Enterprise Performance Management:
The U.S.A. State of the Art
Dr Bassil Yaghi and Professor Andy Neely
Cranfield School of Management Centre for Business Performance
Professor J. Richard Dietrich
Fisher College of Business - Center for Business Performance Management
Nigel Youell
Oracle
2
Enterprise Performance Management: The U.S.A. State of the Art
About the Authors
Dr. Bassil Yaghi is a lecturer at Cranfield School of Management. Bassil Yaghi is
researching, teaching, and consulting in strategic management with an emphasis on
strategy development and balanced scorecards. His research and academic and
executive teaching is grounded in his extensive practical experience in the industry as
practitioner and consultant.
.
Professor Andy Neely is Director of Research at Cranfield School of Management,
Deputy Director of AIM Research, the U.K.’s research initiative on management, and
Chair of the Performance Measurement Association. He has authored more than 100
books and articles on performance measurement and management and is widely
recognised as one of the world’s leading authorities on the subject.
Professor Dietrich is a professor of accounting and management information systems,
chairman of the Department of Accounting and Management Information Systems, and
academic director of the Center for Business Performance Management in the Fisher
College of Business at The Ohio State University. He has served as academic fellow at the
Securities and Exchange Commission's Office of the Chief Accountant and he currently
serves as a member of the Standing Advisory Group of the Public Company Accounting
Oversight Board. Dr. Dietrich’s research has been published in leading journals and he
consults frequently with leading organizations on accounting and MIS matters.
Nigel Youell is Director, Global Integrated Marketing for Performance Management at
Oracle Corporation. He has over 25 years of experience in IT covering a wide range of
senior management roles. Organisations that Nigel has worked for include Hyperion
Corp, Comshare Corp, The Strathclyde Institute, Morgan Crucible plc and Marconi plc.
Nigel has spoken internationally and authored a number of articles on Performance
Management.
The authors would also like to acknowledge the support and contributions made to this work by Amanda Brahier and Jeff Rodek of the
Center for Business Performance Management – Fisher College of Business, The Ohio State University, USA and Mark Conway of Oracle.
3
Enterprise Performance Management: The U.S.A. State of the Art
Executive Summary
Knowledge to Insights
As companies try to cope with the downturn in the USA
economy and the increasing competitive globalization
pressures especially from Indian and Chinese companies,
some economists cast a doubt on the ability of the USA to
maintain the productivity increases it gained in the late 1990s
that were fueled primarily by managerial and technological
innovations. Indeed, there is strong evidence suggesting that
the productivity increases are declining which is in turn
impacting economic growth. American companies more than
ever need to create greater value to cope with these
competitive pressures. Enterprise performance management
systems when properly designed, implemented and used have
the potential to help companies create greater value. When it
comes to the use of enterprise performance management in
the United States, we know very little. To overcome this lack of
knowledge Oracle joined forces with Cranfield School of
Management to conduct the first global study of enterprise
performance management. We have collected data from
executives in five different countries - the UK, the USA,
Australia, Japan and China. This report, one a series of
country reports which summarizes the USA data which were
gathered by the Center for Business Performance
Management at Fisher College of Business, The Ohio State
University. Using the evidence-based management framework
[see Figure 1] to structure this report, the main conclusions of
the report are:
• Enterprise performance management software and
information helps companies gain better insights.
• Although USA companies made significant investments in
building enterprise performance management systems,
there is still a large room for improvement.
• Despite its severe limitations, Microsoft Excel is still the
dominant technology tool to analyse, report and manage
enterprise performance.
• Despite many companies adopting a Balanced Scorecard
approach, most of the measures are still financial and few
companies create strategy maps.
• Despite widespread acceptance of the virtue of aligning
enterprise performance management systems with other
operational systems, many companies are lagging behind.
Information to Knowledge
• Most companies are using enterprise performance
management systems operationally or tactically.
• One of the consequences of this operational and tactical use
of measurement, with its excessive focus on assessing
output and controlling input, is that employees do not buy in
to enterprise performance management.
Insights to Value
• Reflecting the tactical and operational use of enterprise
performance management systems, respondents report the
greatest benefits are gained in better operational decisions
followed by improved performance of KPIs.
• Enterprise performance management systems help
companies make better strategic decisions.
• Many companies report that enterprise performance
management systems helped them achieve better overall
performance and to a lesser extent better relative
performance.
Fig.1: Evidence based management
Potential Value Creation
Data to Information
• Enterprise performance management systems help
companies gain better understanding of the intangible
drivers of business performance.
Insights
Knowledge
Information
Data
Window of Opportunity to
Translate Information
Knowledge & Insights into Value
Time
Learning/Experience
The time to get from data to value is limited
4
Enterprise Performance Management: The U.S.A. State of the Art
Fig.2: Financial measures still dominate
100
90
80
% reporting use
70
60
Data to Information
50
• Are we measuring the right things?
40
• Do we have high data quality?
30
• Are our enterprise performance management systems
aligned with other management systems?
20
10
0
What do companies measure?
Fig.3: Balanced Scorecard is the most used approach
60
% of respondents
50
40
30
20
10
How do companies structure their measures?
0
Balanced
scorecard
Six
sigma
EFQM
Fig.4: The majority of companies benchmark
50
Organizations are increasingly realizing the limitations of
piecemeal approaches to performance measurement and
adopting performance measurement frameworks because:
1. They emphasize the different dimensions of performance that
can be measured given that earlier performance
measurement systems incorporated only financial measures.
2. They emphasize the different dimensions of performance that
are important.
40
% of respondents
Despite widespread calls for a balanced approach to assessing
organizational performance, financial measures still dominate.
According to the data collected in USA, the most common
indicators are financial [91.1 percent], customer [74.0 percent],
internal process [56.1 percent], and people [57.7 percent], while
the least common are environment [16.3 percent], supplier [25.2
percent], learning and growth [27.6 percent], and regulator [28.5
percent] [see Figure 2]. The dominance of financial measures is
even more starkly illustrated when one considers that 62.4
percent of the respondents report that financial measures
represent more than 50 percent of their performance measures.
35
30
3. They provide structure for performance measures. This is
important given the limited number of measures managers
can remember. Thus by creating categories more measures
can be incorporated. Performance categories also allow
linkages to be made between them.
25
20
15
10
5
0
No
benchmarking
Internal
benchmarking
External
benchmarking
Internal &
external
benchmarking
Reflecting the popularity of the balanced scorecard as a
framework for guiding the design of enterprise performance
management systems, 48.8 percent of respondents claim to have
one in place followed by Six Sigma [40.7 percent] [see Figure 3].
Do companies benchmark their measures?
Reflecting the wide adoption of total quality management
techniques in the 1990s and the emphasis on operational
efficiency, the majority of companies benchmark their
performance [87.7 percent]. 26.3 percent of companies use
internal benchmarks only. 13.2 percent only use external
benchmarks, comparing performance with other companies e.g.
competitors or best practice. 48.2 percent report using both
internal and external benchmarks [see Figure 4].
5
Enterprise Performance Management: The U.S.A. State of the Art
Fig.6: Majority of respondents report that their KPIs
reflect their business
50
45
40
The respondents were almost evenly split when it came to
reporting on whether they use too many measures. The
respondents who reported that they do not have too many
measures were 36.1 percent and those who reported they have
too many measures were 33.3 percent [see Figure 5].
35
% of respondents
Do companies have too many measures?
30
25
20
15
10
5
0
Strongly
disagree
Do KPIs reflect the business?
The majority of the respondents [63.5 percent] report that their
KPIs clearly and accurately measure their business [see Figure
6]. However, a significant number of respondents [36.5 percent]
either disagreed with or were neutral on whether their KPIs
clearly and accurately measure their business.
The majority of the respondents [65.4 percent] report that their
KPIs are based on quality data [see Figure 7]. However, a
significant number of respondents [34.6 percent] either
disagreed with or were neutral on whether their KPIs are based
on quality data.
40
35
30
25
20
15
10
5
0
Disagree
Neither
agree nor
disagree
Agree
Strongly
agree
Fig.8: Majority of respondents report that their performance
indicators reflect their strategy
50
45
% of respondents
40
35
30
25
20
15
10
35
5
30
0
25
Strongly
disagree
20
Disagree
Neither
agree nor
disagree
Agree
Strongly
agree
15
10
Fig.9: Majority of respondents do not develop strategy maps
5
60
0
Strongly
disagree
Disagree
Neither
agree nor
disagree
Agree
Strongly
agree
50
% of respondents
% of respondents
Strongly
agree
45
Do performance indicators reflect the strategy?
Fig.5: Respondents are split on whether they have
too many measures
Agree
50
Strongly
disagree
Only 68.7 percent of respondents report that their performance
indicators reflect their strategy [see Figure 8]. A significant
number of respondents [31.3 percent] either disagreed with or
were neutral on whether their performance indicators reflect
their strategy. This may not come as a surprise given that only
5.7 percent of the respondents report using strategy maps to
structure their indicators [see Figure 9].
Neither
agree nor
disagree
Fig.7: Majority of respondents report that their KPIs
are based on quality data
% of respondents
Are the KPIs based on quality data?
Disagree
40
30
20
10
0
Cause effect
diagrams
(strategy
maps)
Indicators not
structured
Indicators
structured
Indicators linked
to strategic
objectives
6
Enterprise Performance Management: The U.S.A. State of the Art
Fig.10: Majority of companies do not visualize their
measures
70
% of respondents
60
50
Do companies visualize their strategies?
40
Despite the abundant literature on mapping strategies, the
majority of the respondents [62 percent] do not visualize their
strategies. Of the respondents who reported that they visualize
their strategies only 10.2 percent reported that they visualize
measures between strategic objectives and 6.5 percent between
performance measures [see Figure 10].
30
20
10
0
None
Between
perspectives
Between
strategic objectives
Between
performance measures
Fig.11: Few organizations managed to integrate EPM
with other systems
90
% of respondents
80
70
Management reporting
60
Planning & budgeting
Financial reporting
50
Forecasting
40
Reward systems
Risk management
30
CRM
20
Project management
10
0
Fig.12: Spreadsheets are the dominant EPM technology
No software
BPM
CustomBPM
ERP
Spreadsheet
0
10
20
30
40
50
60
70
% of respondents
Fig.13: Most companies develop EPM internally
Collaboratively
Consultant led
In house
How well do companies align their enterprise
performance management systems with other
management systems?
Despite widespread calls for the virtue of aligning management
systems and recent legislation (e.g., Sarbanes-Oxley), many
companies are lagging behind. The four management systems
most aligned with enterprise performance management systems
are management reporting [87.7 percent], planning and
budgeting [81.8 percent], financial reporting [78.5 percent], and
forecasting [63.2 percent], while the least aligned are reward
systems [53.3 percent], risk management [50.6 percent],
customer relationship management [50.3 percent], and project
management [43.9 percent] [see Figure 11].
What technologies do companies use to
automate their enterprise performance
management systems?
Although the enterprise performance management software is a
multibillion dollar industry and the major players are based in
the USA, it is surprising that the most-popular enterprise
performance management software tool remains the
spreadsheet, with 60.2 percent of respondents using this,
compared to 35.7 percent using an off-the-shelf or customized
enterprise performance management system [see Figure 12].
Related to this approach is the fact that the majority of
organizations [74.6 percent] have taken an in-house approach to
developing their enterprise performance management systems
[see Figure 13].
7
Enterprise Performance Management: The U.S.A. State of the Art
Fig.14: Most companies use EPM tactically
80
Assessing Performance
Aligning Employees Behaviours
70
Operational Efficiency
Compensation/Rewarding
Investigating the purpose of enterprise performance
management systems in the USA reveals that companies are
mostly using them operationally or tactically. The three strategic
purposes, strategic decision making, strategic planning, and
validating strategies, are the least used [see Figure 14]. The
most common reasons for using enterprise performance
management systems are to assess performance [74.8 percent],
align employee behavior [71.6 percent], measure operational
efficiency [66.7 percent], and set compensation/rewards [65.1
percent].
Reflecting further the use of enterprise performance
management for operational and tactical reasons, management’s
focus on using KPI information emphasised the control of inputs
over other dimensions of performance [64.5 percent] [see Figure
15]. Thus performance appears to be assessed from a
managerial mindset focused on the level of organisational inputs
(people, premises/infrastructure, economic, etc.) and how these
are deployed across the business.
Who advocates and uses enterprise
performance management systems?
One of the consequences of this operational and tactical use of
measurement, with its excessive focus on assessing output and
controlling input, is that employees do not buy in to enterprise
performance management. Figure 16 shows the proportion of
people, at different organisational levels, who are advocates of
enterprise performance management. It is striking that while
65.7 percent of CEOs are said to be advocates of enterprise
performance management, this figure drops to 18.5 percent of
middle managers and 11.1 percent of employees. Those who
measure appear to be more convinced of the value of
measurement than those who are measured.
Financial Control
50
External Reporting
Strategic Decision Making
40
Strategic Planning
Validating Strategy
30
20
10
0
Primary reason for measurement
Fig.15: Most companies use EPM to control inputs
60
Output control
50
Input control
Behavioural control
% of respondents
What is the purpose of enterprise performance
management systems?
40
30
20
10
0
Strongly
disagree
Disagree
Neither
agree nor
disagree
Agree
Strongly
agree
Fig.16: Less people buy-into EPM moving down
the organization
100
90
80
% of respondents
Information to Knowledge
% of respondents
60
CEO
Top executive team
Senior managers
70
Middle managers
60
Employees
50
40
30
20
10
0
Avocate of EPM
8
Enterprise Performance Management: The U.S.A. State of the Art
Fig.17: Better insights from EPM
80
70
% of respondents
60
Knowledge to Insights
50
Do enterprise performance management
systems enable companies to gain insights?
40
30
20
10
0
Understand
Intangible
Drivers
Better Insights
from
EPM Software
Better Insights
from EPM
Fig.18: majority of companies do not validate strategies
Respondents report that information from their enterprise
performance management systems enables them to gain better
insights [78.3 percent]. They also report that enterprise
performance management software enables them to gain better
insights [74.8 percent]. Moreover, they report that their
enterprise performance management systems allowed them to
gain a better understanding of the intangible drivers of their
business performance [62.1 percent] [see Figure 17].
% of respondents
40
Do companies attempt to validate their
strategies using information from their
enterprise performance management system?
35
30
25
20
15
10
5
0
Strongly
disagree
Disagree
Neither
agree nor
disagree
Agree
Strongly
agree
Fig.19: Strategy validation results in insight
The majority of the respondents report that they do not validate
their strategies. Only 42.6 percent of the respondents report
validating their strategies [see Figure 18]. But does validating
business strategies make a difference? Using regression
analysis, we tested the relationship between strategy validation
and better insights and we found a positive and statistically
significant relationship between the two. For every 1 percent
increase in attempts to validate cause and effect we see a 0.5
percent increase in the quality of insight [see Figure 19].
Insights to Value
Better insight
What is the impact of enterprise performance
management systems on performance?
Validating cause and effect
Fig.20: Most companies are reaping benefits from EPM
Relative
Performance
Improved
Performance
Strategic
Decisions
Improved KPI
Operational
Decisions
0
10
20
30
40
50
% of respondents
60
70
80
Reflecting the tactical and operational use of enterprise
performance management systems, respondents report the
greatest benefits are gained in better operational decisions [78.4
percent] followed by improved performance of KPIs [74.9 percent]
[see Figure 20]. However, making better strategic decisions was
not far behind at 67.9 percent. A significant number of
respondents report improved overall business performance [66.9
percent]. However, fewer respondents report better performance
relative to their competitors. This may not come as a surprise if
we consider that a significant number of the respondents in the
sample are internally focused [see Figure 4].
Enterprise Performance Management: The U.S.A. State of the Art
What to Do?
Data to Information
In translating data into information, companies should ask these
questions:
1. Are we measuring the rights things?
2. Are we measuring the right things right?
3. Do we have the right technology to ensure reliable and timely
information is delivered to the right decision makers?
4. Do we have integrated systems to ensure consistency?
In answering the first question, companies may consider the
following:
1. Adopting performance management framework such as
Balanced Scorecard, Performance Prism, etc.
2. Creating strategy maps reflecting their theory of competing
(strategy). Strategy maps are visual representations of
strategies consisting of hypothesized causal relationships
between strategic objectives.
In answering the second question, companies may consider the
following:
1. Using two to three measures to evaluate each strategic
objective. This will ensure better validity of the measures.
2. Ensuring that the measures are reliable. This will ensure
consistency of measures.
In answering the third and fourth questions, companies may
consider the following:
1. Using technology solutions that enable them to automate the
data collection, storage, coding, presentation, and
communication.
2. Using technology solutions that are scalable.
3. Using technology solutions that allow them to integrate their
enterprise performance management system with their
operational systems, such as CRM, ERP, etc.
9
10
Enterprise Performance Management: The U.S.A. State of the Art
Information to Knowledge
In translating information into knowledge, companies should ask
these questions:
1. Are we measuring to control, learn or both?
2. Are we engaging all levels of the organization?
In answering the first question, companies may consider the
following:
1. Using enterprise performance management systems not only
to control the implementation of business strategies but to
evaluate and formulate new business strategies.
2. Engaging all levels of the company not only as users but also
as advocates. This could be only done by building a
performance and support culture.
Knowledge to Insights
In translating knowledge into insights, companies should ask
these questions:
1. Are we validating our business strategies?
2. Are we validating our strategic assumptions?
In answering the first question, companies may consider the
following:
1. Generating business insights by building analytical
capabilities. Strategies are the company’s theory of
competition that should be validated.
In answering the second question, companies may consider the
following:
1. Building competitive intelligence capabilities to constantly
scan the environment for signals that might render their
business strategies obsolete. All strategies are based on
strategic assumptions that should be validated.
11
Enterprise Performance Management: The U.S.A. State of the Art
Insights to Value
In translating insights into value, companies should ask these
questions:
Potential Value Creation
Fig.21: From hindsight to insight
Knowledge
Information
1. How are we defining success?
Hindsight
Data
2. Do we measure success?
Window of Opportunity to
Translate Information
Knowledge & Insights into Value
In answering the first question, companies may consider the
following:
Time
Learning/Experience
1. Defining success clearly. Companies should balance short and
long term business performance.
In answering the second question, companies may consider the
following:
1. Quantifying success. At a high abstract level, companies
should be able to benchmark their measures of success with
others.
In translating data into value using enterprise performance
management systems, companies should strive to minimize the
time to do so because they risk losing the window of opportunity to
act which results in translating data into hindsight [see Figure 21].
Fig.22: Respondents by sector
Utilities
Manufacturing
Health
Telecoms
Financial services
Wholesale/retail
Other
About the Research
We selected a sampling frame that contains private companies
located in the United States of America. A sample of 1500
companies was selected. After piloting the survey with
academics and practitioners, we administered the web-based
survey to members of top management teams in the sampled
companies. We received 155 responses. The usable survey
responses were 123, resulting in a response rate of 8.2 percent.
The respondents were from all sectors of the USA economy [see
Figure 22].
Manufacturing companies accounted for 6 percent of the
respondents and 53 percent of the companies were publicly held.
About 62 percent of the respondents reported that their revenues
were between £100M and £250M [see Figure 23]. All participants
were assured that their responses would be kept confidential.
The survey stated that only aggregates would be used for the
research and that no individual company would be linked to
specific responses.
0
5
10
15
20
25
% of respondents
Fig.23: Respondents by revenue
Up to £100M
£100M - £250M
£250M - £500M
£500M - £1B
£1B - £5B
Over £5B
30
Centre for Business Performance, Cranfield School of Management,
Cranfield University, Cranfield, Bedford, MK43 0AL UK
T: +44 (0)1234 751122 | F: +44 (0)1234 751806 | www.som.cranfield.ac.uk
To contact Andy Neely, email: a.neely@cranfield.ac.uk
To contact Bassil Yaghi, email: bassil.yaghi@cranfield.ac.uk
Oracle Corporation UK Ltd., Oracle Parkway, Thames Valley Park (TVP),
Reading, Berkshire, RG6 1RA. UK
T: 0118 924 0000 | F: 0118 924 3000 | www.oracle.com
To contact Nigel Youell, email: nigel.youell@oracle.com
Center for Business Performance Management - Fisher College of Business,
The Ohio State University, USA
T: (614) 292-2082 | F: (614) 292-2118 | www.fisher.osu.edu
To contact Professor J. Richard Dietrich, email: dietrich@fisher.osu.edu