Comprehensive Enterprise Performance Management. Gregory Johnson & Ana del Rey, Accenture Christophe Caquineau, Avanade

Transcription

1 Comprehensive Enterprise Management Gregory Johnson & Ana del Rey, Accenture Christophe Caquineau, Avanade

2 CFO s consider enterprise performance management to be the most important in creating shareholder value Importance of Finance Capabilities in Outperforming Competitors Enterprise performance management 47 % Value-centred culture 44 % Capital stewardship 25 % Enterprise risk management 25 % Finance operations 19 % Most Important Not Important Management is an umbrella term. It comprises all processes, methodologies, metrics and technologies that enterprises use to measure, monitor and manage business performance. 2

3 While companies have invested significant sums on point solutions, many executives remain frustrated and dissatisfied with their current capabilities Research Findings Wrong Metrics Cost of Data Quality Only 23% of companies demonstrate proven link between the scorecards and shareholder value 1 Only 12% of companies link quality measures to stock returns 70% of companies employ metrics that lack statistical validity 1. Approximately $40 billion spent on data warehousing Of this, more than 60% spent on data cleansing 2 Oceans of Data 60% of workers experience information overload 3 43% of managers impacted through delayed decisions 4 Islands of Systems Lack of integration between initiatives produces additional cost and inconsistent results Partial View of Value Current management systems ignore and under-manage value-creating assets In 1980, 80% of S&P 500 Index could be traced to tangible assets compared to 25% today 5 Wrong Incentives incentive measurements with no clear link to long-term shareholder value Incentives tend to be near-term focused Footnotes: 1. Ittner and Larcker, Coming Up Short on Non Financial Measurement, HBR, 11/03 2. Thomas H. Davenport, Dave De Long, Jeanne G. Harris, and Al Jacobson, Data to Knowledge to Results: Building an Analytic Capability, Accenture, June 1, Thomas H. Davenport and J.C. Beck, The Attention Economy Understanding the New Currency of Business, Harvard Business School Press, Boston, P. Waddington, Dying for Information: an Investigation of Information Overload in the UK and Worldwide, Reuters Business Information, London, Accenture Institute of High Business, Future Value: The $7 Trillion Dollar Challenge. Journal of Applied Corporate Finance, 5/04 Outlook, 7/04 3

4 The majority of shareholder value is now not covered by financial reporting Market to Book Value Over Time S&P 500 ( ) Market Value (%) ~20% ~80% ~45% ~55% ~85% ~15% ~75% ~25% Peak Post Post-Crash Crash (3/2000) (8/2002) Unexplained Value Accounting Book Value Sources Lev, Baruch. Intangibles: Management, Measurement, and Reporting, Brookings Institution Press, 2001 Lev, Baruch. Remarks on the Measurement, Valuation, and Reporting of Intangible Assets. Economic Policy Review (Federal Reserve Bank of New York), September

5 EPM enables both the financial and non financial elements of shareholder value to be measured and reported Statutory Reporting vs. Reporting Information Requirements Back Office Financial Strength Customer Supply Chain Human Technology Enablers Cost Efficiency Service Effectiveness Headcount Process Standardization Informal Processes Organization Reputation Operational Risk Compliance with SOX etc. Level of Internal Control Cash Investments Receivables Payables Property, plant and equipment Capital Productivity Debt/equity mix Credit Ratings Borrowing Capacity Bad Debt Balance Sheet Strength Quality of Investor Relations Customer Growth and Retention Market Penetration Sales Force Productivity Customer Profitability Contract Mgmt Customer Satisfaction and Loyalty Brand Awareness Customer preferences Demand Mgmt Transportation Mgmt Operational Excellence Inventory value Plant Flexibility Plant Modernity Access Rights Inventory Quality Traditional scope of financial/statutory reporting Employee Retention Diversity Management Contracts Documented Accessible Skills Inventories Management Quality Employee Loyalty Leadership Capabilities Problem Solving Ability Operational Efficiency (Cost Reduction) Centralization/ Standardization of Systems and Data Level of Automation Level of Internal Control Data Integrity Customer Service Intangible Tangible 5

6 Comprehensive Enterprise Management Enterprise Management (EPM) Framework Target Setting & Portfolio Assessment Portfolio Value Assessment Set Targets for Key Measures of Accountability Cascade Targets to Lower Level Metrics / Organization Determine Key Measures of Success Strategy Formulation & Planning Incentives and Rewards Leadership Capability Determine Key Business Drivers Refine Corporate Vision & Strategic Objectives Planning, Resource Allocation and Forecasting Develop Plans to Achieve Targets Enablers Integrated IT Architecture Allocate Resources (capital & people) to Achieve Plans Standardized Processes Common Data Structures & Controls Review, Challenge & Finalize Plans & Forecasts Measurement & Reporting Develop Action Plans, Re-allocate Resources and Update Forecast Review with Executive Management Monitor Key Measures of Business Close and Consolidate Books and Report Actuals 6

7 Enterprise Management enabled through Microsoft Point Server EPM Demo Introduction

8 Purpose of the Demonstration Showcase EPM best practices to identify and resolve common business issues Illustrate a realistic client scenario based on a hypothetical large telecommunications company, e.g., CommCo Based on the Accenture EPM framework and built on Microsoft Point Server Inclusive of Strategy, Portfolio Assessment, Planning, Budgeting, and Forecasting, and Reporting and Analytics Key highlights include: External Analysis Consolidations Eliminations and Adjustments Long Range Planning / Annual Budgeting 18-Month Rolling Forecasting Dashboards, Drilldown, Reporting, Alerting, Visualization and other BI capabilities Capital Planning 8

9 CommCo Overview: Company Profile Leading US telecommunications company operating wireless and wireline businesses in four (4) regions Strong presence in both consumer and business markets Strategically focused on full integration capabilities throughout the enterprise Upgrading wireless and wireline networks to compete in the marketplace with a focus on fast, next-generation digital infrastructure Significant new products and services launching in the marketplace Strategic objective is to double share price over the next 5-years 9

10 Current Year Next year s planning Next year s performance Story Board CEO Review current year s performance Strategic Planning Review performance CFO Prepare Consolidated numbers Controller Top down Long range planning FP&A VP Marketing Monitor through analytics Communicate to shareholders VP/ SVP Operations Monitor and Capital Planning NE Sales Manager Bottom up annual planning Re-forecast 10