What is corporate performance management? (With benefits)

By Indeed Editorial Team

Published 14 November 2022

The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.

All types of companies can only operate at their best when as many of their employees as possible are performing to a high standard. This means that businesses are always looking to improve and they rely on a wide range of analytics to inform them of their shortcomings. Knowing how to implement corporate performance management (CPM) can allow you to help your employer completely overhaul its own approach for the better. In this article, we explain what CPM is, outline its benefits, review the CPM metrics and look at how businesses implement this process.

What is corporate performance management?

Corporate performance management is a broad term that encompasses many techniques and efforts that all aim to help businesses make short- and long-term improvements. This includes measuring, reporting, testing and improving certain company processes so the firm can grow for the benefit of both its customers and employees. Analytics are at the core of CPM and form the basis of almost every decision that someone can make on how to enhance the company's processes. They give team members and executives hard data on the business and its possible shortcomings. Usually, they use specialised CPM software to help with this.

CPM has three core focuses, including strategy, metrics and processes. In combination, these areas provide a wholesale perspective of the business, allowing whoever's analysing this data to take every factor into account and accurately determine the firm's strengths and weaknesses. Strategy refers to how the company leaders define and approach their main management methodologies. Essentially, this involves how they run the business. Conversely, metrics refer to certain key performance indicators (KPIs) that assess if the company is reaching its goals or running efficiently. In contrast, processes look at the firm's procedures and how they facilitate the company's activities.

Related: What does a performance manager do? (With salary info)

CPM benefits

Below are the main benefits to a business of using CPM:

Reduces risk

Businesses often experience lots of risks when carrying out their daily operations. For instance, one significant but incorrect decision may result in a big loss for the company. This may have significant consequences, so reducing risk is very advantageous for any firm. CPM relies on data, which means those using it rarely make any notable changes to a company unless the analytics support this decision.

Related: What is business risk? (Definitions and how to assess risks)

Encourages company alignment

Companies that align their goals across every department generally have more motivation to achieve their long-term aims. Uniting the business in this way may help to make each part of it feel a sense of purpose, with a clear direction and greater employee engagement. The company's products or services can easily reflect this engagement, resulting in a stronger overall performance for the business. By implementing CPM alongside other techniques, such as risk or supply chain management, the whole company can reach its full potential more easily.

Improves financial health

CPM looks at more than just a business's processes and performance, it also helps to evaluate a company's budget and how it spends its available resources. Performance tracking lets firms evaluate their own costs and figure out a new strategy that allows them to reduce the amount they spend. CPM software also helps them forecast their finances and determine the likely results of any spending that the company is considering. When using CPM to streamline current strategies or create new ones, firms can develop them in ways that avoid exceeding the budget.

Related: How to manage a budget: techniques and a step-by-step guide

Creates a more efficient workplace

CPM involves streamlining a company to reduce or even remove inefficiencies and anything else that might prevent the business from achieving success. It looks at how the business can improve each of its processes and gives recommendations that allow companies to achieve greater profits or any other metric of success by implementing them. The insight CPM provides is usually easily actionable, giving the firm a clear path they can follow that improves the business and its overall health by identifying performance shortfalls and offering ways to correct this.

Related: Effective vs. efficient: definitions, differences and tips

CPM metrics

CPM utilises many metrics to track performance across a wide range of business goals and activities, including:

  • Conversion rate: This is how successful a firm is in transforming curious leads into loyal customers, who may even promote the business themselves. Depending on the company, loyal customers may make up a substantial amount of its revenue, making it vital to pursue a high conversion rate by using effective advertising methods.

  • Employee retention: This metric involves seeing how the company meshes with current or past employees, including what the firm can do to help retain its dedicated staff members. High employee retention helps a business's management team to develop a qualified team that has a good understanding of the company and shares its values and goals.

  • Budget variance: This refers to how close the budgetary predictions match the actual costs, which is essential for a business to monitor so they know how to best apply the budget in the future. Being able to work out better ways for the company to spend money can make the business more effective in reaching its targets.

  • Sales growth: This metric relates to how the company's revenue changes, including in response to certain factors, campaigns or new products. With this information, firms can determine what customers, and the market as a whole, respond to and how they can capitalise on this further or make changes to generate more growth.

Related: What are metrics in business? (Plus examples and formula)

How to use CPM

Here are the usual steps that companies follow to implement CPM:

1. Determine the company's goals

To use CPM, companies usually start by determining their short- and long-term goals, as this helps them identify how they measure success while using it. This step also includes deciding on the ideal KPIs to use that match the company's goals and figuring out the exact numbers the business hopes to achieve across each of these. By knowing the goals and expectations beforehand, businesses can help align each department towards these aims and improve the chances of success.

Related: What are business goals and how to create them (with steps)

2. Choose appropriate software

CPM frequently relies on software to record and track KPIs, such as the firm's finances and sales figures, so the next step typically involves choosing appropriate CPM software. The right software depends on the business and its needs, so it's useful to thoroughly investigate the options and choose the package that's best suited to the company. This software helps businesses to generate forecasts and provides a single place for the firm to report its progress.

3. Select a framework

As CPM uses certain frameworks to structure a business's approach, it's necessary to select one. These frameworks can include the Six Sigma methodology, which is a data-focused model that looks specifically at the cost-effectiveness of certain products and how to reduce a firm's weaknesses.

Additionally, a business may choose to use the balanced scorecard model. This framework uses different business viewpoints, such as how customers respond and the company's financial performance, to create a more complete overview of the firm. In contrast, a business may choose to use the general performance management framework, which focuses on company strategies, management processes and resources.

4. Communicate the approach to the team

Next, companies typically speak to everybody, including stakeholders and employees about CPM and the firm's approach to using it. This helps to further align the business and keeps everyone informed on company developments. Moreover, educating the company staff on CPM tightens their focus and helps them to work towards the goals set with this technique. This also means businesses can check to see if their stakeholders approve of the changes that CPM might bring to the company.

Related: Communication in project management (definition and types)

5. Analyse the resulting data

Finally, businesses usually analyse the data that CPM produces. As CPM generates a lot of data about a company, it allows businesses to easily assess their performance. The data collected helps businesses to gain a holistic view of the firm and its strategies, allowing decision-makers to compare the business's results with their expectations. This enables these individuals to identify improvement areas.

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