Many performance management projects fail to deliver

Survey shows that firms are not getting the expected benefits because they are failing to adopot best practices

Growing numbers of firms are deploying performance management systems but many are not getting the expected benefits because of a widespread failure to adopt best practices, according to a major new survey of over 1,100 firms.

The study from business intelligence software vendor SAS found that performance management systems, which are capable of monitoring financial and operational performance against strategic targets, are increasingly ubiquitous: 84 percent of firms are now undertaking performance management efforts in two or more departments. However, many firms are failing to achieve the expected benefits, and some projects are even leading to weaker corporate performance.

Respondents to the survey claimed that they were deploying performance management systems in an attempt to align day-to-day activities with overall corporate strategy, ensure budgets are in line with strategic goals, optimise processes, enhance financial transparency and grow revenues. But the survey found that none of these benefits was being fully achieved, with firms particularly disappointed in the failure of their performance management systems to deliver better alignment between corporate processes and strategies.

The deployment of performance management systems in departmental silos is highlighted as the main cause for this failure to maximise the benefits of the technology. The survey found that over half of the firms running performance management systems in multiple departments had done nothing to integrate the technologies.

Jason Goodwin, head of solutions strategy at SAS, said that failure to take an enterprise-wide performance management strategy is, in some cases, leading to weaker corporate performance.

"If your performance management strategies are not aligned, the best case scenario is that you get inefficiencies, the worst case is that you set up conflicting goals," Goodwin said. "For example, one financial services company measured its marketing department’s performance based on numbers of new customers, while the risk function was measured based on keeping a balance between credit and risk. As a result, marketing was motivated to bring in any customer they could, which meant the risk department was really struggling to achieve its targets."

Goodwin said that firms need to take an enterprise-wide approach to any deployment if they are to deliver successful performance management systems capable of delivering visibility over processes and ensuring performance is optimised. "If you are going to have an enterprise-wide strategy, you need buy-in from the board in order to ensure departments do cooperate and set metrics that do fit with the overall corporate strategy," he added.

Goodwin also argued that firms keen to manage corporate performance need to eschew traditional BI reporting tools in favour of more sophisticated performance management systems. "BI tools are very good at providing a dashboard and reporting on performance but they don't offer the ability to create scorecards and budgets that allow you to measure performance against a strategy, " he said.

However, despite the difficulties being experienced by many firms deploying performance management systems, Goodwin insisted there is little chance of a slowdown in the performance management software market, estimated to be worth $23bn globally this year. "The survey shows that many performance management projects are struggling at the moment, but, ultimately, who can argue with improving your performance?" he said.