Corporate Performance Management

Corporate Performance ManagementEssential Building Blocks for the High-Performance Institution

Table of Contents

The Basics: What is Corporate Performance Management? ......................................................... 5

How CPM Works: The Process of Planning to Performance .......................................................... 6

Building the High-Performance Institution: The Benefits of CPM .................................................. 7

The Building Blocks of CPM for the High-Performance Institution............................................... 10

Assembling the Building Blocks ................................................................................................ 17

Making CPM Happen ............................................................................................................... 21

How to Know If You Were Successful ........................................................................................ 21

Putting the "E" in CPM ............................................................................................................ 22

� Corporate Performance Management: Essential Building Blocks for the High-Performance Institution

The adoption of a Corporate Performance Management

discipline can provide tangible, measurable benefits for

those financial institutions that choose to do so. The

payoff is better decisions and greater certainty in the

execution of business strategy. The key to achieving

these objectives is an understanding of what Corporate

Performance Management is, and the order in which

the essential building blocks of Corporate Performance

Management must be assembled. Read this paper to

learn how.

Donald J. Shaurette

Product Marketing Manager

Corporate Performance Management

IPS-Sendero

Executing your institution’s business strategy has become

more difficult over time. Managing credit, interest rate,

liquidity and operating risks is a major challenge on

a good day. Legal, regulatory and compliance issues

further compound this challenge, and that’s before

consideration of other factors like industry consolidation,

new competition, and keeping customers happy. The

information you need to support decisions likely comes

from a multitude of places, may not be consistent, and

doesn’t arrive at the “right” time. The approach for

combining the outputs from your business planning

and measurement activities is probably fragmented and

unsynchronized. In addition, more effort is probably spent

assembling the information than analyzing it.

How do you ensure delivery of financial returns to

your stakeholders? How do you get from planning to

performance? Corporate Performance Management

(CPM) is the answer.

�

The Basics: What is Corporate Performance Management?CPM is a management discipline that frames the

condition, prospects and risks of an institution. The

intent of CPM is to improve overall corporate (institution)

performance by providing the insights required to make

timely, informed, proactive decisions. A discipline such as

this relies on a framework that links together the elements

needed to plan, monitor and manage the business

strategy of the institution, including the performance

measurements (the metrics), and the supporting

technologies that can bring it all together.

In The Strategy-Focused Organization, Robert Kaplan and

David Norton of the Harvard Business School suggest

failure to meet business objectives doesn’t result from bad

strategy; it results from bad strategy execution. CPM,

when properly orchestrated, creates the opportunity to

link business strategy to business execution, helping to

ensure attainment of goals.

A key assumption underlying CPM is that all participants

leveraging the CPM discipline are working from a

common set of data and assumptions about the business.

If the managers of an institution don’t have the same

understanding or interpretation of what drives the

business, or of the data used to describe results, the

information upon which decisions will be based will never

be viewed consistently and comparably.

Be clear on what CPM isn't:

• It's not a technology, but technology is certainly a

component of CPM's deployment.

• It's not a "scorecard" or "dashboard". These are tools

to structure, report and convey performance measures

and their degree and manner of attainment, and can be

used in that capacity as a part of CPM.

• It's not a "reporting" system. Reporting is a component

of CPM, not an end unto itself.

Implementing a CPM discipline is a multi-faceted exercise

that will involve the management of organizational culture

and change, not just the processes and technology that

can link business strategy to business execution.

Corporate Performance Management: Essential Building Blocks for the High-Performance Institution

1 Robert Kaplan and David Norton, The Strategy-Focused Organization, 2001, p. 1.


How CPM Works: The Process of Planning to PerformancePlanning activities and goals linked to actual performance

measurement and reporting create a "planning-to-

performance" business process. Simply linking the activities

is not enough. CPM requires that the processes be

executed in a fashion that is both adaptive and iterative.

Figure 1 illustrates this process. As the institution executes

its business plans, a feedback mechanism is employed

to compare actual business results with those projected

in the plans, allowing the institution to react to and

anticipate situations or opportunities that vary from planned

objectives. These steps occur on a continuous, "closed-

loop" basis, allowing the institution to adjust and change its

plans, if needed, along with changing business conditions.

The process takes advantage of enabling technologies that

provide for rapid delivery of business critical information. In

addition, these technologies provide capability to include all

participants in the process that can impact plan outcomes,

fostering collaboration and the alignment of goals.

Having all planning-to-performance activities working

within the closed-loop helps maintain focus, limits

distractions and inconsistencies, and reduces potential

points of failure. Without a closed-loop process, planning,

budgeting, profitability and risk measurement, analysis and

reporting are at risk of being executed as disconnected,

standalone activities. When these activities are conducted

on a disconnected, standalone basis, the stage is set for

strategy execution to fall between the cracks.

Figure 1. Diagram of Planning to Performance Process

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Building the High-Performance Institution: The Benefits of CPMSo why undertake a CPM initiative? If the strategic

and tactical issues you face in running your institution's

business aren't daunting enough, consider how Gartner

sums up the need to adopt CPM: 1) to avoid the risks

associated with failing to comply with government

regulations for reporting, 2) the competitive disadvantage

to late adopters as CPM becomes more widely used, and

3) the pressure to maximize current resource efficiency.2

These precepts are underscored by the complicated nature

of financial services in the 21st century.

Understanding that all financial institutions are not

created equal, it might be difficult to accept the "broad

brush" premise of value that CPM can provide. In fact,

there are many common benefits, in addition to the

overarching value of better, faster decisions and improved

certainty of plan execution, to be realized by financial

institutions of all types:

One Version of the "Truth"

By establishing linkages between all components of

the planning-to-performance cycle, and by relying on a

common set of information through which to continuously

plan, monitor and measure business performance, the

CPM discipline lays the groundwork for reliable decisions

to be made on the basis of interdependent management

processes supported by identical, comparable source data.

The question of "which view of the business is correct?" is

no longer a consideration.

A Business System Optimized for Planning-to-Performance

Cobbled-together approaches for planning-to-

performance can't possibly work as efficiently and

effectively as integrated systems and tools built specifically

for the task.

Take the case of spreadsheets. They are tremendous

productivity tools that have become a mainstay for

many institutions in terms of their execution of planning,

budgeting, reporting and analysis activities. However,

they are less than optimal as a "system" upon which

to base CPM given their inherent shortcomings...they

are cumbersome, difficult to control, and are frequently

inaccurate. For example, consider what can happen when

spreadsheets are used to support the budgeting process...

inadvertent data entry mistakes occur, formulas get erased

or overwritten, whole worksheets get reformatted and

critical elements are deleted, in addition to the many


2 Gartner, Avoid the Fatal Flaws of Business Intelligence and Corporate Performance Management, June 2005, p. 3.


other error-creating events that can compromise budget

assembly, analysis and decision making. A well-designed

CPM system addresses these risks with embedded tools

that overcome them, while simultaneously leveraging

spreadsheet utilization and familiarity by system users.

Because CPM employs a systems approach intended to

optimize the planning-to-performance cycle, you should expect

meaningful enhancement to underlying business processes:

• They should become more accurate because of the

"controlled" nature of the system.

• Process cycle times should become shorter. Tasks can

be completed more rapidly, and decision making (both

reactive and proactive) should be accelerated because

information is available at the "right" time.

• Process costs should decline because of system efficiencies.

Imagine the business transformation that can occur when

certain activities that now take days can be accomplished

in minutes.

Of great importance is that fact that a CPM system

can foster accountability for planning assumptions

and business results through its architecture. A CPM

system is designed as a common platform possessing

the capability to both "look back" and "plan forward".

Historical results can be consistently analyzed, and the

future can be planned using multiple assumptions and

scenarios. Common data and tools, which in turn drive

common processes and methods, eliminate the ability for

managers to hide behind the reports they would ordinarily

create outside of such a system, and their analysis

and interpretations of that data. Besides, there is no

organizational learning created when business insight is

captured and catalogued in an "outside" system.

Better Governance and Regulatory Compliance

The increasing demands of a diverse group of stakeholders,

each requiring greater accountability around the management

of the institution's business activities, drives a need for greater

focus in this area. A management discipline that is linked and

overarching, and supported by appropriate systems and tools,

can provide the basis for the detailed oversight necessary to

address the many mandates for disclosure and compliance.

An attribute of CPM is that it is a framework, by definition,

that requires the existence of effective internal control

mechanisms to provide the deep business insight needed to

enhance business performance. Processes and policies are

defined and documented as the CPM framework is assembled.

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Activities around external reporting and compliance can

no longer be managed as an adjunct to the business...

they need to be considered as integral components.

The closed-loop, iterative cycle of CPM acts as an early

warning system, allowing the institution to work ahead

of examinations and reporting deadlines to address

weaknesses before they become real problems, further

laying the groundwork for the execution of strategy.

Improved Transparency into Business Activity

Rarely can data that is inconsistent, incomplete,

insufficient in terms of its detail, or presented at

aggregated levels adequate for providing the level

of understanding necessary to manage business

performance. Further, data of poor integrity is probably

not auditable, nor will it provide directional benefit

regarding the risks facing the institution.

CPM's integrated approach, based on well defined uses for

its supporting information, establishes capabilities that can

expose the relationships that exist between results, the data

that underlies them, and related scenarios and assumptions.

Communication, Collaboration and "Buy In"

Because CPM has the ability to define common goals

and objectives for the institution as a whole, it can

communicate the corporate plan and make it relevant

to the lowest levels of the organization responsible for

planning and strategy execution. This creates alignment

from top to bottom.

It also creates fertile ground for collaboration and plan

"buy in". The planning-to-performance process is an

ideal feedback loop as plans are executed, results are

monitored, and business strategies are adapted to

changing conditions. Consider the value that enhanced,

bottom-up planning would provide in terms of precision

and accuracy in managing balance sheet and net interest

margin in such a collaborative environment.

Michael Coveney outlines the downside of not creating

a collaborative planning process that provides such a

feedback mechanism and "buy in" opportunity in The

Strategy Gap: Leveraging Technology to Execute Winning

Business Strategies. Specifically, employees require an

opportunity to provide input regarding their ability to

implement strategy. Failure to secure support for plans

will result in them not being executed.3


3 Michael Coveney, The Strategy Gap: Leveraging Technology to Execute Winning Strategies, 2003, p. 6.

10 Corporate Performance Management: Essential Building Blocks for the High-Performance Institution

The Building Blocks of CPM for the High-Performance Institution"Rome was not built in a day", and you shouldn't expect

your CPM framework to be either. Building a CPM

framework is a multi-phase process. There are practical

limits in most Institutions as to how rapidly new systems

and management processes can be implemented in a

given period of time. This might suggest that the value

created by CPM could be a long time in the making, but

this is far from true.

Realization of the value that CPM can provide does not

have to be deferred until all data, processes and systems

are linked. It can be attained incrementally as the

"building blocks" are assembled. The key to speeding

along the realization of value is in understanding what

value each building block provides in the context of an

overarching CPM discipline, and the order in which they

should be assembled.

The building blocks of CPM can be defined as the specific

management processes of the financial institution that are

engaged throughout the planning-to-performance cycle,

the tools needed to support them, and the key insights

that are desired that will improve decision making. So

what are these building blocks? For most Institutions,

they'll be the following:

Consolidated, "Unified" Data

Without data, there is no information. Without

information, there is no insight.

The data that supports a CPM discipline will be evaluated

historically, and prospectively. It must draw attention to

causes and effects, as well as support decisions based

on expected outcomes. The degree of insight that a

well deployed CPM initiative can provide will require

deep, transaction level detail. For data to be valuable,

it must be "fresh". It must also be relevant to the

different user audiences that will attempt to leverage

it. Most importantly, it must be consistent. There must

be no variation in how of all data that describes a given

dimension of the business can be interpreted...it must be

the only version of the truth.

The availability of the "right" data to support your

institution's unique performance measurement criteria

(see the Definition of Key Business Drivers below) is a

fundamental building block of CPM. The key linkage for

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this building block is its correlation with the decisions

CPM is intended to support, and the fact that it must be

optimized for that purpose.

Unfortunately, the needed data this comprehensive

definition often resides in different places, is structured

differently, and needs to be cleansed and transformed

before it is of use.

Data Management and Normalization Tool(s)

Making the data integrated, consistent and common is the

role of this building block.

Considering the diverse nature of information needed

to support the planning-to-performance process, the

disparate systems data may reside in, and the multiple

formats in which it may be created and stored, the

existence of management focus and a mechanism to make

the data useable is required.

CPM takes advantage of tools optimized for integration

with the internal IT infrastructure, or with the technology

platforms delivered by external providers. Tools such as

these may be standalone and take the form of an ETL

(extract-transform-load) tool, or may exist as an integrated

component of another building block of the CPM system

in the form of a data import tool.

Asset/Liability Management Models

Net interest margin accounts for a significant portion of

overall profitability, exceeding 60 to 80 percent of revenue

in many institutions. Planning for and managing how

an institution's net interest margin reacts to unexpected

changes in interest rates is integral to the task of asset/

liability management.

Asset/liability management is tightly coupled with an

institution's execution of its strategic plan (including

decisions around pricing, product mix, size, growth and

structure of the balance sheet). Given these correlations

to institutional performance, it is to be expected that

the tools and processes of asset/liability management

would be a key building block of an effective CPM

system. The native ability of these models to benchmark

current positions and to "simulate" or model alternative,

forward-looking scenarios (e.g., balance sheet and income

forecasting) based on changes in the business (and the

environment in which it operates) solidifies their place in

the closed-loop cycle of CPM.

Asset/liability management models further solidify their

position in the CPM framework given their value as tools

through which to measure risks inherent in the balance



sheet, both current and planned. Potential variability of

financial results (particularly for market and liquidity risks)

can be quantified under differing scenarios. The measures

generated by this process provide support for regulatory

compliance and internal risk management activities.

Most institutions already use an asset/liability model in

some form, but they may not have considered their use as

part of a larger, overarching process connected to other

parts of the Institution and their decision processes.

Budgeting and Planning Capabilities (Systems and Processes)

Budgeting and planning capabilities, and the systems

and processes that define them, perform a vital role in

CPM where forward looking plans are quantified. This

building block is critical to establishing management

action, tactical execution, and identifying the need for any

mid-course plan corrections as the closed-loop cycle of

CPM is iterated. The comparison of operating plans, and

their corresponding budgets, with actual results, is the

essential "milestone check" to assess whether business

performance is occurring as planned.

A key focus for this building block relates to the

enumeration of a short-term operating plan for the

institution, including the calculation of net operating

margin based on a defined scenario for the future. This

typically involves the modeling of scenarios (based on

varying management assumptions for the business) as a

precursor to the establishment of the budget itself.

Building the budget for the institution requires the

use of systems and tools optimized for the purpose.

Because the plan (and associated budget) should be

in meaningful levels of detail to manage and monitor

business performance, budgeting and planning tools

must support the design of the institution and its chart

of accounts (with planning units down to the center

level, if appropriate), with the budgeting structure of the

operating plan consistent with the reporting structure in

the operating units. Whether created from a "top down"

(where "global" assumptions are distributed to the

planning unit level) or "bottom up" (where budget details

are prepared at the planning unit level and consolidated

at the institution level) perspective, budget and planning

information is developed at business unit and center levels

to provide needed accuracy and to establish accountability

for the managers of individual budgets and plans.

A unique attribute of this building block is that it has

the potential to involve many participants in the creation

of the plans and budgets themselves. Accordingly, an

13Corporate Performance Management: Essential Building Blocks for the High-Performance Institution

element of this building block involves aspects of the

management of the process...process control, cycle time,

and accuracy...owing to budget inputs, submission and

approval, and adjustment activities spread across the

many participants.

Within CPM, planning and budgeting can become

dynamic and adaptive. As the assumptions underlying the

budget change, and outside of the timing of traditional

budget cycles, the ability to re-forecast potential outcomes

through the manipulation and input of key variables or

business drivers (e.g., volumes and margins) is another

element of this building block. This element supports the

trend towards rolling forecasts as a management tool,

and allows an institution to rapidly respond to changing

business conditions through more proactive, higher-

frequency planning cycles.

Management Reporting Capabilities

Integrated management reporting capabilities should be

considered another fundamental building block of CPM.

These are the management processes and tools through

which insight into business performance is communicated.

This building block relies heavily on its "tool" component.

This building block should be designed with capabilities

that support the relevant linkages between strategy

and execution, with reporting definition becoming a

by-product of the way the institution needs to look at

its business (both internally and externally)...i.e., that

which will serve it best in terms of providing the visibility

to be able to assess and enhance performance. Actual

and proforma financial statements, cash flow projections,

liquidity reports, economic value reports, gap reports,

duration and maturity reports, and variance reports, as well

as audit and regulatory reports, could all be considered

"standards" of the CPM management reporting mix.

Custom report writing and multidimensional reporting using

techniques such as on-line analytical processing (OLAP) may

also be deemed a necessity, based on the complexity of the

institution's business.

The capacity of the CPM infrastructure to provide

reporting based on a single view of the institution's

financial position across complex organizational,

legal, regulatory and geographical boundaries and

structures is also a desired element of this building

block. Consolidation tools can automate the repeatable

processes of rolling up subsidiary units, reducing

manual effort and the potential for clerical error, thereby

1� Corporate Performance Management: Essential Building Blocks for the High-Performance Institution

strengthening internal controls. Information translation

and remeasurement (e.g., valuation of foreign currency

positions) can also be accommodated with

these tools.

Accelerated financial reporting that complies with

regulatory and accounting standards is a goal of this

building block. In addition, the use of appropriate

management reporting tools can actually improve

corporate governance because expanded disclosures can

be made available, and internal controls can be made

auditable and certifiable.

A key tenet of this building block is that reporting

capabilities should be evaluated relative to their ability to

meet the needs of diverse users and stakeholders, and in

terms of their ability to deliver information that is relevant,

exception oriented, predictive and at an adequate level of

detail. Tools that take advantage of enabling technologies

in order to ensure dissemination of information on timely,

flexible and reliable terms are another requisite of the

CPM foundation.

An aim of CPM should be to move from reporting and

analysis cycles that are reporting system or accounting

cycle driven to one that is continuous in nature...

capabilities that provide expedited reporting set the stage

for quick reaction to changing business conditions and

help ensure execution of strategic initiatives. Insight

needs to be acquired and acted upon at the "speed of

business", and not according to an artificially imposed

timeframe or constraint.

Profitability Measurement Capability

This building block provides the institution with the

ability to gain insights about the business from a

variety of cross-sectional views and dimensions. These

views and dimensions will be defined by the nature

of the institution's business, and will generally include

measurements for things such as lines of business and

responsibility centers, products and product lines, markets

and market segments, distribution channels, customers

and relationships, activities, etc. Looking at the business

through this type of lens is important to the CPM

discipline because it can provide visibility into the relative

contribution to profit accruing from various segments of

the business based on insights about a diverse group of

variables such as product pricing, delivery costs, customer

value, resource utilization, as well as many others.

The dimensions of the business for which profitability

measurement is desired must first be defined in a context

that considers the revenues, expenses and capital that can

1�Corporate Performance Management: Essential Building Blocks for the High-Performance Institution

logically be attributed to them. Business rules define how

revenue, costs and capital are allocated and assigned to

the dimensions. For example, measurement of a branch

office's profit contribution would require the assignment

of a portion of net interest margin based on the branch's

sources and uses of funds (facilitated by the use of a

Funds Transfer Pricing tool). Non-interest items, that are

not specifically attributable to the branch, would rely on

allocation rules to assign such things as product costs

based on some methodology (standard costs, activity

based costs, etc.). Capital assignment to the branch

for the measurement of "returns" might contemplate

required fixed asset levels, growth assumptions, and an

adjustment for risk. Collectively, these business rules

would frame "how" the branch's profit contribution is

to be interpreted. These rules must be concisely defined

and consistently applied for the institution to gain the

benefits of the insights that cross-sectional profitability

measurement offers.

A well designed CPM framework provides for historical

analysis of profitability as well as for the ability to simulate

future profitability for the dimensions of interest.

Definition of Key Business Drivers and Measurements

There is no CPM without this building block. You must

determine what should be measured and why.

Key business drivers are external or internal influences

that significantly impact or set direction for the attainment

of the institution's strategic plan. They must be clearly

defined in the context of strategic objectives, and their

impact must provide for the ability to be measured in

financial terms. Proper definition will enable institution

management to focus efforts on those factors critical to

their success. Additionally, application of these concepts

is appropriate for each the various business dimensions

(lines of business, branches, products, etc) for which

performance is to be managed.

Measurements of business drivers are commonly referred

to as key performance indicators (KPI's). KPI's should

be supplemented with measurements of performance

benchmarked to material plan targets. Industry standards

and benchmarks (including competitor data) should be

considered essential comparative measures.

An important distinction must be made between "what"

must be measured, versus "how", and "how much".

Just like the familiar 80/20 rule, it's likely that a fewer

4 Answerthink, Best Practices in Planning and Budgeting, 2003, p. 2.


rather than larger number of business drivers account for

real business impact. The key is in tracking the right ones.

Answerthink indicates that leading companies plan and

measure 40 line items, while world-class companies track as

few as 15 items...key measures can get lost in sheer volume

when more line items are tracked with a negative impact

on the speed and quality of decision-making. In addition,

more line items translate into time wasting analysis that has

little business value, and more detail does not necessarily

translate into more precision given the greater chance that

that the numbers will be incorrect.4

In addition to the management reporting capabilities

described above to facilitate performance measurement,

the CPM framework can maximize opportunities for

performance reporting through the use of technology in

the form of "dashboards". Dashboards are tools that

provide a visual representation (graphs are an example)

and simplification of the status of KPI's and other critical

measurements, and bring focus to management processes

by calling attention to specific situations that can impact

business success based on their causes and effects. They

are particularly useful when tolerance ranges around

business driver outcomes can be established, creating a

framework for exception management and analysis of

the KPI's. Of course, these are merely tools to convey

performance status. The hard work of defining what

should be measured must precede the implementation of

the dashboard.

Each of the building blocks described above have the

potential for some or all of their elements to be deployed

during the process of being assembled as a part of an

incremental, value-adding CPM framework. The options

will be the result of management preference (typically

some point of "pain"), or specific organizational need.

However, there are practical guidelines that form the basic

CPM blueprint, and specify the order of assembly.

4 Answerthink, Best Practices in Planning and Budgeting, 2003, p. 2.

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Assembling the Building BlocksWhat really contributes to business performance in

your institution? The answer to this question ultimately

will drive the way the building blocks are assembled,

and the speed at which CPM business value will be

realized. At the end of the day, it’s all about strategy

execution…people, processes, systems…and decisions.

Each building block contributes to execution differently,

and co-dependencies do exist. While priorities, resources,

organizational design, product offerings, customer

markets, etc. will vary from institution to institution, there

are immutable truths with respect to assembling the

blocks.

Always keep in mind that a key assumption of CPM is

an integrated, unified view of the business performance.

The goal of the assembly process, therefore, is continued

progress towards this unified view, and the build out

of a “complete”, closed-loop planning-to-performance

business process.

The introduction of change, as well as cultural obstacles,

can act as inhibitors to the assembly process. Different

functional perspectives (e.g., treasury, control, lines of

business, etc.) and priorities can slow progress. The work-

around for this is to engage stakeholders and participants


in the planning-to-performance cycle, and sell them on

the “art of the possible”. Also, don’t forget to consider

the needs of external stakeholders (e.g., shareholders and

regulators).

Assembling the building blocks boils down to a

five-step process:

1. Define the Strategy/Decision Framework for your

institution

2. Define the data needed to support the Strategy/

Decision Framework

3. Implement capabilities to support primary profit and

risk drivers in the context of planning-to-performance

4. Implement planning-to-performance capabilities to

support the remaining profit structure

5. Consider other cross-sectional views and value-adding

insights and add based on business priorities

Why this order of assembly? Simply put, some of the

steps (and the building blocks used in those steps) are

"foundational"...they need to be laid first. Subsequent

assembly steps prioritize and accelerate the acquisition of

value intrinsic to each of the blocks employed.


Step 1: Define the Strategy/Decision Framework for Your Institution

Do you define strategic success through traditional financial

measures such as ROA (return on assets) and ROE (return on

equity) only? Do you take an expanded view and employ a

performance measurement methodology such as RAROC (risk-

adjusted return on capital)? Or is a holistic view such as the

Balanced Scorecard your basis for measuring execution of your

institution's business strategy?

Defining the framework through which you will measure

strategy execution and make decisions is the essential first step

in assembling the building blocks. The choice here defines the

parameters around the deployment of the building block that

identifies key business drivers and their measurements.

The value associated with this building block's use at this

stage of CPM's evolution in your institution will be the clarity

and direction that it brings to the planning-to-performance

process...what will be measured, how it will be measured, and

when it will be measured...with a definition of the linkage

back to business strategy and plans.

It is useful to define KPI's in the context of acceptable

ranges, exception levels and tolerances as part of this step.

The tools that can be used to communicate the status of

performance (e.g., dashboards, analytics and reporting

systems) are deployed in subsequent steps.

Step 2: Define the Data Needed to Support the Strategy/Decision Framework

This step addresses the following questions:

• What data do I need to support the activities of the

planning-to-performance process?

• How does the data relate to the Strategy/Decision

Framework?

• How will data be reported and analyzed, and by whom?

• What needs to happen to transform the data into

"information"?

Two building blocks get deployed in this step: 1) the

"data", and 2) data management and normalization

tools. The value associated with the deployment of these

two building blocks is, respectively, movement towards

a single, unified set of data through which to plan and

measure results, and the ability to bring disparate data

sources together to support that aim both initially, and on

an ongoing basis.

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Step 3: Implement Capabilities to Support Primary Profit and Risk Drivers in the Context of Planning-to-Performance

With the components of the balance sheet responsible

for a significant portion of institutional profitability and

risk, it is only logical that deployment of the asset-liability

management model building block comes next. In

conjunction with this building block, including the building

blocks that facilitate management reporting and analysis,

and high-level planning and budgets set the stage for

planning-to-performance to be administered on at least

a macro, institutional level. The CPM value that this step

provides, along with these building blocks collectively, is the

institutional-level view of operational planning and results on

an integrated basis, with a simultaneous leveraging of a single,

unified view of data.

This step sets the stage for operational planning and

performance measurement to be executed continuously,

and for the adaptation of business plans based on the

insights gained. It is also appropriate at this step to

take advantage of tools such as graphs and charts, and

dashboards, as a way of improving insights into business

performance through the visual analysis of data.

Step 4: Implement Planning-to-Performance

Capabilities to Support the Remaining Profit Structure

Whereas the previous step closed the planning-to-

performance loop, this step is intended to refine the

capabilities of those building blocks previously utilized.

With balance sheet planning and reporting well

addressed, attention is turned to the remaining profit

structure, with an emphasis on the remaining elements of

the income statement (primarily the components of net

non-interest income).

Opportunities to distribute planning and budgeting

activities, as well as to apply greater focus on

organizational profitability become the priorities of this

step. The "drill down" into individual organizational

and responsibility center plans and budgets adds more

precision, accuracy and predictability than could be

attained at the macro level, identifies resource needs,

and creates accountability for the execution of plans.

Most importantly, individual plans can now be aligned

with strategic objectives. Participants in the planning-to-

performance process are now coordinated.

An added value is the setting of the stage for true two-

way, collaboration in planning and reporting, and for the

"buy-in" of those individuals responsible for delivering

business results.



Step 5: Consider Other Cross-Sectional Views and Value-Adding Insights and Add Based On Business Priorities

There are certainly other views and dimensions of the

business that are worthwhile evaluating in addition

to those that are organizationally defined. This step

leverages the components of all the building blocks and

the tools of profitability measurement specifically, to do

just that.

As financial services organizations have organized

themselves around lines of business, each with different

products, customers, delivery channels and geographic

dimensions, the opportunity exists to take a cross-sectional

view of these dimensions as a means of enhancing

business performance as a by-product of enhanced

management insight. This step will need to consider

allocations (of costs, for example) to the dimensions being

analyzed, and require specific capabilities (such as an FTP

tool) to assign value for assets or liabilities originated.

The value of this cross-sectional analysis of activities

is greater understanding of what drives business

performance. This, in turn, leads to better decisions about

resource allocation, resolution of strategic conflicts, and

ultimately better business strategy.

Figure 2. The Building Blocks of CPM

Figure 2 summarizes the building block assembly process

for CPM.

Profitability/"Multi-Dimension" Tools

Management Reporting Tools

Unified and Normalized Data

Strategy/Decision Framework

A/LM ModelsPlanning/Budgets/

Analysis Tools

21

Making CPM HappenAdmittedly, implementing CPM can be a broad undertaking.

There are a few things that you can do to move things

along, and insure your success at the same time:

• Get multi-level organizational commitment around

CPM and its use in daily operations.

• As you evaluate solution offerings from CPM vendors,

give strong consideration to the purchase of an

application from a provider who focuses solely on the

financial services industry and its uniqueness. Financial

services is not healthcare or manufacturing.

• Consider ways that you can "future proof" your

investment in CPM right from the start. Choose a vendor

that can support your growth plan and changing needs.

Make sure they have a product vision that supports a

unified view of CPM and the supporting tools (not just

point solutions). Make sure that the technologies to be

deployed are current, scaleable and can interoperate with

your institution's technology strategy.

• Choose a vendor that can assist with implementation

and integration...with appropriate domain (financial

services) expertise.

Depending on your situation, it may make sense not to

do this alone. Taking advantage of resources skilled in

the needs of financial institutions and their performance

management activities is a best practice.

How to Know If You Were SuccessfulAs you undertake a CPM discipline in your institution,

there are questions you should ask yourself to see if you

are making progress and being successful:

• Are better decisions being made? Are decisions more

proactive? If they are still reactive, has your reaction

time been accelerated?

• Have your "predictive" abilities improved? Has there

been a reduction in "surprises"?

• Has previously unidentified profit potential been

realized, costs been avoided, or risk(s) been mitigated?

• Is information being shared more broadly?

• Are the right people sharing the right information?

• Are cycle times for the planning-to-performance process

shorter? Is the process more accurate? Is it more

productive? Are fewer elements of the process left open

to error, or to chance?

• Is the interpretation of information consistent across all

users of the information? Are they drawing the same

conclusions?

• Has decision making become more "two-way"?

• Can your institution more readily make mid-course

corrections in their plans if business conditions so

dictate?



• Are you seeing perspectives of your business that were

missing in the past? Has it become easier to identify the

linkage between business performance measurement

and strategy execution?

• Is your business performance improving?

These questions are excellent benchmarks to determine

if you are on the right track. Remember, CPM is much

more of a journey than an event. The iterative, adaptive

underpinnings of the planning-to-performance process will

always lend themselves to continuous improvement.

Putting the "E" in CPMAcronyms are useful tools. They allow us to take

wordy, important and sometimes complex concepts

and communicate them in an abbreviated, self-

describing manner. CPM is a great example. However,

when properly orchestrated, Corporate Performance

Management's acronym should be amended to "CPM-E".

The "E" is for execution. Strategy execution and superior

performance are the big payoffs of CPM. The planning-

to-performance cycle can be accomplished more quickly,

accurately and at less cost, and provide better insights and

decisions when your institution adopts a CPM framework.

You don't need to wait. The benefits of CPM can

progressively add value to your institution if you assemble

the framework "block by block".

23

About IPS-SenderoIPS-Sendero is a business unit of Fiserv, Inc. and a provider

of technology solutions and education for corporate

performance management, including asset/liability

management, profitability measurement and financial

management and planning. Financial institutions of

all types use IPS-Sendero products and services to

help manage balance sheet risk, measure and manage

profitability, develop budgets and forecasts, and produce

information needed for sound decisionmaking. More

than 3,400 organizations in 56 countries have licensed

7,800 IPS-Sendero products through the company's

headquarters in Atlanta and its global offices.


2�

230 Scientific DriveSuite 800Norcross, GA 30092-2904USA

Toll Free: 800-879-1996 Phone: 770-409-0047Fax: 770-409-1735www.ips-sendero.com

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