Introduction
Organizational performance is a broad concept spanning multiple areas of operations that collaboratively contribute to organizational growth. Enterprise performance must be evaluated as a benchmarking approach to ensure organizational success in the competitive business landscape. Although workers’ performance directly impacts organizational performance, organizational performance extends beyond workers’ productivity. It is a holistic growth attributed to an organization’s technological, financial, and other operational capabilities along with worker’s productivity.
Enterprise Performance Management
Surprisingly, statistics have shown that over 90% of organizations fail to implement their strategic plans effectively due to a lack of effective communication and management systems. A management system that fosters accountability and effective control of operations by exploring resources helps an organization achieve success. Connecting measurement to management delivers accountability across organizations, pushing them toward success.
Enterprise Performance Management (EPM) is an approach that connects the dots between measurement and management. EPM is designed to assist organizations in planning, forecasting, budgeting, and reporting on business performance and financial results. This software-based management approach evaluates organizational performance and helps manage the areas that require improvement.
Evolution of EPM
Prior to the introduction of technology and computers, business performance evaluation was done manually. Generally, finance teams tracked progress and ensured its alignment with the business goals and objectives. However, they faced several challenges in creating a cohesive business strategy involving budgets, objectives, and data. The manual process was time-consuming and subject to errors, making it hard to keep pace with changing regulations.
In response to the challenges of conventional EPM processes, a comprehensive and advanced concept of EPM systems came into play during the 1990s. In 1970, the first EPM software applications were launched along with accounting solutions. These solutions aimed to work on business reporting by collecting information regarding budgets and other finances.
In 1980, spreadsheets were introduced to allow finance teams to automate budget and report designing in place of manual worksheets. The EPM concept later evolved into an advanced source of collaboration, budgeting, and reporting in 1990 with the launch of emails in spreadsheet sharing. It was during this time that the first EPM software systems became available to automate financial consolidation and reporting processes. These systems were hosted on-premises and required efforts to extract, transform, and upload data. It replaced manual workflows, fostering efficiency in reporting and regulatory compliance. Some examples of this software are IMRS Micro Control, Hyperion Pillar, and Hyperion Enterprise, used mainly for financial reporting and planning.
EPM Today
Over time, EOM software platforms shifted from on-premises to cloud-based systems. With recent advancements in technology, a rise in the demand for cloud-based EPM software or SaaS-based software is observed now. A cloud-powered EPM allows collaboration among remote servers instead of being in a single company location.
A cloud-based platform helps reduce operational and capital expenses compared to previous web-based EPM platforms. It doesn’t require any expensive infrastructure to support and staff to execute tasks. The new, evolved form of Enterprise Performance Management holds great potential to transform into something more powerful in the near future.
Components of Enterprise Management System
Enterprise Performance Management system comprises multiple components to deliver accountability and improved operations-
- Enterprise Resource Planning (ERP): Managing core processes in a centralized manner using the same semantics to ensure security, accuracy, and integrity.
- Data Accessibility: All business units get access to data from all departments of the organization for better communication.
- An Integrated Group: Consolidation functions are embedded with transactional accounting solutions.
- Collaboration: Collaboration in strategy planning is ensured by driving the strategy across business units to attain financial and sustainability objectives.
- Improved Tax Management: Tax management is improved with EPM by optimizing financial resources and increasing returns on investments.
- AI in Analysis: Performance is reviewed with AI insights against the deployed strategic plan. This opens the door to new opportunities and addresses areas of improvement.
- Enhanced Sustainability: Exploring sustainability data alongside financial data decision-making is empowered to achieve sustainability across operations.
Relationship with Enterprise Resource Planning
Enterprise Resource Planning (ERP) and Enterprise Performance Management are two distinct yet closely related systems that help businesses run efficiently. ERP optimizes internal processes and daily operations. Whereas EPM leverages the data drawn from the outcomes of these operations to empower decision-making. Both EPM and ERM have a synergic relationship that collaboratively takes a business toward success.
ERPs aim to automate transactional processes, and EPMs automate management processes to ensure overall performance improvement. Both software system plays a crucial part in organizational financial development. As two distinct enterprise systems, both work to enhance organizational performance, eliminating any potential issues concerning the operations.
What are the Advantages of Having EPM?
Having an Enterprise Performance Management system can benefit your organization in many ways. Read more to know the advantages it provides in business management-
1) Improved Efficiency
EPM streamlines financial operations with data insights and effective management of performance. Streamlined operations drive efficiency, leading to better performance and growth.
2) Risk Reduction
As EPM largely relies on organizational data to evaluate performance, it is capable of finding loopholes and inaccuracies in financial transactions. With the help of Enterprise Performance Management, organizations can identify issues and eliminate them before they impose any threat to organizational performance.
3) Strategic Planning
Insightful data, accurate reporting of budgets, finances, and sustainable achievements through EPM enable businesses to strategically plan activities for boosting performance.
4) Better Tax Reporting
In a continuously evolving taxation and regulatory environment, organizations often struggle to plan and manage taxes. EPM can resolve this issue by streamlining tax reporting.
5) Consolidation
EMP provides consolidation to financial transactions and develops close reports to help organizational managers understand its overall financial health.
6) Budgeting and Forecasting
Through EPM, budgeting and forecasting have become hassle-free. It is due to the data-driven forecasting and automated budgeting processes of the Enterprise Performance Management system that organizations are staying one step ahead of the market competition.
Conclusion
Performance management in businesses is a multifarious approach that ensures holistic growth. Recent advancements in Artificial Intelligence have enhanced EPM capabilities in many ways. From accurate predictions to automated analysis and pre-formulating insights to speed reconciliation, EPM plays an instrumental role in amplifying business performance and overall growth. With more technological advancement in the future, EPM systems are likely to bring revolution in enterprise performance management.
