Gartner has observed a rapid adoption of CPM by a majority (approximately 60%) of enterprises that provide a comprehensive and unified environment to support these core management processes. These processes are not uniformly adopted; those related to planning and financial reporting are more widely used than those related to profitability modeling and strategy management. Not all four processes discussed in this research will have the same degree of importance for all organizations (and there may be differences in short-term versus long-term importance). Prioritize the processes you want to implement or improve in support of your short-term cost optimization initiatives, longer-term strategies and competitive advantage, and create a road map for process innovation to realize longer-term strategies. Technology and vendor selection should follow documentation of processes to ensure that solutions adequately support the processes you want to change or automate. This research outlines the top four CPM processes on which organizations should focus during the next five years. Improvement in these processes can help with short-term cost optimization and profitability initiatives, improving the execution of strategy, and supporting longer-term business growth and transformation. Organizations have invested heavily over many decades to establish and optimize core transactional processes, but these transactional processes are much less mature in their approach to management-related processes. Over the past decade, methodologies, best practices and packaged solutions have emerged to assist organizations to better establish and automate core management processes. Gartner defines the heart of these core management processes under the term "corporate performance management" (see "Understanding CPM Applications"). The primary functional areas of CPM are:
- Budgeting
- Planning and forecasting
- Scorecarding
- Profitability modeling
- Financial consolidation
- Financial/statutory reporting
This represents the broad set of functionality required to support all performance management functions and processes at the corporate level. Although awareness of the CPM concept has become widespread, most implementations are focused on the core financial aspects — budgeting, planning and forecasting, financial consolidation, and financial/statutory reporting. While this is not a bad thing, it shows that the more strategic aspects of CPM (understanding the drivers of profitability and strategy management) are not well-understood. This is beginning to change as the market and buyers continue to mature and recognize the transformational benefits that these solutions can offer. This research discusses the top four CPM processes (see Figure 1) that organizations should focus on during the next five years, not only to support cost optimization, but also to improve the financial close, support increased regulatory reporting, and align strategic and operations activities for better execution of the strategy. Figure 1. The Top CPM Processes 
Source: Gartner (September 2009)
However, for simplicity, we have introduced the key processes in a linear almost sequential fashion. It is important to understand that these processes are interlinked (see Figure 2) with closed-loop and feedback cycles that enable processes to coexist, and enable organizations to recalibrate/adjust rapidly. Figure 2. The Links Between CPM Processes 
Source: Gartner (September 2009)
Despite decades of investments in business intelligence, most organizations still struggle to execute on their business strategies. Strategies are intended to focus everyone's attention on what to do; but, in many cases, they are inadequately created, poorly communicated and badly measured. The align-to-action process is aimed at helping organizations synchronize their strategic and tactical activities, and better execute their strategies. This process includes the use of scorecarding, goal management, strategy maps, methodologies (such as the balanced scorecard or Six Sigma) and the analysis of key metrics. Also included is the basis of long-term planning (high-level business plans to evaluate the impact of different strategic alternatives), which forms the scope of more-detailed planning covered by the plan-to-perform process. This includes creating strategic plans on a "base case plus" or initiative-based approach, along with scenario modeling to compare the financial outcomes of various strategies. Strategic planning includes long-term financial planning, which creates a high-level perspective of revenue, expenses, balance sheet items and cash flows to show the financial impact of different strategic alternatives. People issues are a significant impediment to the successful adoption of the align-to-action process, not the specific methodology used or the identification of the right metrics. Therefore, a well-designed metrics system aligned with a compensation/reward program (such as allocating bonuses to teams or business units that perform well, and differentiating rewards for outstanding performance) will encourage appropriate behavior. Individual and team contributions can easily be better designed, communicated and measured when aligned with the objectives and overall strategic objectives (see "Using Corporate Performance Management to Deliver the CEO's Strategic Vision"). Successful implementations of this process are less common than for other CPM processes, and most of those that are tend to be stand-alone that are not linked to other performance management processes. Required Capabilities and Investments: Most of the capabilities required to support this process are people skills, rather than IT investments. Successful approaches require consulting to help articulate the strategy, create strategy maps and identify the key metrics. Many solutions are available — from stand-alone scorecarding tools to CPM suites that support implementation of this process. Action Item: Create strategy maps to define and align the strategy with tactical activities, and use a metrics model to communicate and drive the desired behavior to support strategy execution. Look to external professional services to help deliver these capabilities.
The plan-to-perform process represents an evolution of the plan-do-check-act process defined as a core management principle by statistician/professor/author W. Edwards Deming in the 1950s. Unlike its earlier iterations, the plan-to-perform process recognizes that there are multiple planning cycles that need to integrate with each other. For example, there is the strategic planning (primarily the focus of the align-to-action process), financial planning and operational planning cycles. Additionally, some planning approaches use activity-based management concepts to determine and allocate costs at a highly granular level to help determine product and customer profitability. More-sophisticated instances of this process enable costs and revenue to be allocated and modeled, which provide after the event detailed analysis of costs and profitability, as well as before the event planning and scenario capabilities. Planning is one of the most commonly deployed aspects of CPM processes due to its long established principles and broad applicability. It includes strategic planning, financial budgeting and high-level operational planning. This process supports the concept of planning from multiple perspectives — for example, top-down, high-level planning (which sets goals at a corporate/business-unit level and allocates these to lower-level organizational elements) and bottom-up budgeting (which creates corporate budgets by aggregating lower-level organizational unit budgets). Increasingly, this process is executed as an ongoing iteration, rather than an historical point-in-time exercise to deliver rolling budgets and has, therefore, incorporated the concepts of beyond budgeting. Furthermore, this process incorporates forecasting and modeling capabilities to help finesse existing iterations into new scenarios that provide multiple new outcomes as an early indicator of future performance. Required Capabilities and Investments: Many sophisticated solutions are available to address financial budgeting needs and to support an enterprisewide approach to this process. For example, CPM-based budgeting, planning and forecasting applications are mature and sophisticated in functionality to support this process. However, Microsoft Excel is also still widely used; Gartner estimates that nearly 50% of large enterprises and 75% of midsize organizations are still using spreadsheets or legacy applications to support this process. CPM processes can help identify how to manage cost-cutting initiatives, while protecting profitable revenue (see "Update: Cost Optimization Requires Corporate Performance Management"). Action Item: Improving the plan-to-perform process can be one important way to reduce costs and improve productivity. Users should replace Excel-based systems or manually intensive processes with packaged budgeting, planning and forecasting applications.
Most organizations continue to produce their key financial reports (such as the three core financial statements — profit and loss [P&L], balance sheet and cash flow forecast), as well as a raft of management reports via manually intensive processes. The monitor-to-measure process defines an organization's internal financial reports and management reporting. This process involves the steps required to generate the core financial statements (P&L, balance sheet and cash flow forecast), and incorporate and align actuals with budgets/forecasts for comparative reporting. Many solutions may present information in the form of cascading dashboards or, alternatively, provide links to business intelligence platforms. With direct links to the consolidate-to-comply process, this also covers the financial and related information classification structures and the steps to analyze and report information consistently at the appropriate levels of detail for multiple users, such as accountants, senior executives, managers, auditors, investors and other stakeholders. Required Capabilities and Investments: The monitor-to-measure process has been incorporated into many of the CPM suites available today to simplify sharing financial data, improve auditability and streamline financial statement production. In addition, we have seen the emergence of stand-alone financial reporting solutions to automate more of the controls and governance related to the financial disclosure process. However, more recent innovations, such as XBRL (see "XBRL Will Enhance Corporate Disclosure and Corporate Performance Management") are emerging. Action Item: IT organizations and finance must audit their existing systems to ensure they are sufficient for increasing regulatory and financial reporting, and to enable tight integration with business intelligence platforms for management reporting. Consider how to leverage XBRL to improve internal financial and management reporting.
4.0 Consolidate to Comply Financial consolidation and the financial reporting close are highly specialized interconnected stages in a core management process. They are usually managed by a small team of accountants at the corporate head office in support of the legal and regulatory needs to create the master financial data and key external reports (such as Form 10-K, Form 10-Q, interims, annual report and other regulatory reports). This process is a fundamental part of CPM and creates the audited, enterprise-level view of financial information that must be shared with other CPM applications, and a wider management community via business intelligence to report and analyze variance from targets. The consolidated financial data is also the ultimate financial performance measure. Executive management uses this information to communicate financial key performance indicators to shareholders, regulators, analysts and other stakeholders. Best-practice approaches automate this process, which starts with the financial close and involves the consolidation of multiple legal entities for group accounting and support for multiple financial standards, such as U.S. generally accepted accounting principles (GAAP) and International Financial Reporting Standards (IFRS; see "The 21st Century Disclosure Initiative Will Reprioritize Your Business Intelligence and Performance Management Strategies"). This process is heavily regulated and subject to external auditing, and is, therefore, rigorously and comprehensively understood and implemented. Successful implementation of this process will improve compliance with regulatory and financial standards, provide transparency, and reduce internal accounting and external audit costs. Required Capabilities and Investments: Many well-established applications, such as general ledger, ERP and CPM applications, support the financial close, financial consolidation and financial reporting. Changes to the regulatory and financial reporting standards, such as the adoption of IFRS and 21st century disclosure, are driving the need for additional investments. Action Item: IT organizations and finance must ensure that the solutions to support the consolidate-to-comply process are not restricted to group finance, can meet the emerging standards and are a key part of the management reporting environment.
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