Performance matters, especially these days. And the old B-school truism — you can’t manage what you can’t measure — still holds true. So today, CFOs are being asked to report and analyze all manner of financial measurements and nonfinancial metrics (data not traditionally collected, reported, and analyzed by the finance group). That means BPM, business performance management.

Key performance indicators (KPIs) are changing, too. It is no longer enough, for example, to report last month’s sales. CFOs, instead, are fielding requests about which of those sales or accounts are profitable. Similarly, they are being called on to become forecasters, predicting, for instance, the financial impact of shedding seemingly less profitable accounts. Today’s new KPIs might measure the lifetime value of the customer relationship or the cost of adding suppliers.

Managers intent on managing performance will want data not typically found in the usual finance department reports. That leaves the CFO to scramble, often rushing to adopt costly BPM tools to measure, analyze, and report new performance metrics alongside traditional financial reporting. This race to the latest technology, however, can produce disappointing results.

Rushing out to buy a BPM product is Big Mistake #1. Every BI vendor — Oracle/Hyperion, SAP, IBM/Cognos, and more — will eagerly sell pricy BPM tools or just-as-pricy add-ons to the BI tools you already have. The problem is not that they won’t work; at some level, almost all will work and possibly work well. The problem is that you won’t be able to take advantage of them, at least not initially and maybe never.

Remember GIGO — garbage in, garbage out. “Until the business understands what to put in the BPM tool, it won’t be able to get much out,” says Sanjay Sehgal, principal, CFO Advisory Services, Archstone Consulting. With BPM, the CFO doesn’t yet know what data he or she should pour into the tool. It’s not immediately obvious and will take time to figure out. Selecting a BPM tool before you know is a proven formula for making a bad tool investment.

And there is another problem with just running out and buying a BPM tool. Sehgal often walks into organizations and finds they have different BPM tools; one for finance, another for sales, a different one for marketing, and yet another for operations. That amounts to a lot of tools, licenses, maintenance fees, and IT resources, which are costly and likely to produce inconsistent results. It’s like classic dueling spreadsheets but on steroids.

The solution is to work out the organization’s overall BPM strategy starting with its BPM vision before buying anything. This is a laborious, time-consuming, tedious process, requiring the involvement of multiple C-level executives.

Defining this vision starts with the data requirements of the organization along with defining what it hopes to achieve through BPM. To that end, the BPM vision needs to:

• Specify the information managers need

• Identify the areas where BPM will be applied

• Define in concrete terms the outcomes to be achieved

• Establish the key metrics (KPIs) and how they are derived

Based on the BPM vision, a project team can design any new processes, identify the correct people, determine the required governance policies, and select the appropriate tools. Only at this point should the organization open its checkbook. ###