Financial Planning: Who Should be Involved?

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1 ABPMPartnersWhitePaper Financial Planning: Who Should be Involved? Driver-based decision-making is good for enterprise performance management, especially if the right people take part. April 2014

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3 2014BPMPartners,Inc.Allmaterialcontainedinthisdocumentremainsthe propertyofbpmpartnersandcannotbepublishedorduplicatedwithoutthe expresswrittenconsentofbpmpartners,inc. FinancialPlanning:WhoShouldbeInvolved? 1 1

4 Overview While business performance management (BPM) software, also referred to as EPM and CPM for enterprise and corporate performance management respectively, has progressed into its third generation and joined the migration to cloud architecture, some usability and participation challenges remain unsolved. Finance wants to break up its own monopoly or should want to and give operational and line managers greater input to drive decisions impacting planning, forecasting and budgeting. By extending business performance management beyond Finance, companies can equip line of business and operations managers to model and control the impact of operational drivers on profitability. Challenges A common scenario in a medium- to large-sized enterprise today is that the planning process is managed entirely by Finance. This is limiting for the financial planning process, and not very good for Finance either. Typical drawbacks of this structure: Finance crunches large volumes of data and builds static forecasts that are imposed on the entire organization. Financial planning and analysis (FP&A) specialists labor manually on linked spreadsheets and lack the time to engage with the business managers whose input they need. Budget templates do not fill this gap. Unstructured input, crucial to making plans that are relevant, goes unused. Plans are not based on the insights and the individual views of those close to the process, and may often be inaccurate or in some cases irrelevant. Plans are partially outdated by the time they are in the hands of business unit leaders. When plans exist in informal or static forms such as Excel spreadsheets it s common for an organization to experience confusion or debate over which is the most accurate and up-to-date version, and who has signed off on it. While other departments graduate to cloud-based applications, Finance remains trapped in consolidator mode, combining spreadsheets. Limitations lead to dissatisfaction In the latest BPM Partners Pulse Survey, over one-third (37.5%) of respondents listed limited communication / collaboration among their reasons among their reasons for their dissatisfaction with a budgeting / planning system. The survey also found: 2 FinancialPlanning:WhoShouldbeInvolved? 2

5 Over 60% responded that in their company, most managers are not involved in the budgeting process. Only 30% responded that planning in their company involved everyone with revenue or expense responsibility. 40% present alternate planning / budget scenarios only occasionally. (For a clue as to why, see the next bullet.) Over 65% were dissatisfied with their approach to strategic planning. All this represents an opportunity missed, because the promise of performance management is to get more accurate input and ownership by reaching out to everyone who should contribute to the process, and providing performance feedback to those who can apply it effectively. So why are so many planning structures falling short? Typically, it s because too many organizations don t have a BPM / EPM system in place that is capable of supporting easy, low-friction collaboration. Additionally, their corporate cultures might resist information sharing. The latter won t change overnight, but the right BPM solution will help. What sneeded Most Finance organizations, particularly in mid- to large-sized companies, would be well served to select a true cloud-based solution as a starting point. The cloud pricing model usually allows a customer to start small and scale up smoothly. The most innovative and effective BPM applications that were originally designed for the cloud emphasize ease of use to extend the pool of potential participants. They are also designed to accommodate the varied endpoints users rely on in their work, including tablets and smartphones. In planning, the contributors you want to pull in often are not sitting in one location; they re in the field, on the road, or on the plant floor. Key features for finance Companies that seek easier-to-use financial planning and wider participation tend to articulate their requirements by mentioning specific features, such as these, which are drawn from actual requirements lists: Enhance budgeting and forecast processes throughout the organization to allow everyone to look at the same information set. FinancialPlanning:WhoShouldbeInvolved? 3 3

6 Review and expand existing key performance indicators (KPIs) to: o o o Measure and monitor operational as well as financial drivers; ensure alignment and linkage between strategic and departmental objectives and initiatives; and Improve alignment of tactical execution with strategic objectives throughout the business. Improve management reporting and communication to allow management to view standardized revenue and expense reports as needed, and to provide visibility into revenue attribution and expense allocation business rules and underlying drivers. Implement intuitive dashboards to visually highlight the status of key performance measures and forecasts. Looking beyond the checklist A shortcoming of feature checklists is that they can obscure crucial themes in software selection. For example, a multitude of benefits can be gained by selecting a solution natively designed to support even built around -- collaborative planning as a process. Among these benefits is the ability to secure broader participation in planning. But because collaboration doesn t easily boil down to a list of required features, customers often overlook the crucial ability to plan collaboratively when setting evaluation criteria. This oversight can have significant impact. Recognizing when change is needed How can Finance professionals recognize when they should look for a better BPM solution? As a guideline, wherever you see teams of Finance professionals spend days in tedious data grinding to create detailed plans, software is being underutilized. When workflows are inefficient and automation virtually nonexistent, crucial data is most likely locked in silos separate databases, spreadsheets, even s. When planning is locked within legacy solutions, organizations often miss out on the efficiencies that come from an open yet controlled planning environment. 4 FinancialPlanning:WhoShouldbeInvolved? 4

7 HowThisTypeofSolutionFitsintoToday senterprise Environment Once you ve acknowledge that improved, more democratic planning is a priority and you ve acquired a performance management system, what s next? Adoption. Finance owns and maintains the BPM application, of course. But to avoid silo-fication and to promote a democratized planning process, it must encourage business line managers to take part in planning as an ongoing process. The message to broadcast to potential users: This is easy to learn, and it s convenient. Log in from whatever device and screen you have with you, and you ll be productive immediately. It s not just about ease of use, however. Finance executives should educate business decision-makers about the other benefits of ongoing collaborative planning. Decisions can be made faster, are based on more complete data and analysis, and are backed up with documented analysis and visual reports. For instance, the application s collaboration capabilities should provide a logic trail that records the ideas and recommendations made from people within the process to help justify the decisions that are ultimately made. These decisionmakers can then confidently point to the recorded contributions of others to justify their judgments. In this kind of environment, decisions can come faster and with greater frequency, which typically reduces the drastic adjustments to gentler course corrections and this also lowers risk. A positive chain reaction Typically, the shift to collaborative, wider-participation planning and more frequent plans and decisions does not happen overnight. The transition to an ongoing process of plan-adjust-monitor is not a Big Bang change of behavior. It comes as a chain reaction, with satisfied users recruiting more colleagues. As participation evolves, forecasts become more accurate. It s not automatic. As business managers engage with the system and draw reports and information, they also have visibility into the driver-based models. Collaboration features make it easy for them to inform the right people if reality differs from the driver assumptions. It typically takes the form of a quick message that is routed to the model steward or owner, and in a more intelligent workflow, also to those directly impacted: Hey, just noticed that the model puts a ratio of 7% clickthroughs to FinancialPlanning:WhoShouldbeInvolved? 5 5

8 signups for our marketing campaigns. It s more granular than that: 10% in the US and 5% in Europe. Just thought I should mention it Conclusions We think democratization of BPM / EPM is an overall benefit and results in smarter companies. Finance still leads and promotes financial planning, but a certain amount of crowd-sourcing hikes the intelligence in these plans. There is now room for motivated business managers to chime in when they have time and new insights to contribute, and they will be rewarded with better decision-making information, as well as more representation in planning and budgeting. The question of timing for adopting this more participatory mode of financial planning with operational input is easily answered: improvements to planning can yield rapid benefits that are significant. The shift to cloud-based performance management is well under way. We suggest investigating collaborative systems for BPM / financial planning in the near term. If your organization currently suffers from oversized course corrections due to a lack of reforecasting, or from a reality gap of finance-bound planning, consider starting the initiative to democratize planning now. AboutBPMPartners BPM Partners is the leading independent authority on business performance management (BPM) and related business intelligence solutions. The company helps organizations address their budgeting, planning, financial reporting, regulatory compliance, profitability optimization, key performance indicator (KPI) development, and operational performance challenges with vendor-neutral experts who can guide companies through their BPM initiatives from start to finish while both reducing risk and minimizing costs. For further details, go to Follow BPM Partners on AboutTidemark Tidemark extends financial planning beyond the CFO s office to the front lines of every business decision maker. Tidemark's team has helped more than 5000 companies evolve their analytical capabilities over the past 20 years. We believe it is time to engage every decision maker from finance to operations to business line managers with better data, deeper analysis and a richer experience. That s why we re-imagined enterprise analytics with a powerful, cloud-based analytics platform and intuitive apps designed for mobile first access. Visit Tidemark at 6 FinancialPlanning:WhoShouldbeInvolved? 6