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Finance professionals are playing an increasingly important role in monitoring operational performance across an entire organisation, but stakeholder engagement is still remarkably low.

That's the conclusion from the Oracle Enterprise Performance Management (EPM) Index II – a study to investigate the progress of business towards Management Excellence.  Commissioned by software giant Oracle and conducted by analyst group, Quocirca, the EPM Index II is intended to assess the ability of businesses in Europe and North America to unite management processes and information systems to form a consolidated view of business performance.

Calculated on a scale of 0 to 10, the overall Index for all of the surveyed countries has leapt by 38% from 5.13 in a previous report in January 2009  to 7.04 this year, reflecting an improvement in performance management confidence across all geographies, sizes of organisations and all verticals.

Confidence growing

Oracle attributes this rise in confidence about enterprise performance management to the global economic situation.  When the first study was conducted,  businesses  were still wrestling to come to terms with the deteriorating economic outlook.  The main findings then exposed the lack of integration and the poor quality of information exchange between key business functions. While there are still material improvements that need to be made, the better results in this year's study suggests that the majority of businesses now feel more confident about their ability to address these shortcomings.

Businesses now increasingly accept the need to adhere to the principles of enterprise performance management and perceive significant improvements in their strategic planning and reporting processes. But they still remain too internally focused, at the expense of wide-ranging stakeholder expectations, and have comparatively weak levels of integration between the operational areas. For example, there is  a higher focus on customer loyalty to drive growth as opposed to new products, services or geographies.

“The findings reveal that businesses feel more confident how to handle the new reality of today’s economy,” suggested Frank Buytendijk, vice president and fellow of Enterprise Performance Management, Oracle. “The improved Index doesn’t as much signal any material advances, but this rediscovered confidence creates the preconditions for real improvement to take place.

“Comparing it to a rise in consumer confidence preceding a spending increase, this increase in performance confidence will precede new projects and improved ways of working. Finance departments have spent 2009 fixing broken processes and information flows. The findings from Oracle EPM Index II reveal that businesses now understand better that key management performance processes need to be integrated.”

An integrated approach

Previously, over a quarter of businesses thought the six processes supporting enterprise performance management could be viewed in isolation.  This is now down to under 5% while nearly a third of companies now consider that the six processes  are interlinked and require an integrated approach (up from one-fifth). “Organisations need to pay attention to all their critical Management Excellence processes to ensure that they are best placed to adapt to, and capitalise on, ever evolving economic and market conditions,” advised  Buytendijk.

The largest proportional increases in overall values in the EPM Index II are in the areas Business Plan (44%) – which assesses the capacity of business planning to respond to changing operational circumstances and market conditions – and Market Model (40%), which assesses the ability of organisations to fully understand and thus capitalise on their position in the sector and changing market dynamics.

“The Index for Business Plan has made a particular improvement, from below average in the first report to above average now,” said Buytendijk. “This underlines how businesses are taking more care in their business planning process to make best use of available resources. The improved Index for Market Model also emphasises the focus businesses are placing in more effective planning - firms are applying more rigour to the process of identifying the best opportunities, determining competitive differentiators and ultimately creating a competitive advantage.”

But stakeholder engagement, the process of connecting corporate strategy with the interests of key stakeholders (employees, customers, suppliers, regulators, society, and investors), has worsened in relation to the other indices and the average.  “It would appear that there is still too much focus on internal business matters in organisations’ finance departments,” said Buytendijk. “For long term health, a company should solicit contributions from its stakeholders to drive business performance – a key part of meeting stakeholder expectations.”