You've driven the winding road to ERP. You've navigated the bumpy journey to CRM. Now, it's time to rev up your engines for the next big technology race: the race to the newest enterprise goal: CPM.If you haven't already heard the term, it stands for corporate performance management-also known as enterprise performance management (EPM) or business performance management.

CPM was coined a few years ago by the Stamford, Conn.-based research and advisory firm Gartner Inc. And, although one more acronym in the mix is confusing, the idea of CPM-by any of its names-is an idea whose time has come, according to industry sources.

"Basically, (CPM) refers to a unified system that captures all operating and financial data," says Matthew Josefowicz, group manager of the insurance practice at Boston-based Celent Communications Inc. "It's a single, standard enterprise system that rolls up all operating data and budget information, which can be used for performance monitoring and tracking on a real-time basis."

The promise is: Senior executives and line managers can evaluate how their business is doing against strategic and operational goals with real-time data. The top brass can design its strategy and collaborate with operational managers to establish metrics tied to corporate goals.

Managers at all levels can monitor key performance indicators (KPIs), both financial and operational, on a daily basis using scorecards and dashboards, adjusting operations accordingly. And, to top it off, real-time data can be fed back into planning, budgeting and forecasting, enabling executives to drive their businesses like a high-performance automobile.

That's the promise. Right now, the reality is that most insurers are still at the starting line. Although many have being using business intelligence for nearly a decade, and some have more recently implemented scorecards or dashboards as well as planning, budgeting and forecasting software, very few are at the point where they're actually tying all these pieces together under one enterprisewide umbrella.

In fact, very few insurers have a clear and accessible view of their own operating data, says Josefowicz. "There are a lot of business intelligence and data mastery initiatives in various areas in insurance companies-especially in claims and new business. But very few carriers have an easy and instantaneous rollup of all that data on a real-time basis."

Most companies use a hodge-podge of periodic management information reports, spreadsheets, manual processes, and a variety of software tools to find answers to the three fundamental questions associated with managing a business, says Meg Dussault, director of CPM market strategies at Cognos Inc., an Ottowa, Ont.-based CPM vendor. Those key questions are: How are we doing? Why? And, what should we be doing?

Currently, management finds out how the business is doing through e-mail and phone calls-or scorecards and dashboards if the process is automated, she says.

In many organizations, answering the question "why" involves using business intelligence tools, she adds, but typically, those tools-which include data marts, data mining and analytical software-are scattered throughout an organization. The result: There are multiple versions of the truth.

As for determining what a company should be doing-better known as planning, budgeting and forecasting-that has been the domain of the ubiquitous spreadsheet. And, although spreadsheets work well at the departmental level, they're inefficient when executives need to consolidate reports from across the enterprise, Dussault notes.

Business intelligence tools have been installed in insurance companies for a decade, says Leo Tucker, financial services director at Cognos. Insurers are very accustomed to managed reporting for sales, customer and policy retention, and claims management.

And progressive insurers are using scorecards and dashboards. When it comes to planning, however, carriers are still plodding along the road of what he calls the "million spreadsheet march."

For companies where business intelligence is used, it may be easier to make the leap to corporate performance management, he says. But, many companies actually start their CPM program with planning, budgeting, and forecasting.

"We've seen all three entry points in terms of getting on the road"-business intelligence, scorecards/dashboards, and planning/budgeting/forecasting, says Dussault. It doesn't matter so much where a company starts, but it is important to take an incremental approach, she says. "Start out thinking big about CPM, but take small steps toward the vision, and make it manageable."

That's the approach Pharmacists Mutual Cos. is taking. The Algona, Iowa-based firm began its CPM journey in 2003 after several years of declining profitability led management to inquire about a way to receive more helpful reports.

The company's back-end P&C policy system is powerful and effective, according to Jon Grether, COO, but its reporting features are lacking. "We can get loss ratio reports on a line-of-business basis, but the numbers are fundamental," says Grether. "And we wanted to identify trends more quickly so we could see where we needed to place additional attention."

Dynamic reports

After abandoning one performance management product that didn't deliver results after a year, Pharmacists Mutual began using a Web-based system from iPartners LLC, an Atlanta-based application service provider.

Currently, the insurance company receives seven reports based on monthly data it uploads to iPartners. And the company plans to receive eight to 10 reports when the service is fully implemented. Those reports include all the basic measures an insurance executive needs to know: loss ratio, premium change, premium growth, business retention, and loss analysis and claims, says Grether.

More importantly, the reports are dynamic, which enables management to "slice and dice" the data and drill down for more detailed information. "If I pull up a report on loss ratio analysis, I see a map of the United States and I can see those numbers for any point in time." says Grether. "I can look at all lines of business and I can see that, for the month of March, for example, we came up with a direct loss ratio of 49% for all lines of business in all states.

"I can then go to a box on the screen and enter a desired loss ratio-let's say 48%-and immediately the map is refreshed to show me all the states in red that have a loss ratio greater than that target, and all the states in green that have a loss ratio under 48%."

Clicking on a particular state-Iowa-Grether sees that in March, the company's loss ratio in that state was 62%. Another click on Iowa, and the system loads another screen-a different reporting feature-showing every policy and premium and every incurred loss in Iowa in March. "I can see precisely-claim by claim, dollar by dollar in premium-what made up that 62% loss ratio in Iowa in March," he says.

This is a "dashboard," an executive instrument panel, so to speak. And the information Grether monitors enables him to more quickly spot loss trends, identify problems within a particular line of business or region, and react quickly, he says.

"I can make better decisions-such as a rate change or underwriting change to mitigate our losses."

Pharmacists Mutual is also using scorecards available through the iPartners service. Score-cards consist of key performance indicators (KPIs) showing management how the company-or a single department-is performing against set targets. KPIs can also be weighted by importance, creating a balanced scorecard. Management may deem customer retention to be as important as loss ratio, for example.

An insurance company can use a scorecard to view metrics such as claims frequency per 100 policies, loss frequency per $10,000 in premium, average premium per policy, and open and closed claim counts, Grether explains.

Currently, Pharmacists Mutual analyzes 15 KPIs, which include both revenue and claims metrics. "Using the scorecard, we can set a goal for the company, such as a 50% loss ratio," he says. "We can also target a line or business at a different loss ratio. Then, we can see, month by month, our variance from those goals."

The company also sets alerts on the system, which automatically notifies management if a KPI exceeds a specified limit. "I may want to know if the loss ratio for personal auto in Pennsylvania exceeds 55%-because a state law has changed," he says. "As soon as that occurs-if it occurs-I get an e-mail telling me the KPI is outside of bounds. It's a red flag telling me to go into the system to see what's going on-to do some additional research."

In the next phase of its CPM program, Pharmacists Mutual intends to incorporate its financial data into the system. "We don't have the financial reporting piece in place yet," says Grether. But because iPartners can pull data from any database, he anticipates the company's general ledger data will be uploaded soon, as well as data from its life insurance company. Even information contained in Excel spreadsheets-such as employee count and overtime-can be uploaded and included in the reports, he says.

"iPartners can tie various databases together. They can tie our data from the policy system-the premium and loss information-to a financial component such as surplus trends. They can tie employee counts to number of policies issued to determine if productivity is on the mark or not. Those are the kinds of measures we can track."

"Think of CPM as tying the organization together. It creates alignment across the organization," says Jagdish Mirani, senior director of marketing in the corporate performance management group at Oracle Corp., Redwood Shores, Calif.

It does this by enabling all levels of management to collaborate within one enterprise system, he says. "How many decisions are made in the executive suite that simply die there because there isn't a very good way of communicating them down through the various operating units?" he asks.

Oracle has been talking about the concept of CPM since 1998, he says, but at that time the company called it integrated business intelligence.

Mirani sees a similarity between the business intelligence and packaged software applications. Both have evolved from a functional approach to an enterprise integration approach.

"This is a familiar path," he says. "In the early days of packaged software, vendors took a very functional view. Some vendors focused only on CRM and others focused only on ERP. The problem was: Companies don't automate based on functional views of their business. They automate based on process flows."

As a result, packaged application vendors responded to business needs and began developing products that enabled cross-functional, business-process integration, which is exactly what is happening in the world of business intelligence, he says.

"Initially, business intelligence was 'siloed' and function-specific. So there was sales business intelligence and a sales data mart-while finance had its own BI forecasts and analytics for reporting purposes and internal use."

But business intelligence has progressed to corporate performance management (or integrated business intelligence) because companies automate across functions, he says.

"Prior to CPM, there was no workflow or process automation for managerial processes. So there was no way for managers to collaborate with each other on decision-making. They were simply presented with static information."

All that is changing now

CPM is absolutely what's going to happen because it's common sense," says Cognos' Tucker. Over the next year or two, we'll see insurance companies setting up more formal performance management programs. And, three to five years down the road, the majority of insurance companies will have a formalized program in place."

Celent's Josefowicz concurs. "It's part of an overall trend toward data transparency and a focus on operational transparency-making sure people really can get an easy and clear picture of what's going on in the corporation."

Whether insurers decide to use one single enterprise system-or to use data standards, established data mapping and integration tools-to achieve CPM remains to be seen, he adds.

"But clearly, the interest in enterprise data standards, customer data consolidation, data mastery, data transparency, reporting, business intelligence-all of this, in plain English, is just trying to understand what the heck is going on in your business so you can move in the right direction," he says.

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