This article concludes the discussion of the top five problems facing CEOs today in regard to corporate performance management, with a focus on reporting.
In interviewing a very successful CEO and founder of a large company, he expressed the corporate performance management (CPM) issues he faced, and all of them are echoed by hundreds of other executives I have spoken with in recent years. He then explained his vision of the “ideal” solution to his issues. In summary, these were the problems he faced:
Lack of one version of the truth when discussing performance.
Lack of accountability because management commentary was not tracked along with their reports.
“Analysis paralysis” – too many reports, too many versions, and too many reporting tools.
Lack of core exception reports that immediately are sent to managers when there is an issue.
Lack of agile, strategically focused, centrally controlled, top-down, bottom-up budget process.
Let’s pick up where we left off by looking at problem #5 in detail and then discuss the ideal solution that the CEO was looking for to solve this problem:
Issue 5: Lengthy, manual planning processes with different, disconnected budgeting and forecasting models. Lack of agility in these models results in slower or sub-optimal reactions to changes in the internal or external business environment.
Solution: Deploy a single, web-based portal that houses budgeting and forecasting models as well as reports and dashboards. Implement a budget process that:
Starts with a top-down budget version created at HQ and closely aligned with the strategic plan and strategic goals for the coming year.
Continues with a bottom-up budget to assure alignment with each department/division.
Agree on what information is important for decision-making and control, and collect plans at that level.
Finishes with alignment of the two budget versions and adjustments as required to arrive at the desirable budget.
Housing both strategic plans and goals in the same budget system assures close ties to budgets and forecasts. The key outcome of best-in-class planning processes combined with best-in-class planning tools should be maximum agility. In other words, if a competitor releases a key product that can have a dramatic impact on your company’s results, your staff might find themselves in emergency meetings to try to come up with a similar or better product as fast as possible. This means that your annual budget goes in the trash can, and ideally, you should have an advanced planning tool where your team quickly can model the required investment cost and resulting impact on cash flow, sales and other key areas and make a world-class decision that can save jobs, shareholder value and maybe even the company itself.
For most organizations, the annual budget process takes three months or more to complete, and it is costly and time consuming and rather the opposite of agile. In the potential crisis scenario above, a top-down, driver-based planning model could save the day and quickly help managers create a re-forecast to give them the metrics they need to get approval for and then implement their proposed actions, instead of months of delays while in the meantime, the train is starting to leave the station. In order to make the road to enable world-class decision-making easier, the CEO who provided the five issues above also had to deal with the fact that several of his subsidiaries were in different industries with local enterprise resource planning (ERP) systems. He had the foresight to enforce a policy where a certain portion of each subsidiary’s chart of accounts had to follow a uniform standard to make it easier to maintain consolidated reports and to discuss high-level key performance indicators (KPIs) and financial statements across any of the business units. From prior companies he had built and managed, he was also painfully aware of the fine balance between too detailed, too sophisticated CPM vs. too high level information, where the former could result in expensive, consulting-intensive models that are hard for employees to maintain and the latter would result in lack of insight.
In today’s fast-paced society, it is more true than ever that the business that arms its employees with the best, most up-to-date information is the most likely to succeed. No longer is good information enough; it should also be Accurate Full of detail whenever needed Transparent and easily available to anyone needing it Rapidly available and timely Presented in a clear format In the vast majority of organizations today, the reporting, planning and analysis situation is quite messy, and employees don’t have a unified CPM platform to help enable world-class decisions.
Although this situation is quite eye-opening, at the same time it is a huge improvement opportunity, with potential major impacts on revenues as well as profits, as indicated by the McKinsey survey results referenced earlier in this chapter. In other words, a well-planned and executed BI strategy and the right technology platform represents a chance for top executives to take the initiative to make their organizations best in class. Technological progress and globalization are changing industry by industry at a rapid pace, and successful companies are able to create or adapt their strategies to take advantage of this rather than being victims of the change. Armed with modern CPM technologies, they can analyze trends, quickly reforecast revenues, expenditures and cash requirements to support their initiatives, and enable a standard of world-class decision-making across their organizations.
Solver enables world-class decisions with BI360, a leading web-based CPM suite made up of budgeting, reporting, dashboards, and data warehousing, delivered through a web portal. Solver offers BI360 through cloud and on-premise deployment and is reinventing CPM with its next generation solution. BI360 empowers business users with modern features including innovative use of Excel in the model design process. If you’re interested in learning more, our team is excited to hear about your organizational needs and goals.