With the financial crisis of 2008 and the "Great Recession" that followed, we watched many companies temporarily abandon growth and hunker down, cut costs and focus more closely on productivity. Today, it is time to refocus on growth, but they cannot forget the cost management discipline that brought them to this point. Getting the right balance to stoke the growth engines requires performance management systems that enable senior managers to track new product development, make progress in new markets and achieve other growth metrics.
But the competition today is increasingly fierce. Companies in today’s global business are as likely to find new opportunities as new layers of complexity. Consequently, it is increasingly difficult to marry the overall business strategy with the right resource allocation, planning, forecasting, reporting and analysis capabilities.
Data collected by Accenture Benchmarking Solutions confirms this. It found that as many as 70 percent of companies are using metrics that are not statistically valid. And, only 12 percent of companies can link their quality measures to share price performance.
Accenture Benchmarking Solutions also found a significant percentage of analysts’ time being spent on data collection, reconciliation and compilation instead of actual analysis. At the median company, only 40 percent of analyst time is spent on analysis. Even for a company ranking in the 1st quartile, they may be only spending half of their time on the analysis companies want to do.
But that is only one piece of the puzzle. As my colleagues noted in their paper, "Data to Knowledge to Results: Building an Analytic Capability", organisations spend more than $40 billion per year on data warehousing applications, with more than 60 percent of that spent on cleansing data. And, research published in "The Attention Economy - Understanding the New Currency of Business" indicated that 60 percent of employees feel overwhelmed by the amount of information they receive while 43 percent of managers believe that managing too much information hinders decision making, as was published by Reuters Business Information in the article, "Dying for Information: An Investigation of Information Overload in the UK and Worldwide", 1996).
You might wonder how this could be. In recent years companies have made significant investments in their enterprise resource planning (ERP) systems. While this has made them better at explaining their financial results, they do not necessarily understand why it is happening (or what is next operationally). The situation is compounded by the fact that their investments in business intelligence (BI) technologies, designed to improve internal management reporting capabilities, are often decentralised. Consequently, a lot of rework is required to reconcile internal and external management reporting. And, that additional work creates an unwanted layer of cost, and limits a company’s visibility into its growth drivers and profitability.
To improve internal and external reporting, companies can consider a number of options. For instance:
- Create a common data warehouse with resources dedicated to the centralised aggregation and reconciliation of data.
- Develop a data architecture that provides an efficient link between the information flow between details systems of record and financial management reporting activities.
- Establish a reporting centre that serves as a locus of finance excellence, a business intelligence competency centre, or some combination of the two to lower finance costs.
- Design a governance structure to streamline information management through a common source supported by a robust data architecture and an overall reporting solution.
Combining enterprise performance management (EPM) techniques with such innovations can improve overall program structure and management, and deliver benefits to nearly any company. For instance:
A leading pharmaceutical company operating in an increasingly resource constrained environment was burdened by duplicative reports and a growing number of competing performance metrics. Report production and issuance timelines lagged. In response, the company optimised its business reporting resource levels by identifying a set of "endorsed metrics", and as a result, eliminated the need to rework their management reports. The company also set up a robust governance process to support a sustainable, ongoing reporting system.
Getting data architecture and data management right is critical for enabling an effective EPM capability and achieving operational excellence. Similarly, comprehensive knowledge of ERP and BI technologies is required to deliver comprehensive and enterprise level internal management reporting.
Our research and experience indicate that organisations could benefit from creating the ability to manage internal and external reporting needs through a single data source, aligning strategy, planning and forecasting to create shareholder value.
Posted by Eric R. Noren, Senior Director of finance & performance management consulting, Accenture