What is EPM? Definition and Understanding of Enterprise Performance Management

Operating any business is a tall order, let alone an enterprise. But improving its operational and financial performance is even harder. Luckily, Enterprise Performance Management can help you with that.

 

What is Enterprise Performance Management or EPM? 

One of the best definitions of EPM comes from Gartner. Gartner Glossary defines enterprise performance management (EPM) as:

“The process of monitoring performance across the enterprise with the goal of improving business performance.”

 

Or, as SelectHub has it here:

In other words, EPM allows organizations to plan, budget, forecast and report on their performance and achieve financial results from that. EPM is also often referred to as corporate performance management (CPM), business performance management (BPM) or financial planning and analysis (FP&A). However be sure not to confuse it with business intelligence (BI), which is often only a part of EPM’s bigger picture.

 

What are the Benefits of EPM?

Why do businesses turn to EPM in the first place?

 

Enterprise Performance Management is not a new concept. It was first introduced in the 1990s. Since then, it has become something of a “must-do” in the enterprise environment.

 

EPM provides several benefits for the organization that employs it. Namely, we can talk about three main advantages of the process:

 

1. Enables more efficient management

Without EPM, it is “every management process for itself”. EPM brings these processes closer together and allows them to work more in unison. This includes budgeting, forecasting, SCM, operational planning and more.

 

2. Provides real-time analysis necessary to execute your strategy

Changes in business conditions happen too quickly today to rely on old information. You must have real-time information to make key business decisions.

 

3. Improves performance across different operational and financial metrics

EPM, if implemented correctly, can also drastically improve bottom-to-top line performance of different sectors within the company. It also highlights what is important in business, aka the “key value drivers” and improves the decision-maker’ ability to make informed and timely decisions based on relevant information.

 

EPM system’s role is to provide an overview of the organization’s performance based on the captured data. It also allows the updating of organizational planning data based on various business drivers and calculation of business rules. An EPM platform should never be rigid, but flexible enough to adapt to your business needs (and not the other way around).

It is supposed to help you Plan, Execute and Analyze easily and effectively, in one place.

 

A Few Important Things Before Implementing EPM in Your Organization

Suffice it to say that it is not possible to implement Enterprise Performance Management in an organization overnight.

With EPM, you should aim to involve people from different departments in your organization, such as Operations, IT, Finance, Project Planning and Analysis, just to name a few, and understand how to involve the right stakeholders at the right phases of the project.

It is also important to understand how the project might affect the different stakeholders during its course. Again, key stakeholders are those that have the most to gain/lose from the initiative. As such, you should put primary focus on these when implementing EPM in your organization, starting with the groups and then working towards the individual.

 

The Cost of EPM?

Many organizations avoid introducing Enterprise Performance Management for fear of high cost.

While it is true that the initial cost of an EPM platform can be up to several hundred per user per month with most vendors, the results should outweigh the costs very quickly.

 

However, there are a few things to consider:

• Does the vendor have enough understanding of your goals and strategy and why you want to introduce EPM in your organization?
• How do you plan to integrate the software/platform with your current systems within the different departments of your organization?

 

Can you automate the integration and bring data regularly into the system? Can you integrate the software with your current MS Office, G Suite, Zoho or similar suite of products?

 

EPM Future Trends

In 2017, the EPM market was worth $6.17 billion. By 2023, it is estimated that it will be worth $11.7 billion.

Like we said, Enterprise Performance Management has been around since the 1990s. It adapted and changed over the years and decades to better answer the business environment of that time. That also means it has seen many trends over the years. Some stayed, some did not, but whatever the case, it is important to know and understand these trends.

 

The biggest trend for years in EPM now is the move to the cloud. A lot of CFOs are still on the fence whether to jump to the cloud or not. That is despite what they might already know of it.

 

Another trend is the move to more predictive accounting. We are seeing a wider and wider gap between what the managers want to see and what the accounting reports. Today, managers no longer want to know just “how much ‘X’ costs now?”, but rather “how much will ‘X’ cost in the future and why?”.

 

Yet another trend has to do with the need for more social and cultural skills over just technical skills. The barrier(s) to EPM integration and implementation are in most cases not technical, but social and they come from people (stakeholders) and not systems. Therefore, it is vital to have a “champion” or “advocate” who can demonstrate the value of EPM to their coworkers and executives.

 

Conclusion

According to Gartner, 75% of enterprises are seeking ways to improve the accuracy and strategic impact of financial planning and analysis data, combining them with operational data from multiple divisions or business units to meet and exceed their growth goals. (via SelectHub).

 

That just goes to show the importance of what EPM does and the impact it can have on the organization’s operational, planning, and financial performance and why your organization should also at the very least consider it.