Your Controller: IT Wannabe or Wise Man?

The need for improving financial reporting IT systems may first be recognized by your business' controller or chief financial officer.

A Tibetan proverb says, “The wise understand by themselves; fools follow the reports of others.” Does it seem like your controller – or chief financial officer or whatever they're called in your business -- is constantly meeting with the IT people? Perhaps it is because he or she sees danger in “the reports of others.” The interaction with IT probably means you have a good controller, but it may also mean your reporting systems are inadequate.

In today’s business world “the reports of others” are a critical part of day-to-day business for both the wise and the foolish. Most corporate job descriptions include reporting of some form, but for many small-to-medium sized businesses, the controller and IT manager are at the frontlines of the reporting that supports your company’s most important decisions.

A good controller has tremendous insight into financial reporting needs, and he or she often leads the charge for improving systems. The controller understands that both timeliness and accuracy are at risk when reporting depends on manual data entry and an ever-growing spider web of linked spreadsheets.

As reporting needs increase, the controller’s job becomes awfully scary if systems don’t help. Many top executives would shudder if they understood the degree to which the “information” that drives major decisions is dependent on the data entry accuracy or the Excel skills of their most junior accounting employee.

Having visibility into key budget and profitability drivers is essential for decision making throughout the company. Controllers often help define technology needs, collaborating with the IT manager to understand and deploy appropriate business systems. Good controllers often become far more systems-savvy than the average employee, or even the average executive.

Take, for instance, the case of a Chicago insurance company. An unexpected resignation left the IT organization with a void in their financial reporting function during a difficult time in their business cycle. The company recognized the need for good information and acted decisively, hiring an interim controller to work with IT to determine what steps needed to be taken as the company approached their next phase.

The controller, working within the IT team, immediately began visiting face-to-face with department leaders involved in financial reports and analyses. Those discussions opened a dialogue that had been absent and helped to break down longstanding barriers.

The controller’s communication skills and in-depth financial knowledge helped the company discover profitability issues that would have otherwise not been uncovered. For example, the company had a tendency to fill job vacancies with contractors, rather than full-time employees, because it was assumed to be a preferable, cost-effective way to manage short term staffing. Deeper analysis challenged some of those assumptions, and enhanced reporting was created to allow managers to see the relationships between day-to-day hiring decisions and broader financial results. The controller also improved visibility into other profitability drivers, such as costs associated with myriad vendor contracts and the IT department’s employee and consultant budgets.

This company understood the need for timely information to enable them to make good decisions that would drive results. Their story illustrates the unique role an experienced financial executive can play when working at a detailed level with systems people. Neither group can independently create timely and accurate reporting, but acting as the link between IT and management, a controller has the “hands-on” insight to ensure that systems meet rapidly changing business needs.

So if it seems like your controller is joined at the hip with IT, it may be time to look at your financial reporting systems to see if they meet your business needs. Today’s wise business leader recognizes that quality decisions depend on quality information and therefore reporting isn’t a technology project, it is a business project.

Lisa Metcalfe is a Regional Practice Leader in the Technology Leadership Practice of Tatum LLC. Tatum is the nation’s largest executive services firm, providing financial and technology leadership nationwide.

The Value of Enterprise Project Management

Cut a piece of wood hastily, and will likely be ruined. That’s why “measuring twice and cutting once” is a carpenter’s golden rule. That same rule applies to implementing and managing business projects or programs: double check your work to understand every project aspect before you launch.

Talk to nearly any corporate executive today, and you're likely to hear stories of frustration regarding projects gone awry. With the challenging nature of managing multiple projects, measuring their success and aligning their costs with objectives, it's no surprise that solid success stories are few and far between. Many companies improve their odds by implementing an Enterprise Project Management Office (EPMO).

Whether it's a merger, integration, spin out or some other large project, C-suite executives employ EPMOs to help handle major programs. Such projects generally run horizontally across the enterprise, impacting many areas. The EPM office is all about taking each project and measuring it twice -- understanding its requirements and risks while managing expectations and ensuring consensus of success. Use it effectively, and your projects will come in on time and on budget.

Controlling project chaos

Imagine yourself a retailer considering a project like a major store refurbishment. Perhaps you're introducing a new logo, theme, or look. This might include changing the physical appearance along with the product mix or displays -- all of which impact multiple departments -- from the office of CFO through marketing, pricing, sales, construction, and operations. Once you see the wide impact such an initiative can have, you see why every function must be well coordinated.

Corporate programs that are not managed by an EPM function are often poorly executed, missing deadlines, or budgetary requirements. But with a program management function in place, the success rate is much higher. Because redundancies and missteps are avoided, costs are also contained -- even 10-20 percent less than a project done on an ad hoc basis.

So, how do you measure success? With EPM, you create a set of criteria to define and measure success. Program plans include clearly defined steps and responsibilities. To ensure accountability, there are also people dedicated to the program management function who report directly to a C-level executive.

Establishing a governance committee

Just as corporate governance is now a critical part of doing business, so is making sure IT decisions and projects align with objectives. This is where a governance committee plays a vital role -- ensuring that the program management function is well structured and gets buy-in from the officers and department heads. It also establishes the criteria for managing programs, which could include project size and scope or factors like resource allocation, cost, or impact on strategic initiatives. Unless a program only impacts a single function or doesn't hit the thresholds of cost or impact, it should be managed by the EPMO.

For example, consider resource conflict, which includes things like operating capital or people. A governance committee may uncover a conflict like an employee assigned to five different programs plus his daytime job. Stretching people this way yields fragmented results, which can hinder the project's success through poor work quality, missed milestones, or cost overruns.
If you're executing a large scale program, it's important to organize it properly from the outset, which is why appointing an EPM executive is a critical first step. That executive assigns a team of project managers and lays out the details in a formalized project management tool which can perform a variety of tasks, from tracking phases, tasks, hours, and costs to determining how long it will take and what the interdependencies are.

There are a variety of toolkits available for this purpose and for activities like collaboration, portfolio analysis and ERP. You may even custom develop a solution for yourself which leverages those tools. As for cost, some tools are available for free, while others can cost several hundred thousand dollars, depending on the scale of your program and the number of users. The key is finding a toolkit that works from a cultural as well as a technological perspective within your organization.
Managing interdependencies

In virtually any project, managing interdependencies is critical. That means ensuring that step "A" is completed before step "B." If you missed the timelines or costs associated with any step, it impacts the cost of the overall program and prevents you from proceeding to the next, which is why all interdependencies must be well coordinated and managed. You can even ensure that steps are not interdependent by structuring activities to run in parallel or independently.

With portfolios in particular, you may find items that cause interdependencies across a set of programs or projects. Each is part of the portfolio, and if you don't complete them, they may impact something down the road. Your whole portfolio of programs or projects may also exceed your operating or capital budgets, which forces you to go back and reprioritize, which is another vital function of the enterprise project management function and governance.

Enterprise program management goes far beyond technology. It applies to all aspects of major programs your company might be initiating. Measuring twice and cutting isn't just a catchy proverb -- it should serve as a reminder for you to take those steps necessary to complete your picture of each project and build a detailed plan, namely through a robust Enterprise Project Management function. When you do, you can improve your overall focus and avoid the disappointments that a failed project can bring.

Mike Gorsage is a Partner and Technology Practice Leader for Tatum LLC. Tatum is the nation's largest executive services firm, providing financial and technology leadership nationwide.

Scaling Your Business with Technology

In today’s economy, companies are looking at every opportunity, every tool available to help them prepare for growth. The answer for many is technology. But before you invest, make sure you understand just how it will impact your organization.

By this point in the financial crisis, you've made countless cutbacks, and wrung as much productivity as you can from your organization. But how can you grow without adding large numbers of people? Scaling your business from here requires a significant change, and for many organizations, that means employing new technologies.

Technology can empower your organization, helping you improve efficiencies and even expand operations. But to use that technology well, you must balance your needs with the realities of how you do business. That means understanding not only which technology to invest in, but also how it will affect your operations and how to maximize your returns on that investment.

Ask the right questions

What does it really mean to scale your business? Today, it means much more than simply throughput. When considering a new technology, many organizations focus on the wrong questions. They want to know, "What can I do with this technology?" rather than "What can this technology really do for me?"

Today, businesses and consumers alike expect everything from new technology, namely speed, collaboration, consolidation, accuracy, and greater connections. But it's risky to think that simply plugging in a new box will do the trick. Using new technology to scale your business involves much more, primarily exploring how well it will integrate with your network, your IT components and your users.

Think automation

Whether the solution you are looking for relates to manufacturing or improving payroll efficiency, a new technology can scale your business through automation.

Consider the example of an auto manufacturing plant utilizing robots. Thanks to that technology, it no longer takes 17 people to build a car -- it may now take three. While people do monitor the technology, there is no one actually driving the screws. In this case, the technology platform improves efficiency and helps the organization meet new "green" business standards. Reducing the number of people makes for a smaller carbon footprint, with fewer resources required.

From a general business perspective, technologies can have a similar impact. Tools like enterprise resource management systems, financial systems, and customer service technologies all have a tendency to improve effectiveness and efficiency without always having to "brute force it" with more people.

Consider scaling your customer interactions, for instance. The Web has made it possible to sell without human interaction. Today, even a multi-million dollar at- home business requires no bricks and mortar. Everything can be automated, from the sales floor and collection of money, even through distribution.

You can even scale your human resource function by converting to a self-service model. Here's an example: A staffing company goes through a large HR payroll implementation, which needed to accommodate the 380 thousand people on payroll. Over a year, they undergo a major conversion that allows them to handle 800 thousand people without adding more than 1-2 percent to headcount.

Clearly, automating functions like employee background searches, enrollment in benefit plans, and payroll can allow you to scale dramatically without adding to your carbon footprint or adding headcount.

Get the most from your investment

A common mistake many organizations make is allowing the technology to choose them, rather than choosing technology to grow their business. Many select technology before they really build out their business case and consider the process re-engineering required to make the company better. Very often they buy software and then convert their processes to support the software, which can actually make things worse.

That is why before you invest in technology, build a thorough business case that looks at the total cost of ownership (including costs of hardware, software, and implementation and maintenance over time). When determining costs, remember that once you invest in a technology, it's fairly well set. Major changes or upgrades are usually not required for some time. But technology does require continual care and feeding.

After implementing the technology, you must then go back and verify that the business case met your company's internal rate of return. For example, if you projected a million dollars in savings, go back and review the business case, compare it to actual performance and show that you did as well as promised or worse. If you did worse, conduct a 360 degree review that explains what lessons were learned, and how you could do better. Such an exercise renders you more thorough, diligent and focused in terms of vetting the business case before proceeding with any kind of project.

When looking to scale your business, remember that scaling through technology means something different to every business and every network. But if you ask the right questions, budget and plan properly, your investment can pay for itself many times over. When you know your business, you'll know how it will respond to change. You'll also be better equipped to meet today's challenges and prepare for growth.

Mike Gorsage is a Partner and Technology Practice Leader for Tatum LLC. Tatum is the nation's largest executive services firm, providing financial and technology leadership nationwide.

Business Insights: Learning From The Future

Ever driven a car with your eyes fixed on the rear-view mirror? You won’t get far, and neither will companies that base their strategies solely on past performance. That is why many turn to business insights -- a holistic approach to capturing and analyzing data that helps them predict the impact of their decisions on future success.

Today's organizations must constantly reinvent themselves to adapt to changing conditions. But one element remains constant: success stems from solid decision-making based on solid data. In the last few years, companies have invested heavily in technologies such as SAS software, Business Objects and Hyperion, all of which are designed to help capture higher quality data.

But look beyond the tools for a moment. How smart is your organization's approach to business intelligence? If you rely too heavily on dashboards, your view of the company may be too high level, missing key details on specific performance issues. The data you capture may only offer a snapshot view of your business, making your intelligence unfortunately short-sighted. In the end, an approach that focuses primarily on tools while overlooking data and strategy will not add significant value.

Today, business intelligence must rise to the level of business insights -- a more sophisticated approach that gives your executives the information they need to drill into each area covered by a dashboard and play "what if" scenarios, based not just on a historic perspective, but also a prospective one. When your approach includes both reflective and predictive perspectives, you can get much more out of the tools you're using to balance risks and rewards and set strategy more effectively.

A prospective view

As you shift your focus to business insights, keep in mind that it's not just about the tools -- it's about building a robust enterprise capability that enables you to take operational characteristics and turn them from analytical data into useful, predictive data to manage your business either on a current, real-time basis or on a future predictability basis.

In the past, business insights have been used primarily for sales forecasting and reviewing knowledge around areas like supply chain or customer and product profitability -- all of which line operations people need to make strategic decisions. This use of business insights is a vertical application that looks at departmental functions. An expanded approach is a horizontal application - extracting data that crosses the organization, connecting all relative pieces together to give you a common look and feel for predicting the future.

This application helps you see the consequences of moving the levers of your business. For example, let's say you wish to change your inventory management processes. Business insights allows you to look ahead to see its potential effects on areas like cash flow, staffing, delivery times or liquidity. This type of insight helps you predict how your decisions will impact your business, customers and profitability.

Building a robust insight capability

• A solid data structure. The first element you will need is a strong data structure, which comes out of all the applications you rely on to operate your business. Those include your ERP systems, financial accounting, HR, supply chain systems, manufacturing, logistics, customer files and other areas to give you a departmental or vertical view of the company. When you look at all of these pieces, an overall story emerges about what is going on inside your company at any given point in time. At that point, it's time to start connecting the dots by creating a common, horizontal set of data elements. When you do, you produce the kind of insights your leaders need to move the levers that fine tune and optimize your business. This is where ETL or data extraction tools come into play, placing the right information into a common platform: your data warehouse.
• Looking outward. The next step is to sub-divide your data warehouse into individual data marts, which are a horizontal or vertical perspective of the company. As you conduct business insights activity, be sure you look outward, or prospectively first, not necessarily inward. Think of it as looking out the windshield as you drive, rather than focusing on the rear-view mirror, which can only cause you to miss vital turns or make serious mistakes.
• Painting your picture. The final element is the right set of reporting tools, including Hyperion, Business Objects, Cognos, and SAS software, or Crystal Reports. By plugging your data into these tools, you can now begin painting the overriding picture of your business insights. From there you can generate dashboards or predictable modeling scenarios that allow you to change one dial or lever at a time and measure the impact on your business.

As you tweak the dials and levers of your business, it is absolutely critical to have the information you need to keep from flying blind in today's tough economic climate. By raising your business intelligence to the level of business insights, you can obtain new barometers of knowledge about your business and how it's performing. But creating value requires more than an investment in technology – it requires a comprehensive data model and strategy. When you understand the true worth of business insights, you support smarter, more agile decision-making within your organization and build strategic advantage.

Mike Gorsage is a Partner and Leader of the Business Operations and Technology Practice for Tatum LLC. Tatum is the nation's largest executive services firm, providing financial and technology leadership nationwide.