI-related data available weekly, and sometimes offers a daily analysis of numbers. This means data usually becomes available within 24 hours, necessitating automation and the use of IT systems.
Most of the time, EPM simply means use of several financial/nonfinancial metrics/key performance indicators to assess the present state of the business and to prescribe a course of action. Some of the areas from which top management analysis could gain knowledge by using EPM:
1. Customer-related numbers: new customers acquired, status of existing customers, attrition of customers (including breakup by reason for attrition)
2. Turnover generated by segments of the Customers: these could be demographic filters.
3. Outstanding balances held by segments of customers and terms of payment: these could be demographic filters.
4. Collection of bad debts within customer relationships
5. Demographic analysis of individuals (potential customers) applying to become customers:
and the levels of approval, rejections and pending numbers.
6. Delinquency analysis of customers behind on payments
7. Profitability of customers by demographic segments and segmentation of customers by profitability.
This is more an inclusive list than an exclusive one. The above more or less describes what a bank would do, but could also refer to a telephone company or similar service sector company.
What is important is
1. KPI related data which is consistent and correct.
2. Timely availability of KPI-related data
3. Information presented in a format which aids decision making
4. Ability to discern patterns or trends from organised information
EPM integrates the company's processes with CRM and/or ERP. it becomes able to gauge customer satisfaction, control customer trends and influence shareholder value.
Technology
Tool categories commonly used for enterprise performance management include:
OLAP online analytical processing, sometimes simply called "analytics" (based on dimensional analysis and the so-called "hypercube" or "cube")
Scorecarding scorecard, dashboarding and data visualization
Data warehouses
Document warehouses
Text mining
DM Data mining
BPM Business performance management
EIS Executive information systems
DSS Decision support systems
MIS Management information systems
SEMS Strategic Enterprise Management Software
Design and Implementation of EPM
When implementing a EPM programme one might like to pose a number of questions and take a number of resultant decisions, such as:
Goal Alignment queries
The first step is determining what the short and medium term purpose of the programme will be. What strategic goal(s) of the organization will be addressed by the programme? What organizational mission/vision does it relate to? A hypothesis needs to be crafted that details how this initiative will eventually improve results / performance, a strategy map.
Baseline queries
Current information gathering competency needs to be assessed. Do we have the capability to monitor important sources of information? What data is being collected and how is it being stored? What are the statistical parameters of this data, e.g., how much random variation does it contain? Is this being measured?
Cost and risk queries
The financial consequences of a new BI initiative should be estimated. It is necessary to assess the cost of the present operations and the increase in costs associated with the EPM initiative? What is the risk that the initiative will fail? This risk assessment should be converted into a financial metric and included in the planning.
Customer and stakeholder queries
Determine who will benefit from the initiative and who will pay. Who has a stake in the current procedure? What kinds of customers / stakeholders will benefit directly from this initiative? Who will benefit indirectly? What are the quantitative / qualitative benefits? Is the specified initiative the best way to increase satisfaction for all kinds of customers, or is there a better way? How will customer benefits be monitored? What about employees, shareholders, and distribution channel members?
Metrics-related queries
These information requirements must be operationalized into clearly defined metrics. One must decide what metrics to use for each piece of information being gathered. Are these the best metrics? How do we know that? How many metrics need to be tracked? If this is a large number (it usually is), what kind of system can be used to track them? Are the metrics standardized, so they can be benchmarked against performance in other organizations? What are the industry standard metrics available?
Measurement Methodology-related queries
One should establish a methodology or a procedure to determine the best (or acceptable) way of measuring the required metrics. What methods will be used, and how frequently will data be collected? Are there any industry standards for this? Is this the best way to do the measurements? How do we know that?
Results-related queries
The EPM programme should be monitored to ensure that objectives are being met. Adjustments in the programme may be necessary. The programme should be tested for accuracy, reliability , and validity . How can it be demonstrated that the BI initiative, and not something else, contributed to a change in results? How much of the change was probably random?
Implementation of EPM
Enterprise Performance Management (EPM) can be implemented in a very basic manner or in a high end complex installation, please feel free to contact us to discuss your needs and requirements.
