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Unleashing Profit Potential and Cost Control at Skadden Arps Using Oracle HPCM
- 1. Unleashing Profit Potential and Cost Control at Skadden Arps Using Oracle HPCM Session 12426 Ivan Orlic – Skadden Arps RJ Linehan – Innovus Partners
- 2. Company Information • Premier Global Law Firm • 23 Offices • 4XX Partners • X,XXX Attorneys • Ranked X by AmLaw (based on Revenue) • Utilizes Hyperion Planning, Oracle Essbase, and recently implemented Oracle HPCM. • Innovative EPM and BI services and solutions. • Specializing in Forecasting & Budgeting Solutions, Reporting Solutions, Profitability & Cost Management Solutions. • Oracle Gold Partner. • Headquartered in NYC.
- 3. Only 5% of the work force understands the strategy 60% of organizations don’t link budgets to strategy Only 25% of managers have incentives linked to strategy 85% of executive teams spend less than one hour per month discussing strategy 9 of 10 companies fail to execute strategy The People Barrier The Vision Barrier The Management Barrier The Resource Barrier ©1998-2012 Balanced Scorecard Institute Today’s Management Challenges Inability to Translate Vision into an Executable Strategy
- 4. ©1998-2012 Balanced Scorecard Institute Vision and Strategy Objectives Measures Targets Initiatives FINANCIAL “To succeed financially, how should we appear to our shareholders?” Objectives Measures Targets Initiatives LEARNING AND GROWTH “To achieve our vision, how will we sustain our ability to change and improve?” Objectives Measures Targets Initiatives CUSTOMER “To achieve our vision, how should we appear to our customers?” Objectives Measures Targets Initiatives INTERNAL BUSINESS PROCESS “To satisfy our shareholders and customers, what business processes must we excel at?” Today’s Management Challenges The Four Perspectives of Translating Vision and Strategy
- 5. Linking Tactics to Strategy Customer Perspective • Strategy - Improve customer value to increase revenue and profitability • Tactic – Define profitable customers, Identify those customers, Acquire and/or retain those customers Financial Perspective • Strategy - Manage financial resources more efficiently to reduce costs and increase profitability • Tactic – Identify cost drivers, Decide what costs are wasteful or unnecessary, Eliminate those costs Today’s Management Challenges
- 6. Strategy and Tactics Lead to More Questions • How do we define a profitable customer? • How much does it cost to service our customers? • What is the profit margin for products sold to our customers? • What organizational resources does a customer consume? • Why has an increase in revenue not translated into an increase in profitability? Today’s Management Challenges
- 7. Measuring Profitability and Costs Challenges of Measuring Profitability and Cost Drivers • Homegrown disparate models are inflexible, inaccurate, and inconsistent • Time lags to create and update profitability model • Insufficient customer, product, or driver data at the correct grain • Lack of integration with financial data • Excessive cost associated with maintaining profitability solution
- 8. Measuring Profitability and Costs Qualities of an Effective Profitability Solution ***Connecting the Dots*** • Integrated solution that is flexible, accurate, and consistent • Owned and maintained by business users • Offers transparent results that are reliable • Provides traceability to source data for easier visibility • Lowers total-cost-of-ownership
- 9. • Packaged Profitability functionality • Computes Profitability for Business Segments, Customers and Products • Pre-Built Framework for profitability modeling: • Pre-built Measures dimension • Support for Multiple Cost Allocation methodologies • Pre-Built Validation reporting • Graphical Interactive Traceability Maps • Genealogy Reporting shows flow from any stage to any stage • A User-Driven application • Measures, Allocates and Assigns Cost and Revenues via User Defined Rules • Finance User-facing Administration • Provides Scenario Modeling for Decision Making • Tightly integrated with the full Hyperion EPM Suite • Shared Data and Metadata via EPMA • Shared Reporting Tools like Financial Reports & Web Analysis • Proven Technology Stack Hyperion Profitability and Cost Management (HPCM) An Oracle EPM System Module
- 10. Oracle’s Enterprise Performance Management Platform Common Integration & AnalysisData Quality and Consistent Dimensions Common Reporting & Interaction Strategic Planning Financial Close Planning & Forecasting Profitability Management EPM Architect / Financial Data Quality Management Hyperion Profitability & Cost Management DW / Excel / Text Files / Etc…
- 11. Skadden’s Business Requirements Business Challenges Driving Business Requirements •Flexibility •Integration •Traceability/Transparency •Ease of Maintenance
- 12. Solution Design - Architecture
- 13. Solution Design – Data Sources
- 14. Solution Design – Allocations • Cost Center to Cost Center • Cost Center to Profit Center • Intra Cost Center • Intra Profit Center
- 15. Solution Design – ASO Reporting App • Direct Revenue and Expense Data • Allocation Results • Additional Detail
- 16. Lessons Learned • Administrator / End-User training (much steeper learning curve vs Essbase/Planning) • Scrub source data (research your data) • Define End-report first so that the model is able to produce it (impacts outline / allocation models, etc) • Who should own the solution? (IT? Finance? Hybrid approach?)
- 17. • Additional complexities to build and maintain not found in Planning applications / projects • Proof of concept apps are important • Subject matter expert / business analyst for your business' specific industry Lessons Learned
- 18. Benefits Realized • Centralized allocation system • Maintained by the business users • Web-based solution • Transparency into allocation model • Ability to modify allocation model (drivers, assignments, etc.)
- 19. Future of Profitability Reporting at Skadden • Review and redesign of allocation drivers for each cost pool • Client-based allocations
Editor's Notes
- Translating Vision to Strategy Barriers preventing organizations from successfully executing strategy Vision Barrier Poor communication from management leads to lack of vision and guidance for the work force Management Barrier Lack of management participation and focus on strategy prevents execution Resource Barrier Inability to properly allocate and align resources to strategy counteracts strategy execution People Barrier Without motivation to execute strategy aligned to vision, management lacks desire Vision, Strategy Background Vision An organization’s vision defines its direction – where it came from, where it is going It reflects the goals that and organization wishes to achieve and answers fundamental questions about the organization What is the organization, what does it do Who does the organization serve Why does the organization exist Where is the organization heading It represents the definition of an organization’s success from management’s perspective How does the organization determine if it is successful Strategy An organization’s blueprint for achieving its vision A strategy communicates to the organization the following Priorities Methods Resources Common outcomes A structured endeavor that achieves measurable results Execution through Strategic Planning Management activity that applies an organization’s vision to its goals creating common results Documented strategy that sets priorities, defines methodologies, aligns resources to achieve desired outcomes
- Organizations often refer to The Balanced Scorecard as a means to align their vision with a strategy that translates a plan with specific steps to execute that strategy. Identifying what should be accomplished and measured, planners can actually execute strategy. Organizations can be viewed from four perspectives PerspectivesA Perspective is a view of an organization from a specific vantage point. Four basic perspectives are traditionally used to encompass an organization's activities. The organization's business model, which encompasses mission, vision, and strategy, determine the appropriate perspectives. Financial Through financial data, an organization can gauge performance and success to its customers and shareholders Emphasis on just the Financial Perspective often leads to a biased or unbalanced view of the organization Learning & Growth An organization’s viewpoint towards individual and corporate self-improvement Because of today’s rapid changing work environment, the importance of knowledge workers within an organization who can adapt to the evolution of technology, competition, and redefined business practices is vital to the organization’s success Business Process Established, efficient business processes defined by individuals who are intimately involved in those processes reflect the Business Process Perspective Defines managers’ ability to measure how well their business is running Customer A recent realization of the importance of customer focus and satisfaction Leading indicator An unsatisfied customer will find an alternate product or service
- Linking Strategy to Tactics A natural evolution of proper strategic planning is to link strategy to tactics to ensure communication of an organization’s vision occurs throughout the organization. Key in on Customer and Financial Perspectives and tie in profitability
- Through strategic planning more questions arise
- The chief hurdles for measuring profitability
- Features of a successful profitability solution, connect-the-dots
- Migrate from a legacy system for profitability reporting – FULL ALLOCATION OF COST
- Snazz it up – expand to include sources of data for HPCM