Tuesday, July 29, 2008

Continuous Planning Architecture, Phase 2

Back in April, Kimberley Bermender posted on the finance systems architecture needed to support a continuous planning environment. The overall design goals included:
  • Lower cost of maintenance,
  • Standards-based data integration,
  • Support of accurate, near real-time views into operations,
  • A platform to support detecting, modeling, selecting and implementing change and then measuring results.
The main ingredients were:
  • financial and operational data stores,
  • an analytic (OLAP) engine – with reporting, and
  • planning applications
Inherent in the architecture is the movement of data between data stores and OLAP cubes, as well as fact and metadata management. To build on that architecture, “phase 2” can include two other components that build on those design goals and get you closer to enterprise performance management nirvana.

The first is master data (or ‘reference’ data) management, and the second is a common enterprise performance management rules or calculation engine.

Master data management includes the tracking and control processes of data relationships (especially hierarchies) and instances across the enterprise. For example, product sales for a store in Ft. Collins, CO could roll-up to a ‘Central’ region one quarter, and then to the ‘West’ region the next quarter after a re-org. It’s important to keep track of which region it belonged to when doing quarter over quarter comparisons and other management reporting (not to mention statutory reconciliation and reporting). And that hierarchy could be contained in the store reporting application, the sales forecasting system, the G/L, the customer relationship management (CRM) system, and so on. Right now, those relationships are probably being manually managed and ‘lightly’ controlled. Our more complex financial systems require more automation and more rigorous control over master/reference data. And it certainly addresses at least the first 2 design considerations of Kimberley’s architecture.

For more on master data, see this DMReview landing page.

The second component is a central business rules/calculation engine. In any enterprise performance management environment, users can easily get bogged down in the definitions of data and information. For example, that Ft. Collins store could be looking at a ‘revenue’ report and not know if it’s booked revenue, commissionable revenue, recognized revenue, and so on. And even when they find out what kind of revenue it is, there can be a question of it’s accuracy: how did head office calculate it, where did they get the data from, and does it include intercompany sales or not?

Having one business rules engine lets the enterprise define ‘recognized revenue’ once, with control over the algorithms, the data refresh frequency, the data sources, and so on. Once the rules engine has certified a number, it can be used by all other enterprise performance management systems: planning can use it for prior actuals, strategic financial models can use it for long term scenarios, same store sales dashboards can use it for ranking, and so on.
The three-fold goal is to get better transparency into financial information (how did we get that number), better accountability (finance owns and certifies the number), more efficiency (define it once, don’t reinvent the wheel), and ‘believe-ability’ (start debating what to do about the results, not where the number came from).

Here’s a good article by Robert Blasum in DM Review on central rules (he also connects them to master data management)

Thanks to Kimberley and the team for letting me guest blog, please feel free to visit the Business Foundation blog over at http://businessfoundation.typepad.com/

Tuesday, July 22, 2008

Fuel Costs on the Mind: A Little Innovation Required

As Duke University/CFO.com released their Global Business Outlook Survey, it came as a real shock that as much as inflation or the weak US dollar, rising fuel costs were identified as a key concern for many CFOs. Equally surprising, that almost half of the companies surveyed are dealing with this by raising prices (by up to 4%), while wage increases are estimated to grow by only 3%. Most surprising, that we’re just now dealing with fuel costs as a major business impact. Fuel costs have been rising for years. Every commuter has watched their gas bills jump, often to the point of impacting their monthly household finances. As a finance community, we have only to look as far as our own households, take the lessons learned, and apply them to our companies to find cost-saving opportunities.

For several years now, chip manufacturers have battled as hard on energy efficiency as processor speeds. Why? Because energy costs have soared and companies know that there are huge savings to be found in lower energy-consuming server farms. Technology companies have had telecommuting programs for years, realizing diverse savings from facility management to employee retention. To what percent can we reduce business travel? What opportunities exist in our manufacturing departments, shipping, alternative fuel source options? What are the impacts to our internal processes and external stakeholder groups as we consider these changes?

There is still opportunity for companies to streamline operations, even within manufacturing, where most companies tend to focus efficiency programs. Unfortunately, it tends to be at points where we hit economic crises that we get creative about searching for these opportunities. This is one area where the Finance team has the chance to take a leadership role in driving change within your organization. Finance teams that have access to both the financial and operational data have a unique perspective into the entire business model. Who better to be able to identify opportunity, model scenarios and impacts to internal and external stakeholders, and educate line of business teams on potential areas for improvements across business lines?

The Global Business Outlook Survey provides a bleak picture for the economy, with raised prices and layoffs in the forecast. But it is exactly at these points when the true value of the innovative CFO can be felt across the organization. Ours is the only team that has access to the financial and operational data, combined with the tools to analyze and model the impacts of potential scenarios on the business. By working with the executive team and lines of business, we can explore creative improvements or alternatives to current processes and company business practices. The opportunities are myriad.

Thursday, July 17, 2008

Tips from the Big Guys: Yahoo Shares Planning Architecture and EPM Strategies

With so much focus on Yahoo’s search advertising strategy and ongoing battles with Microsoft, a webinar that focuses solely on their internal planning and back-end processes is a welcome diversion, not to mention a fascinating education. The Yahoo EPM Webinar, sponsored by Star Analytics and Key Performance Ideas, provided insight into how one very large company deals with key performance management issues, including:

  • Creating highly efficient planning systems
  • Maintaining data integrity
  • Improving corporate reporting standards

Bob Yau, a Director of Corporate Applications at Yahoo, walked through their Enterprise Performance Management strategy and architecture and discussed how they have successfully implemented a project to help Yahoo efficiently manage change in a highly competitive market.

Yahoo has created a technical architecture for managing and exporting Hyperion Planning and Essbase data that provides their global business community with 24x7 access to near real-time planning and reporting data. Data is scheduled and automatically exported frequently throughout the day from the Planning application and is (again, automatically) synchronized with their Oracle Data Warehouse, eliminating data latency. Other benefits (and key project requirements) include their ability to maintain corporate reporting standards and improve compliance.

While the webinar does get technical (that’s right, architectural diagrams and everything) Mr. Yau does an excellent job of focusing as much on the business requirements and user needs as the technical implementation. Mr. Yau finishes off the webinar with his ‘Top 10’ lessons learned from his implementation, which covers both technical and business experience. #10 – Partner with the business for success. Good advice. Thanks Yahoo for providing such an insightful view into some of your key processes that support your enterprise performance management.

View webinar

Friday, July 11, 2008

The "Empowered Chief Financial Officer"

In my last post, I referenced a recent CFO Research study of 171 finance executives that found that over 70% of finance activities are still focused on routine finance and accounting tasks. What the heck? That percentage really threw me. So I started looking at posted CFO job descriptions to find out what companies really want from their CFOs, and sure enough, there was the standard list. The following job description actually came with the job title "Empowered Chief Financial Officer:"
  1. Prepare Management Reports
  2. Manage Routine Accounting Functions
  3. Manage Administration Functions

Where is the empowerment here? Then, as I continued perusing job descriptions from various sites, I started seeing some different twists on the CFO role. Job requirements included:

  • Act as a change agent within and outside Finance
  • Partner with business units
  • Internal process improvement
  • Investor activities

The primary difference that I found in the job descriptions was that these were postings for larger companies. Do these companies have their governance processes established and can now focus more effort on decision management? Are their investors demanding more participation from the CFO? Are their businesses in extremely competitive markets? All of the above?

While regulatory compliance is obviously a key concern for any public company, it became clear to me that there is a growing requirement for CFOs to broaden their organizational role. While I suggested in my last post that the Finance team should be educating, providing guidance and showing additional value to business teams, it appears that these functions are working their way into the job description, as well. Now there seems to be some opportunity for empowerment.

I’d love to hear from some CFOs out there what your job functions are looking like – are you primarily focused on control and compliance, or does a significant part of your role include collaboration with lines of business, expanded business and performance management tasks? Are you working to roll out reporting tools to expanded user communities within the business? Are you seeing your role change within your organization? What percentage division are you seeing in your tasks? Please share your experience in the Comments section.


Sources include: finance.cfo.jobs.executiveregistry.com, jobs.efinancialcareers.com, www.careerbuilder.com, www.cfonet.com, www.cfo.com

Wednesday, July 2, 2008

Resolutions for a New Year

For many companies, June 30th marks the fiscal year end; as the sales teams’ frenzy wraps up, the Finance team is crunching the numbers to publish reports. And while publishing the annual ‘report card’ isn’t the most glamorous part of the job, it is often the most externally visible aspect of finance, and within many companies, finance and accounting activities do consume the vast majority of the Finance departments’ time.

A Changing Role

In a recent CFO Research study of 171 finance executives, they found that over 70% of finance activities are still focused on routine finance and accounting tasks, with less than 30% of time spent on decision support. But in the next two years, over 86% of respondents anticipate incremental or dramatic improvements for supporting business management. (1)

The role of Finance is changing to take a greater part in guiding and influencing both management and business decisions alike. Many companies are realizing the value of partnering finance with business to streamline efficiency, productivity and profitability. But while the value is recognized, the time and resources dedicated to this aspect of the role still remain limited. So the challenge becomes: how do we in Finance become an active contributor in and supporter of improved business management, while continuing to support traditional accounting and finance activities?

Finance Report Card

It’s the end of the year; the company report-card is being published. Let’s think about our own organizations – how did we support innovation and collaboration through the business this year?

  • Educate C-level team. If you are fortunate to have a finance-savvy CEO, much of your work is done. But in many companies, educating the executive team about the opportunities for business collaboration, and the kinds of information that finance can provide to teams, is a critical step.
  • Establish relationships with business units. Adding value to business information is the fastest way to become a trusted partner to business units. Creating a two-way channel of communication allows Finance to fully understand the business issues and end-user requirements, in order to provide the most meaningful support possible.
  • Collaborate with IT to find best ways to leverage operational and financial data, and to explore future company requirements for information. In order for Finance to provide strategic direction, and for business teams to make appropriate decisions, users must have access to accurate and timely information. In collaborative efforts, scope, budget and prioritization are established to ensure the project best meets the business end goals.
  • Internal education. As the role of Finance rapidly expands, there is a need for a broader skillset within the team. Analytical skills must be complemented with market knowledge and an understanding the business functions. Collaboration with technology groups requires knowledge of technical requirements and capabilities as well as a common language. All of which means that ongoing education and external focus is imperative for success.
  • Examine existing processes. By refining and modifying existing processes and systems, there is often opportunity for significant improvement. What changes to the planning process would yield greater insight into your market? How fast are you able to get information to business teams? Can they respond appropriately with the information provided? Are the same questions consistently repeated at executive meetings? What is the value of being able to provide this information?


This list just begins to scratch the surface of opportunities to work on innovation and collaboration within a business. Even if you work in an area where the company sees Finance as primarily focused on traditional reporting and accounting tasks, there are myriad opportunities to make contributions that will gradually have larger effects upon the organization. Beginning with the education and support of executive management and business units, you establish yourself as a value-adding member of a larger business team. And as companies experience faster and more significant change in order to keep up with competitive markets, the role of Finance will expand and change as well.

As many companies enter a new fiscal year, and in the tried and true tradition of New Year’s resolutions, the question to Finance: What role do we envision for ourselves in the company? What will our contribution to the company’s success look like in the following year? What changes do we need to make to be leaders within the organization? And once we answer these questions, we’ve already got our new year’s resolutions done. Closing the books is easy after that.

1) CFO Research. “The Evolution of the Finance Function: Teaming with Business Management to Adapt and Thrive.” March 2008