Winston Churchill once said that, "However beautiful the strategy, you should occasionally look at the results." I think this is a great lead in to a discussion of Corporate Performance Management (CPM).

I once taught a class at Seattle University called Management Control Systems. I know this sounds pretty boring (and you would have to ask my students if they agree) but essentially this was an old-fashioned term for what is called CPM (or BPM or EPM) today. For that course, I developed a thesis that went something like this:

Great leadership is about setting a strategy and then executing on that strategy. To make sure that you are executin,g it is imperative to relentlessly measure your results. Measurement tells you whether or not you are meeting the desired goals and gives you the opportunity to focus on those areas where you need to improve and, if necessary, alter your strategy accordingly.

The thesis wasn't too hard to develop and as Churchill's quote from a couple generations ago illustrates, it isn't exactly a brilliant new insight into how to accomplish things. The hard part comes in identifying all the components of a comprehensive measurement program that systematically and efficiently helps you execute your strategy.

I think there are some prerequisites to your measurement process that need to be delivered on before you can contemplate embarking on implementation of a CPM system. The first of these is a commitment from senior management to actively participate in the project. We will discuss this in more detail in future posts (including the role of the CFO and CEO), but this is not a systems project or a finance project. It is a comprehensive and systemic approach of the CEO and senior management to improve the results of the company through great measurement. It is the only way it can succeed. The CFO or Controller can't read a book (or this blog) and hope to implement this in their company in isolation. You have to sell it first to senior management, including the need for them to participate, to have any chance of success.

The second prerequisite is to have the systems necessary to report on the metrics that you will pick out later on to ensure that you are executing on your chosen strategy. By systems I don't just mean Microsoft Dynamics or any of our competitors, but also the data definitions, data structures and hierarchies, and common languages for what gets measured. Of course, having a robust WW system that has a central data repository is also necessary and we may discuss that later, too.

CPM is a kind of virtuous cycle that might look like this:

In this view, once you set the strategy you go about executing on the plan and reporting your results in a way that helps you know how well you are executing. Based on these results you can go adjust your strategy and/or your execution plans. Microsoft is often characterized as being a technology follower rather than a leader. I would be happy to have that debate, but not in this forum. But the point I want to make here is that we are very self-critical and we measure ourselves to see how we are doing. When things are not going as we hoped, we re-double our efforts to get it right. Sometimes this means adjusting our strategy, but more often if just means concentrating on those areas where we think we need to improve and then relentlessly executing, measuring, executing, measuring until we get it right.

That is probably enough for now, but in addition to the topics mentioned above that we need to drill down further, there are many other things we need to explore. For example:

1. Who should participate in this process?
2. How many metrics should we report on?
3. How can we make our scorecard "balanced"?
4. What makes a good metric?

We will also spend some time thinking about some things that will make our CPM comprehensive and consistent with the goals of the strategies of the company. For example, how tightly if at all should this be linked to compensation? How much should be communicated to the rank and file?

It might even be worth some time discussing common characteristics of CPM projects that fail.

I look forward to sharing my ideas with you. I also look forward to hearing from you, especially if you disagree. Let's have a great discussion and participatory interaction to share best practices so that we can all help our companies succeed and prosper and grow.

Craig Bruya
Chief Financial Officer of Microsoft Business Solutions