Business Leaders are clear on what they have to do: provide a competitive return on investment to ultimately increase the value of the company. What Business Leaders aren’t always that sure about is “how” to go about doing this.

Corporate Performance Management (CPM) is a set of practices that has at its aim to assist business leaders achieve this objective. CPM is a set of management tools – processes, metrics, systems, and strategies that business leaders can use to help improve operating effectiveness and efficiency, manage risk, and keep shareholder value growing at a strong and sustainable pace.

Corporate Performance Management includes the following areas:

Managing revenue and contribution margin growth:

• Measuring and continuously monitoring which opportunities are not performing according to initial investment criteria. Measurement takes place against budget as well as rolling forecasts. An example might be that within the Sales and Marketing function Sales Managers are held accountable for their profit contribution. Measurement criteria could be in terms of achievement of the budgeted contribution margin at customer and product level. A typical example of what such a contribution margin report indicating CM variance against budget in terms of volume, price, cost and mix variance is included below.
• Click here for a sample report “CM Variance Analysis”.

Improve operating margins with strategy-driven budgeting by planning for productivity and performance improvements

• Manufacturing and service departments are accountable for their costs and how they leverage those costs to drive organizational value. They are measured in terms of achieving the planned utilization of resources / productivity targets (plant, manpower, materials, utilities, etc). Productivity and performance measurement is facilitated by calculating and managing utilization variances (under- or over-recovery of fixed cost) as well as variable and fixed variances by type of account and cost center.
• Click here for a sample report “Cost Centre Reports”.

Continuous process and product improvement:

• A Continuous focus on process and product improvement is a key contributor to increasing organizational value. It is therefore vital to carry out a continuous assessment of process and product improvements and to continuously assess its impact on profitability. One way of achieving this is to compare cost based on budget assumptions with revised standards where new process improvements have been introduced.

Early warning alerts: Avoid surprises after the event

• A Rolling Forecast is the base for detecting any major deviation from the budgeted profit. Early knowledge of this enables the business to take corrective timeous action.