A letter to the CIO we'd like to see...

Dear CIO,

I bet you never thought this day would come…me writing with good news that my team in Finance will be submitting fewer IT requests. Go figure (pun intended).

Turns out there’s a new way for my staff to manage more of the data, processes and workflows that your team has been handling for us from the finance and BI systems. No more resources needed to manually code and manage this. We can automate most of it while working within the security and data integrity parameters that IT has in place.

Let’s discuss two action items:
- Cancel next week’s sales meeting with our ERP vendor. The allure of standardizing on one supplier is no longer appealing. We’ll save a bundle using the systems we’ve already got and sticking with a best-of-breed approach for financial data management.
- Let’s schedule a roundtable for the IT and Finance teams to strategize on the initiatives we’ve been tasked with by the CEO: Expense and Revenue Management, Performance Management and our adoption of International Financial Reporting Standards (IFRS).

Gotta run - my weekly 1-1 meeting with the CEO.

Regards,
The CFO

Thoughts from the Gartner BI Summit

Only marginally into the BI Summit, but have already had the realization that the Performance Management sessions will be under-attended. Business Intelligence is the domain of IT, but Performance Management is in the hands of the business. Corporate Performance Management, the term which Gartner has chosen to use to refer to those financial applications that are the mainstream of corporate America i.e. planning, budgeting, forecasting, consolidation and financial reporting, is of little interest to the mainly IT audience here in DC.

An interesting observation. Applications that are tailored to meet the business, but have proscribed functions are within the domain of the business, but the tools used for reporting and dashboarding are in the hands of IT. Business Process Management by definition then, should be in the hands of the business; but it is not.

So the conundrum is in where the attention is focused. If there is extensive on-going development or a relational footprint to the applications or tools it comes under the dominion of IT. If it appears as if the majority of the effort in deployment is in the installation and initial implementation then it is under the business' hands. That doesn't make sense to me.

Truly the answer should be one of a collaborative effort where there is someone technical assigned to meet the needs of the business to help them craft the solution that best meets their strategic needs. Finance IT was born for exactly this reason. This role bridges the gap or divide between the implementation of the application and the eventual use and refinement of the implementation AND the future sculpting of the application to keep it in line with the needs of the business. This is the true role of innovation where a blend of fact and function meet the evolving needs of a dynamic business.

Somehow that's lost here at the Gartner event. But as I said, we are only half a day into it - maybe it will resolve itself to be more on topic and dynamic. I should point out that I think Gartner does see the evolution towards a Performance Management driven business culture, but they also say we are two (yikes!) years away from it.

Outsourcing with Integrity

Outsourcing developed a bad reputation straight out of the gate. Few technology process shifts can boast such embarrassing and costly early results as outsourcing did. Companies such as Dell (that outsourced call center operations), experienced such radical declines in customer satisfaction that they were forced to drop their outsource projects (1). Early efforts at outsourcing development operations often resulted in development lag times, missed requirements and ongoing quality issues (2).

The costly lessons of early outsourcing projects have given companies today the knowledge needed to create successful outsource initiatives. As companies work to maintain a balance between streamlined operations and cost-effectiveness, many are choosing to re-evaluate the opportunities offered by outsourcing. According to Gartner Research, "The global outsourcing market continues to grow at a steady pace, with a forecast growth rate of 8.1 percent in 2008. But, healthy growth rates for outsourcing do not necessarily mean that user organizations are without challenges."

Not all outsourcing projects are the same. Project requirements, processes, deliverables, and structures vary greatly with each type of outsourcing project. Whether looking to outsource call center operations, manufacturing, software development, IT services or other operations, there are common success factors that span all outsourcing projects.

Find the right place and people: While one location may offer considerably lower production costs, the talent-base of the workforce must also match your needs. “You must understand the offshore location landscape," states Gartner research vice-president Ian Marriott. Gartner’s Top 30 Offshore Locations for 2008 provides a list of the top countries around the world for IT outsourcing, based upon criteria such as talent availability, environmental stability and cost.

Establish consistent processes: Adherence to corporate processes and procedures by all business teams (whether internal or outsourced), is a fundamental requirement to ensure consistent, quality project results, corporate governance and compliance. This is a difficult goal to maintain when working with external companies across geographies. By automating business and financial processes, companies can ensure consistent, repeatable data movement with integrated control steps. Detailed audit trails from content management, change control, and financial systems provide traceability.

Ensure visibility: Corporate teams must have understanding of outsource project activities and their results at all times. Up-to-date, accurate financial and lifecycle data provide critical insight needed for decision-makers at all project levels. Continuous effort needs to be put to tracking progress and making the best fact-based decisions for the overall business.

Verify integrity: Quality is a major outsourcing concern, and was the downfall of many early projects. Create checks and balances for the outsource project where quality is measured on a number of levels:

• Data Integrity: Is the data from outsourced systems, (financials or operational data), accurate and complete? Is the data refreshed regularly?
• Service Integrity: Customer satisfaction surveys, call monitoring and agent coaching provide basic quality management. Operational reporting, scorecards and analytic tools provide more robust service management.
• Performance Management: Establish a performance management system that tracks performance and measures against expected results. Solutions are available from small-scale tracking and reporting systems (designed for small to mid-size companies), to full Enterprise Performance Management (EPM) systems.

As companies look to outsource a variety of business activities (including manufacturing, contact center, procurement, data management, Software as a Service (SaaS), marketing, etc.), the model for successful outsourcing becomes more complex. A hands-off, contract-signed, out of sight, out of mind approach to outsourced projects will spell disaster. These relationships are extensions of your organization; they rely on the same monitoring, management and integration as other business functions.

Outsourcing with integrity means creating a model that supports people, processes, and data at high quality levels that meet a company’s standards. It also means having the tools and framework in place to seamlessly integrate data from outsource systems into the company’s systems. And finally, it means ensuring that tools are in place to manage and monitor the relationship on an ongoing basis.

Outsourcing done right is good for shareholders, for the company and for the outsource partner. By taking the time to outsource with integrity, companies can experience lowered costs, streamlined operations, and have the opportunity to focus on business growth and corporate innovation rather than on peripheral business tasks.

Some Resources
Gartner Myth vs. The Real Deal Blog
Outsourcing Journal



(1) Dell admits it has "learnt its lesson" after being forced to drop its Indian call centre last year following customer complaints about the quality of service…The call centre operation for the OptiPlex desktops and Latitude laptops was moved back to the United States
ZDNet

(2) Sourcing Mag

Profitable vs Unprofitable Decision-Making

Oracle finally gets it, at least in words. Frank Buytendijk’s blog on “Management Excellence and Oracle EPM part 1” suggests that Oracle may have tried to solve the challenge of making profitable Operational decisions by including the underlying Financial data. He further suggests that Oracle is two years ahead of their closest integration competitor. While I don’t believe the latter and have evidence as to its untruth, I do believe that Frank is focused in the right direction to suggest that a diet of pure financial data or pure operational data is drought or famine, but certainly not a balanced meal. A truly healthy business will make vital decisions that combine up-to-the-minute financial data with the operational systems data to ensure a data-enriched decision process. Decisions in a financial vacuum are anemic and life-threatening when variables such as gas prices, finance rates, currency translation and inventory levels are critical to a decision process and have a delay or periodic update cycle that is out of synch with the decision-making continuum. Multi-dimensional data still lags behind transactional data in its ability to be accessed in a time-sensitive manner due to the very systems that created the data. The power of the cube, such as delivered by Hyperion, created a one-way flow that is now antiquated in theory. The strong financial instincts of today’s CFOs and rising finance stars begs the use of this cube data downstream, co-mingled with the operational decisions of the lines of business. This is the innovation of which we speak; the ability to ask for more and initiate change to older patterns of behavior to uncover a fresh use of data, propelling the business forward into leadership.

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/

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

Addendum

I recently attended a business meeting with Mr. Howard Dresner, industry expert and thought leader for Enterprise Performance Management (EPM), and I paraphrased his comments in my last post on Insight vs. Accountability. In fact, it was his comments that inspired the post. Today, I came across a recent post from Mr. Dresner's blog that encapsulates and extends my paraphrasing. I thought I'd share the quote, and let you have it directly from his words:

"The inclination to buy "yet-another-tool" remains strong – even though most acknowledge it's the wrong thing to do. Of course, vendors like to sell more technology. However, most organizations already have plenty. What they lack is a roadmap and the vision to properly deploy it. But, buying another tool is so much easier than addressing the real problem: a lack of management commitment and organization dysfunction."

Food for thought…

Insight vs. Accountability: Redefining Corporate Performance

Insight: The clear (and often sudden) understanding of a complex situation. (1)

Accountability: The obligation to demonstrate and take responsibility for performance in light of commitments and expected outcomes. (2)

I recently had the opportunity to hear Howard Dresner speak at a business meeting where he touched on the scariest aspect of Enterprise Performance Management – that everyone in the organization becomes accountable (my apologies for the paraphrasing). As he spoke, I experienced an 'Aha' moment. Nobody really wants that. Not really. Well, maybe the CFO, but nobody else.

In past posts I've discussed the evolution of Business Intelligence (BI) and how we've moved from information gathering and analysis into performance-driven organizations. And while I have touched on the shift needed to create a performance-driven culture, I wanted to pause and really think about this.

RESPONSIBILITY FOR PERFORMANCE = ACCOUNTABILITY

It's not enough to understand where our business impacts are occurring, or even why they occur. Thus far, companies have made considerable investments to address these issues. We need to go beyond this: we need to know the what, understand the why, and ensure that the people who can take action have the tools in place to make the best decisions, and that they are accountable for the actions that they take, as well as the actions that they don't. That is a big, scary order. Imagine if every decision you made in a day showed up on a scoreboard. Hey, this was in my area of responsibility and I just blew it off, and everyone is the wiser. It cuts against the very grain of corporate culture.

Bob Kaplan and David Norton, creators of the balanced scorecard, identified in their recent Harvard Business Review article Mastering the Management System, (3) "breakdowns in a company's management system, not managers' lack of ability or effort, are what cause a company's underperformance. By management system, we're referring to the integrated set of processes and tools that a company uses to develop its strategy, translate it into operational actions, and monitor and improve the effectiveness of both."

Many companies, recognizing the benefits of performance management, have already made extensive investments in the technologies to support true organizational accountability:

• EPM systems provide the alignment between strategic, tactical and operational performance.
• The integration of data from financial, operational and stakeholder systems provides a comprehensive, accurate view of our organizational ecosystem.
• Process tools such as balanced scorecards let us manage and monitor the transition from strategy to execution.
• As we come closer to real-time analytics, we are working with a leading, predictive view of our businesses.

With these systems in place, and as we experience unprecedented insight into and understanding of our businesses, we have the infrastructure to support enterprise performance management. We need to continue to develop the business processes and philosophy that support a discipline of continuous awareness and accountability for decision-making within the company.

Building a performance-driven, accountable culture requires a ground-up rethinking of how we do business. It takes leaders from within the organization, at all levels, to drive accountability and to have the discipline to be continually aware of and adapt their plans to subtle changes in the business. They must have a view of the broader business environment, the impacts of their decisions on their own business areas as well as other groups, and access to the right information, updated in real-time. It is a tall order, but by combining accurate data, management tools, and sound business processes, companies can drastically change their performance within the market, and realize gains that go beyond financial success and into a transformation of their corporate culture.

Sources
1. Princeton University Cognitive Science Laboratory, WordNet, Insight

2. Government of Canada Information Management Glossary, Accountability
http://www.informationmanagement.gc.ca/docs/guid-orient/concepts/concepts07_e.asp

3. Robert Kaplan and David Norton. "Mastering the Management System," Harvard Business Review