Implementing a great Integrated Performance Management solution, or even a good one, requires thoughtful, focused leadership and a realistic plan to avoid common pitfalls to success.

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April 14, 2016

Performance Management is an umbrella term encompassing the processes and applications that support strategy development, planning and forecasting, financial management, profitability management, and reporting and analytics. EPM, CPM and BI are popular acronyms referring to Performance Management. At A&M, we call it Integrated Performance Management (IPM) because we believe that the core of management excellence and achieving the success of our clients’ programs is integration – integration of business processes, integration of organizational functions, integration of technologies and integration of data.

In this edition of Action Matters, A&M’s Performance Improvement practice takes us through various client case studies to demonstrate the impact integrated performance improvement solutions have had on companies across the industry spectrum.

Removing Complexity 
What we have learned over the course of our practice is that you won’t get the value out of an Integrated Performance Management solution if you simply replicate tangled, overly complicated Excel models in the new, more sophisticated system. If you put garbage in, you will get garbage out.

A focus on simplification and standardization holds the key to success. Elevate the conversation beyond what has always been done. Make sure you identify the metrics you’ll need to effectively manage business performance, and build the solution with that in mind. Remember to SIMPLIFY. More detail does not equate to better information and precision is not an indication of accuracy. For example, you may consider the following tips for getting your general ledger and reporting structure in order:

  • Create one standard income statement structure for all cost centers.
  • Create a structure where a group of accounts is owned by a single planner across all cost centers or whereby all of the accounts within a cost center are owned by a single planner – there isn’t a right answer, but consistency is key.
  • Don’t compromise the structure for a few reports – it’s better to develop an exception process than to sub-optimize the entire planning process.

One of our clients had restructured their general ledger a few years earlier without adequate input from all the stakeholder groups. Most groups had built processes around report extracts of the G/L data, resulting in gross inaccuracies when departmental reports were summed to a company level and within a highly manual planning and forecast process that was costly, inefficient and inaccurate. With our help and the CFO’s leadership, the client began redesigning the structure concurrently with their IPM initiative.

Don’t Fix the Squeaky Wheel While Ignoring a Broken Engine
When you’re solving complex business problems through process change and technology enabled solutions, it’s easy to get caught up in solving for a particular pain point and lose sight of the bigger picture. The workings of an IPM solution are interconnected.  Focusing on just one part without considering all of the other components is like fixing a squeaky wheel while ignoring a broken engine. Even if the wheel works great, your journey won’t be taking you very far.

Start with a vision and strategy before jumping in to solve for one particular pain point. Agree on a roadmap. Create a three to five-year plan starting with an initial foundational project and followed by subsequent enhancements, ideally in four to six month increments. An advisor with experience can help make sure this strategy positions your initiative for success.

A large consumer products client had implemented a number of reporting initiatives, but still struggled to provide enterprise level insights with the data and information available. An assessment of their financial consolidation process showed they were using multiple systems each with a different set of supporting applications and processes. Furthermore, past reporting initiatives tended to solve for problems in one area, but failed to address the end-to-end integration of data and information. Using a full-enterprise view, we worked with the client to develop an IPM roadmap that laid out the projects and timing to ensure that future focus and investment would address process, data and reporting deficiencies across the entire organization.

Out of the Box Doesn’t Mean What You Think
One of the biggest misconceptions is that you can buy an “out of the box” planning system, pump your data into it, design a few forms and reports, and then roll it out to your users. For the average large company, there is no “out of the box” system that can plan and report your business, comprehensive of your chart of accounts, organizational structure and products and services without significant requirements, design, configuration, testing and training.

 Do your homework before the implementation begins. Identify and understand process and structural issues before bringing in a system integrator.

Gather hard and soft copies of critical reports and spreadsheets. Research and document what rolls into each line of the consolidated profit and loss statement, and document processes including roles and responsibilities and inputs and outputs. You will be better prepared for your IPM initiative, and the “homework process” will help you identify potential improvements for the future state.

 A software vendor convinced our client that moving their planning and forecasting solution to the cloud would be a simple “plug and play” exercise requiring less time than developing an on-premises solution. But while the implemented cloud solution did avoid the common infrastructure challenges associated with an on-premises system, it did not address structural issues with the G/L, the lack of standardization, automation and integration of reports or security. In order to reap the benefits of the system in which they had invested, the client had to retroactively solve for these problems which significantly impacted the original budget and timeline allocated for the project.

Don’t Let Perfect Be the Enemy of Good
The benefits of IPM are clear, and your organization needs them now, but building an effective solution takes time. Finance professionals tend to hold out for perfection, but perfection isn’t always practical. Set reasonable criteria defining when the system can go live and be realistic about the time, resources and prioritization it will take to achieve your goals.

It is rare that a company can do its internal homework, complete a vendor selection process and contract negotiations, engage an implementation partner and go through requirements, design, configuration, testing and roll-out all within one calendar year. That said, you also can’t define “perfect” as the criteria for go live. Set realistic timeframes and criteria for a go-live launch based on your company’s specific constraints. Gauge the amount of progress possible based on your team’s ability to participate in the process design, testing and rollout aspects of the project. Remember, your team already has day jobs. Finally, consider which requirements will drive the most business value, and prioritize accordingly. The majority of the benefits may be achieved through just a portion of the most important requirements.

Several years ago, a large retailer wanted to design a future state planning and forecasting solution to address all the needs of operations, merchandising and corporate business units. They insisted on gathering an exhaustive list of detailed requirements from every group in the company. The requirements-gathering process, alone, stretched out over several years as they tried to build consensus among all groups involved. Without clear decision leadership and criteria for what “done” looked like, the subsequent development process took another 3 years as they attempted to reconcile all of the complex and sometimes conflicting requirements. By the time the system was ready for rollout, another company acquired them, and all system and process work was put on hold.

If You Build It, They May (Or May Not) Come
Just because you build a great system that simplifies and automates the planning process doesn’t mean everyone is going to wholeheartedly jump on board.

Proactively manage the change. CFOs usually cannot personally manage IPM projects, but they can make sure that everyone involved is aligned on the vision for success looks. These success criteria should be the common thread that ties every project decision together. Establish a partnership between the CIO and CFO from the outset. Based on our experience, CFOs must lead the change, but they can’t be successful without IT’s help. The CFO and CIO should be aligned on the overall roadmap and the resource and timeline constraints associated with the plan. Develop plans for stakeholder involvement, communication and training. Goals, priorities and success factors should be communicated top- down, starting with the CFO and CIO. No one should ever have to ask the question “Who is in charge of this performance management project.” It should always be evident that the CFO is in the driver’s seat.

All stakeholders who will use the solution or the information it provides should have a chance to weigh in, starting with process and design requirements and ending with rigorous user acceptance testing. In global organizations, make the extra effort to be inclusive with your international divisions, partners or affiliates. Face-to-face is best. An open exchange of different points of view shortens the time to reach consensus.

Underestimating the pride of ownership in the system or process that is being left behind can doom even the best laid plans from the start. A recent client was on the verge of implementing a new solution that would provide users with significantly enhanced ad hoc reporting, easier data entry, faster turn arounds and reduced administrative maintenance, but their initiative was delayed at every turn by the head of internal audit – who was also the former Financial Planning and Analysis VP who designed the legacy system. Their failure to bring him to the table early on as a critical stakeholder and think through how to manage the change caused significant delays to the overall plan.

A great Integrated Performance Management solution will require a technology enabler, but focusing on process and organization is paramount to paving the way for improving your company’s ability to measure and drive sustainable, profitable growth.

To be successful, CFOs must lead the charge with a clear strategy and help their organizations to see the importance of defining requirements, addressing structural and process challenges early on and managing the change throughout the life of the project.

A&M CFO Services
To learn more about Integrated Performance Management and Alvarez & Marsal’s CFO Services, download our CFO Services brochure.