Corporate Performance Management and the Metrics That Matter - ' Page 2'

Robert Paladino, former senior vice president of Global Performance at Canonsburg, Pa.-based Crown Castle International Corp., believes in CPM. With $930 million in revenue in 2003, CCI is a leading independent owner and operator of cellular towers and broadcasting infrastructure, and leases tower space to providers such as Cingular Wireless and Verizon Wireless, among others.

As CCI's strategic goals shifted over time, so did the way it viewed CPM. In 2001, after the capital markets collapsed, CEO John Kelly shifted from a capital-intensive, growth-through-acquisition strategy—basically a land grab to expand the network of towers—toward a strategy of operational excellence. A new corporate function, dubbed "Global Performance," was formed to improve operations. Functioning as internal consultants, the Global Performance group facilitated the companywide design, development and implementation of more than 45 balanced scorecards, a tool that translates strategy into a comprehensive set of performance metrics. CCI relies on CorVu Corp.'s CorStrategy to manage the balanced scorecards that are the central focus of its performance management efforts. Although CCI doesn't use the term CPM internally, "collectively, you could wrap a CPM [moniker] around our efforts," says Paladino.

One metric that was of great importance to CCI was past-due receivables, or sales outstanding more than 90 days. When that metric consistently "showed red" on a dashboard, Paladino's group investigated and discovered a mismatch between CCI's expectation of when rent cycles began and those of the clients who lease capacity on CCI's towers, among other factors. In 2004 alone, CPM initiatives helped CCI reduce the number of accounts with past-due receivables from 40 to less than ten, improving free cash flow by more than $100 million as part of a broader capital improvement effort. "We've undergone a cultural shift away from managing by anecdote to a more rigorous analysis of trends. Our decisions are more grounded in facts than in the past," says Paladino, who recently left CCI to start a CPM consultancy.

CPM can often reveal areas in which companies are wasting eye-popping amounts of money, especially upon initially installing the software. Toyota Motor Sales U.S.A. claimed a 506 percent ROI from its CPM efforts, largely because the software identified an unnecessary port in Baltimore that was subsequently closed. (See "Oh! What a Feeling," CIO Insight, October 2004.)

What can we realistically expect to save on a recurring basis by using CPM software?

Next: ' Page 3' >>

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