A Capability Maturity Model for Corporate Performance Management, an Empirical Study in Large Finnish Manufacturing Companies

A Capability Maturity Model for Corporate Performance Management – An Empirical Study in Large Finnish Manufacturing Companies 24.09.2009 Mika Aho, Consultant (BI/DW/CPM), PhD-student mika.aho@logica.com / mika.p.aho@tut.fi

Outline
Background, motivation, research problem
Definitions:
Performance Management, Business Intelligence, Corporate Performance Management, Capability Maturity Model
Accelerators and drivers of CPM
A Capabilitity Maturity Model for Corporate Performance Management
Dimensions / components
Levels / stages
Conclusions, suggestions for further research

Background, motivation, research problem
CPM is (still) the highest priority in BI in Europe (Gartner, 2008)
Through 2011, at least 50 percent of companies implementing CPM systems will not realized the benefits of CPM (Gartner, 2008)
This study:
Presents a Capability Maturity Model (CMM) for assessing the maturity of Corporate Performance Management (CPM)
The CPM maturity development process was studies in five case companies
Through a literature study and the development process in each company, the author made observations, and identified the key components, factors, and levels of a CPM maturity
Research strategy and methods:
Qualitative multiple case study
action-oriented, constructive research, conceptual research
Main purpose to understand, interpret and explain CPM maturity development process, and to develop such a capability model
Results:
The findings further extend the CPM research providing a deeper understanding of the process, components, and levels of CPM maturity
Provides organizations an understanding about CPM and its potential value
Provides a quick way for organizations to gauge where their CPM initiative is now and where it needs to go next

Definitions
Performance Management (PM)
Systematic generation and control of organization’s performance (Melchert et al, 2004)
Planning, taking action to control performance, measuring, rewarding (Spangenberg, 1994)
Business Intelligence (BI)
“ A set of methodologies, processes, architectures, and technologies that transform raw data into meaningful and useful information used to enable more effective strategic, tactical, and operational insights and decision-making” (Forrester)
Offers the tools necessary to improve decision-making within organizations
No systematic means of planning, monitoring, controlling and managing the implementation of strategic business objectives (Frolick et al., 2006)
Corporate Performance Management (CPM)
“ Methodologies, metrics, processes and systems used to monitor and manage the business performance of an enterprise” (Gartner)
Brings in new methodologies such as Balanced Scorecards (BSC), Activity-Based Costing (ABC) and value-based management
Also… Planning, budgeting, financial consolidation, reporting and strategy planning (Walker, 1996)
Corporate-level, strategic deployment of BI solutions
Especially from the IT perspective, CPM represents an advancement of the BI
Capability Maturity Model (CMM)
While maturity models are used to support organizational improvement, capability maturity models are focused on the improvement of organizational processes (SEI 2002)
Describes an evolutionary improvement path from ad hoc, immature processes to disciplined, mature processes with improved quality and effectiveness
Provides the key practices for activities in selected areas that enhance the process capability in the topic area (Paulk et al., 1993)

BI vs. PM / BI vs. CPM
CPM is more targeted to support process-oriented organizations than BI
CPM aims at providing a closed-loop support that interlinks strategy formulation, process
design and execution with BI (Melchert et al., 2004)
BI (as a technological solution) provides the IT infrastructure and applications to implement CPM,
CPM includes a business process that leverages BI (Miranda, 2004)

Accelerators and drivers of CPM
Heavily driven by business objectives – often by corporate level objectives and metrics
Organizational:
It is vital to have a C-level sponsor
A partnership between IT, finance and business users needed
Competitive business markets
External pressure by new accounting and regulatory standards
Internal need:
Consolidation of dispersed silos of data
” a single version of the truth”
Focus not only on the needs of finance, but encourage finance users to support PM requirements of other functions and business units

Existing studies on CMM & CPM
CMM has been previously used for example to assess the maturity of IT and Business Alignment, Enterprise Architecture, IT Governance, Service Oriented Architecture
Some existing research on the topic area:
The Data Warehouse Institute’s Maturity Model
Logica’s Maturity Model
Gartner’s Business Intelligence and Performance Management Maturity Model
Davenport’s Maturity of Analytical Capability by Stage

A Capability Maturity Model for CPM – dimensions/components

A Capabiltity Maturity Model for CPM – levels / stages

Example of the levels Enterprise applications, EDW, analytical services. Predictive analytics. Analytical data and BI functionality can be turned into web services in order to leverage the data. DW and analytical server fades in the background. Enterprise data warehouses. Existing DW efforts are improving in data quality and value to the business. Some BI integration with applications. Queries crosses functional boundaries. Data warehouses. Enterprise-wide meta/master data repository established More timely loading of DW. Standard tools become favored. Functional area applications and disparate DW activities. Data is shared and standardized at the departmental level (on cross-functional projects). Data marts. Organizational standards for licensing and support. Tools aligned with user role. Ad-hoc solutions to CPM, different applications across the organization. Individual, disconnected spreadsheets and desktop solutions with their own set of data. No standards. Primitive techniques. Traditional management reporting and spreadsheets distributed without discrimination for actual needs. Inflexible and hard to modify. Infrastructure Technology 5 – Optimized 4 – Managed 3 – Defined 2 – Repeatable 1 – Initial 0 – Unaware

Conclusions / suggestions for further research
The findings of this study further extend the CPM research providing a deeper understanding of the process, components, and levels of CPM maturity
The paper also provides organizations with an understanding about CPM and its potential value
The model provides a quick way for organizations to gauge where their CPM initiative is now and where it needs to go next
Validation needed
An extensive question pattern / a series of questions is needed for the quantitative study
A quantitative research with a larger sample is needed to validate the model in practice

Thank you! [email_address] [email_address]

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A Capability Maturity Model for Corporate Performance Management, an Empirical Study in Large Finnish Manufacturing Companies

by Mika Aho on Sep 22, 2009

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A Capability Maturity Model for Corporate Performance Management, an Empirical Study in Large Finnish Manufacturing Companies Presentation Transcript