As an important part of driving organizational performance and the overall business improvement process, we thought we would explore Integrated Performance Management, or IPM. Broadly defined, it describes an interconnected system of strategies and tools that measures and aligns performance strategically, operationally, and individually.
Borrowing from Lean Six Sigma concepts, the IPM process is molded to help facilitate and make the decision making process faster and more efficient. Whether an organization needs to respond to the changing business climate or evaluate a potential opportunity, the IPM process lends itself well due to its inherent flexibility.
At the heart of the integrated performance management process are two elements critical to its success: integrity of the process, and its successful deployment. With the massive amounts of data being made available in large organizations to improve processes, it seems necessary that an IPM process be strategically implemented and carefully deployed in order to make those sound decisions and assessments.
So what does integrated performance management focus on? It centers on integrating business divisions to make operations run smoothly, taking tasks normally isolated within these areas and broadening their reach to improve the overall functioning of a business. Instead of a task, such as budgeting, being relegated to a one-time event, it becomes a monthly or continuous process.
Ultimately, the tasks within an IPM process can be linked to improvement projects and overall operations. A well-run IPM cycle can effectively help management evaluate current markets and operations against forecasts.
Generally speaking, there are four components to an IPM cycle:
1. Operating Strategy: This is a starting point that outlines the financial resources such as Profit & Loss, Balance Sheet, and Cash Flow to help guide decision making and where to allocate investments and resources in order to meet business goals.
2. Improvement Projects: As the action plan for IPM, the projects outlined here will yield objectives that drive improvement, and are measurable performance targets.
3. Budget and Forecasts: This area balances market insights and the operational situation into rolling 18 to 24 month forecasts, and provides a stronger framework for being able to respond to the ever-changing and variable business climate.
4. Performance: This area compares the current financial forecast information against existing forecasts and targets, and helps determine whether an operating strategy needs to be changed.
When performed correctly, IPM should deliver business value by improving communication throughout the organization, as well as reduce lag time normally associated with siloed activities performed within organizations and companies, delivering important data to help make critical decisions within hours as opposed to weeks or months. The end result is an agile organization able to respond to opportunities and make important changes necessary for business success.