When done correctly, EPM aligns business objectives with real results. The problem is that many EPM approaches are based on outdated principles designed for more predictable operating conditions than those faced by modern businesses. In today’s fast-paced world, where goals shift rapidly, EPM must evolve too. New approaches are required—ones that reflect the way business happens now.
Traditionally, finance has followed a structured process in which the business would set specific goals, and finance teams would have to scramble to try and meet these objectives. In most cases, this resulted in the annual forecasts and best-guess planning organisations have come to associate with conventional business strategies. However, in today’s agile, fast-moving organisations, these are no longer good enough to stay ahead of increasingly demanding market needs. This is where alternative performance management methods come into play, offering more flexibility and a better fit for modern work demands.
1. The Data-driven approach
For a finance team to manage continual change and make optimal planning decisions with real-time agility, it needs reliable, consolidated data from every part of the organisation. Unfortunately, many finance organisations are hampered by inefficient and siloed legacy technology and processes. These splintered systems keep useful data locked up.
As a result, many finance teams spend too much time collecting, adjusting, and reconciling data rather than analysing it and serving as the true business partners their organisations need. This can leave these teams frustrated, with limited insights and missed growth opportunities. With the inclusion of AI in modern EPM solutions, finance teams are having to pay more attention to how the manage and use their data.
By streamlining data movement, processing, and ensuring actuals feed seamlessly into forecasts reports and disclosures, EPM empowers finance teams to make data-driven decisions with greater confidence. This leads to improved financial performance, increased efficiency, and better overall financial governance.
2. The analytical approach
Business analytics is a hot topic because complexity, uncertainty, and volatility are on the rise. Today, the need for analytics may be the only sustainable long term competitive advantage because the traditional generic strategies, like being the lowest cost supplier or product or customer differentiation, are vulnerable to agile competitors who can quickly match a supplier’s price or invade your customer base. Business analytics can generate questions, stimulate more complex and interesting questions, and have the power to answer the questions.
An EPM solution with integrated analytics capabilities can help companies make better decisions about resource allocation, investment, and strategy; help them identify and respond to performance gaps, and improve financial and operational performance. Most importantly, analytics can help companies respond more quickly to unexpected change and disruption.
3. The integrated approach
Business functions can no longer work in their own silos of data using spreadsheets and legacy applications. A more collaborative approach must be implemented in order to achieve overall company goals. This plan needs to be developed cross-functionally, leveraging different types of datasets for accurate and actionable insights.
There is more to this than just connecting all the various data sources within an organisation. Enterprise planning only works if the finance and operations departments effectively communicate with one another. It is not the software itself that drives business improvement, but rather the re-engineering of business processes required for adoption. Ideally, an enterprise should have a single, comprehensive and unified plan to drive execution. This should be both a financial plan and an operational plan. This requires each function to know its specific duty, without losing sight of the end goal.
EPM empowers different parts of the organisation to operate from a common set of data. This seeds the plan in a connected, dynamic, and collaborative framework with a single version of the truth. In much the same way that all areas of the organisation need to be integrated in order to deliver results, the various components of EPM should be used to drive the business. Like gears in a machine, they are interconnected, and companies only using one or two EPM modules are missing out on the benefits offered by a holistic, integrated approach.
4. The people-driven approach
Today’s primary barrier to innovative financial management is no longer technical. The barrier is social, behavioural and cultural. There are many examples of this type obstacle, including people’s natural resistance to change; not wanting to be measured or held accountable; fear of knowing the truth (or of someone else knowing it); reluctance to share data or information; and “we don’t do that here”.
Motivating mid-level managers and other “champions” to demonstrate to their co-workers that progressive financial management and EPM methodologies make sense to implement can be easier said than done, however. EPM teams should adopt skills and capabilities beyond traditional accounting and reporting to predict future performance. The ideal EPM team functions as a centre of excellence, mixing analytics and data science with critical reasoning to make sense of numbers in the broader context of the organisation, which helps them envision future scenarios.
While a focus on analytics, logic, and facts – in recognising the value in data and whether it makes sense — is vital, creativity, imagination, and visualisation are just as important. This is not the traditional EPM skill set that is influenced by a history of auditing and compliance. A people-driven approach to EPM needs fresh ideas, and non-traditional skills.
Each of these approaches offers finance teams a different way to gain the advantages offered by EPM, ultimately translating to more productivity, reduced costs, and better and faster decision-making to supports the entire organisation
