ASMI Dallas March 2012 by Ben Lamorte


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How to make planning a value-add process. Introducing Agile Planning, the most important activity for finance in the 21st century.

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ASMI Dallas March 2012 by Ben Lamorte

  1. 1. The Planning Maturity Curve Where Are You? Where Do You Want to Be? Ben Lamorte VP Marketing, Alight PlanningAGILE
  2. 2. Why Agile Planning? 3-Minute OverviewAGILE
  3. 3. The Value of Traditional Planning Over Time But ROI diminishes quickly over time. VALUE High ROI at the early stages of planning… TIME Source: The Agile Planner BlogAGILE
  4. 4. The Value of Agile PlanningTM Over Time Long-term VALUE value from planning increases significantlyROI remainshigh in theearly stagesof planning… TIME Impactful planning that addresses the right business issues at the right time with the right people. Unlike budgeting, it is a continuous process that adds increasing value over time.AGILE Source: The Agile Planner Blog
  5. 5. The Subtle Message 1: Is it EVEN worth it to replace spreadsheets with a planning tool? 2: If you already bought software, was it worth it? 3: Either way, how do we make planning ADD VALUE?AGILE
  6. 6. The Subtle Message 1: Is it EVEN worth it to replace spreadsheets with a planning tool? 2: If you already bought software, was it worth it? 3: Either way, how do we make planning ADD VALUE?AGILE
  7. 7. The Subtle Message 1: Is it EVEN worth it to replace spreadsheets with a planning tool? 2: If you already bought software, was it worth it? 3: Either way, how do we make planning ADD VALUE?AGILE
  8. 8. Rand Heer (He‘s ―Heer‖ In Spirit)  Business Activities  CEO, Alight Planning (Planning software)  Co-Founder, Aspirity (Microsoft BI consulting)  Founder, FP&A Train (Essbase training)  Founder, Pillar Corporation  CFO for 2 public companies  Rockwell Int‘l, Business Unit CFO and Corporate  Publications  Author: The Planning Maturity Curve: Where Are You? Where Do You Want to Be?  Author: How Agile is Your Planning: Find out by Measuring the ROI of Your Planning Software  Coauthor: “Business Intelligence: Making Better Decisions Faster”. Published by Microsoft Press.  EducationAGILE  MBA degree Harvard Business School
  9. 9. Ben Lamorte (He‘s a Talker)  Business Activities  VP Marketing, Alight Planning  VP Business Development, Alight Planning  Principal, Decision Consulting (Adobe, Kaiser)  Manager, Business Intelligence,  Management Consultant, APM/CSC Healthcare  Editor of “The Agile Planner” Blog  Yes! Planning can be a Positive Experience  Why Financial Reporting Software Delivers No Value?  The Value of Agile Planning Over Time  Driver Based Planning: How is it Defined?  Education  MS Management Science & Engineering, Stanford University  BS Mechanical Engineering, UC DavisAGILE
  10. 10. Agenda The Planning Maturity Curve  Level One: Seat of the Pants  Level Two: Budgeting  Level Three: Reporting  Level Four: Forecasting  Level Five: Agile Planning Case Study in Agile Planning: Pittsburgh Mercy 5-Minute Break 4 Steps to Agile Planning  Out of Excel  Level of Detail  Driver-Based Planning  Integrating Actuals  Scenario Analysis Agile Assessment + Free ASMI Event Winner? CocktailsAGILE
  11. 11. Stuff for After this Presentation -- Slides Coming inEmail and posted to SlideShare Follow up with Alight   Telephone: (415) 456-8528  Join us! The Agile Planner Blog  Webinar Resources  Transforming Planning at Pittsburgh Mercy   Application Requirements for Rolling Forecasts  FOCUS Podcast Featuring Sid Ghatak & Ben Lamorte  mangement-software-failure-4-t/  6% is not enough! The Case for Driver-Based Planning in 2012 with Rob Kugel, Ventana Research and John Miller, Arkonas moderated by Ben LamorteAGILE
  12. 12. Capability Maturity Model for FP&A Seat of Pants Budgeting Reporting Forecasting Agile PlanningGoals Why Do It? EffectivenessKey Process Areas The Capability Maturity Model Who Drives Carnegie Mellon University Who Participates First described by Watts Humphrey Frequency Cycle Time  Capability Maturity Model applied to financialFeatures planning and analysis. Data Type Data Entry Level of DetailPractices Modeling Data Integration Iteration Tools PresentationAGILE
  13. 13. Business Value from Planning Insights Actionable Financially- Understanding things Knowledge Sound Decisions we didn‘t see before Understanding and Scenario analysis gives us acting upon the financial impact of choices operational driversAGILE
  14. 14. KEY POINT: TYPE 1 & TYPE 2 Benefits Effort Type 2: Introduce New Forecasting Processes to Add Value Reporting Budgeting Type 1: Streamline Existing Processes Reduce Effort Business ValueAGILE
  15. 15. Type 1 Benefits of Planning System Finance  No more consolidation errors; formulas don‘t break  Slice and dice the data with dimensions versus pivot tables  Automate data integration—e.g. actuals  Automate security/process Line Managers  Add line item detail  Document assumptions C-Level  CFO Audit  Automated ReportingAGILE
  16. 16. Type 2 Benefits of Planning Systems Insights (I)  The numbers help us understand things we didn‘t see before Actionable Knowledge (A)  The numbers to tell us what to do, or more importantly, what our choices are Decisions (D)  Having financially backed up choices sets up decision makingAGILE
  17. 17. What “They Say” All Planning Software ClaimsEffort Every Vendor Says They Do Budgeting & Reporting Reporting Every Vendor Claims: • Saves Time • Adds Business Value BudgetingAGILE Business Value
  18. 18. Question! For those who SUCCESSFULLY replaced spreadsheets with a financial reporting solution, what best describes your success: 1. Saves time BUT does not add Business Value 2. Saves time AND adds Business Value 3. Adds Business Value BUT does not save timeAGILE
  19. 19. ―Actual‖ Value of Budgeting & Reporting Typical Budgeting & Planning SoftwareEffort ―What FP&A Customer Says‖ about Impact of Dedicated Budgeting & Reporting Tool: Reporting • Saves Time • BUT DOES NOT ADD Business Value Budgeting Just Doing Budgeting is Not EnoughAGILE Business Value
  20. 20. The Big ROI – Agile PlanningEffort THE BIG ROI COMES FROM ADDED BUSINESS VALUE Forecasting Reporting Agile PlanningTM Budgeting Real-Time Scenario Comparison Budgeting Forecasting & Reporting Adds Real ValueAGILE Business Value
  21. 21. Planning Maturity—Seat-of-Pants The Happy CavemanAGILE
  22. 22. Planning Maturity—Budgeting The Happy AccountantAGILE
  23. 23. Planning Maturity—Reporting The Reluctant ManagersAGILE
  24. 24. Planning Maturity—Forecasting The Grumpy CFOAGILE
  25. 25. Where Are You on the Curve?AGILE
  26. 26. Planning Maturity—Agile Planning The Happy TeamAGILE
  27. 27. The Need for Real Time The Excel PowerPoint CycleAGILE
  28. 28. Let‘s Hear from You!Turn to your neighbor for the 3-minute drillIs your management prioritizing Type 1 or 2 Improvements in budgeting & forecasting? Type 1: Do what we‘re already doing, but do it more efficiently Type 2: Introduce new planning processes that enable better business decisions throughout the year Please report back a Type 2 Benefit that is important.AGILE
  29. 29. Examples of Type 2 Benefits Specialized Functionality  Roll the Forecast  BS/Cash Planning  Integrate Short/Long Range Operations Integration  Integrate Drivers  Volume/Rate Causal Analysis  Capture/Calculate KPIs Profitability Analysis  Complex Allocations  Analyze Customer Profitability  Analyze Product Profitability Decision Support  Interactive Dashboards AND Real-Time Planning  Scenario Analysis On-the-Fly  Strategy AnalysisAGILE
  30. 30. Planning Maturity—Agile Planning Planning Maturity Curve (PMC)Effort Forecasting Implement driver-based planning Integrate (don‟t just import) actuals Reporting Implement scenario analysis Forecasting/Agile Planning Move out of Excel Reduce level of detail Budgeting Seat of PantsAGILE Business Value
  31. 31. Case Study: Pittsburgh Mercy Ray Wolfe, CFO (now CEO)  Business Activities  Chief Financial Officer, Pittsburgh Mercy Health System 2006-present  Director of Fiscal and Information Systems– Mercy Behavioral Health 1996-2006  Chief Fiscal Officer, Summit Center for Human Development, 1988-1996  Awards: Ventana Leadership 2010  Education  Juris Doctorate, West Virginia University 1977  BA, Marshall University, 1974AGILE
  32. 32. Case Study: Pittsburgh Mercy Community Mental Health and Health Care Related  Mental Health, Mental Retardation, Drug/Alcohol, Homeless  Prevention Services and a Private Foundation  Serving Southwestern Pennsylvania Business Metrics Pittsburgh Mercy Health System has  3 subsidiary corporations  60 community locations  27 major programs product lines  260 revenue/cost center  1,700 employees; 106 Managers & Supervisors  Funded through traditional insurance billing, government grants and capitation contracts, Private FoundationsAGILE
  33. 33. Case Study: Pittsburgh Mercy Demographic Problems  Managers with only clinical backgrounds/ no business skills  60 sites yielded communication barriers and no common language Excel based —  Overload mode of worksheets with link and formula errors  Too much time to maintain and no certainty of integrity  No way to import and compare actual data to the budget design Budgeting became a ritual without meaning  Budgeting full-year totals with no seasonality  Tops down budgets w/o manager buy in  No P&L visibility by critical factors  No operational integrationAGILE
  34. 34. Agile Planning Case Study: Pittsburgh Mercy Organization of Forecast Groups and Processes  Group managers by functional areas—e.g.  Community Treatment Teams  Outpatient Clinics  Child Services  15 Groups each meet once a quarter  3 to 12 managers per group  4 members from accounting/finance  Real time process elements  Alight Planning displayed on Overhead Projector with Smart Board  CFO is facilitator; Alight Admin on the mouse and keyboard  Review/ make changes in real time  Everyone sees everything!AGILE
  35. 35. Level of Detail (from 10k to 3k line items) Technical Issues  What level of detail? Actuals and plan (STARTED AT „DEFAULT LOW LEVEL” Moved to:AGILE
  36. 36. Using Actuals ―Rates‖ to Drive Plan ―Rates‖AGILE
  37. 37. Case Study: Pittsburgh Mercy Progress to Date  Financial Results  $600K annual savings in revenue increases and cost cuts  Process Results  No budgeting  Global updates twice a year – detailed updates quarterly  Forecast accuracy to 2%  Manager commitments based on demonstrated best practices  Understanding the business as an operating entity  Reaction to issues on a two year horizon, e.g. present cut plan  Model Status  Now on third model iteration built from scratchAGILE
  38. 38. Advantage from responsiveness and adaptability rather than scale ―It is not the strongest of the species that survive, nor the most intelligent, but the one most responsive to change.‖AGILE Source: Commonly misattributed to Darwin, this quote was actually written/said by Clarence Darrow
  39. 39. Guidelines for Agile PlanningTM1. Move Out of Excel  Deal with structure issues  Deal with modeling issues2. Reduce Level of Detail  Plan the way managers think; not the Happy Accountant  Reduce detail to better integrate strategy3. Implement Driver-Based Planning  Reduce direct input data volumes  Increase ‗modeled elements‘—operational/driver based planning4. Integrate (Don‘t Just Import) Actuals  ―Rolling over‖ actuals in plan files—apples to apples  Using actuals to understand trends—focus on rates5. Implement Scenario Analysis  You can‘t predict the future, but you can construct scenarios  You‘re looking for easy maintenance and comparisons at all levelsAGILE
  40. 40. 1. Out of Excel  Structure Issues  Bound by templates: can‘t add line items on-the-fly  Rollup structures with dimensions are difficult to create and maintain  No multi-user security/process controls  Importing (rekeying) actuals is error prone/cumbersome Structure problems Save As relate to budget templates where you need to build in structure and financial intelligence from scratch. Version A Version N…AGILE
  41. 41. 1. Out of Excel  Modeling Issues  Formula and structure errors—aka #Refs  Dependency on key individuals—Lone Ranger Syndrome  Line manager spreadsheet skills are limited; untrained/dangerous. Modeling problems: cell- based linking which discourages driver-based planning which is the source of most errors.AGILE
  42. 42. 1. Out of Excel  What to Look for in Planning Applications  You can build rollup structures with multiple dimensions/attributes  Application incorporates multi-user security and process controls  Users can create line items on-the-fly without breaking things A fundamental deliverable of a Planning Application is user security and process controls.AGILE
  43. 43. 1. Out of Excel  What to Look for in Planning Applications  You can build rollup structures with multiple dimensions/attributes  Application incorporates multi-user security and process controls  Users can create line items on-the-fly without breaking things  Importing capabilities—aka ETL (Extract, Transform & Load)  Object-based linking with audit trails Object-based linking is critical for implementing driver-based planning.AGILE
  44. 44. 2. Reduce Level of Detail  Plan at the Right Level  Lowest level natural class accounts create too much detail  Let managers plan the way they think  Set the stage for driver-based planning It‘s the data that‘s the killer 7 T&E accounts * 100 cost centers * 12 months = 8,400AGILE
  45. 45. 2. Reduce Level of Detail  Guidelines for ―Right Level‖  Plan/report at a higher level—especially for natural accounts; or  Set up a dual system: traditional budgeting plus forecast at higher level.  Do the math for various alternatives; test imports for a ‗visual picture‘.  Go step-by-step: not everything need be done all at once.  The planning application must have line item detail Example of an account structure at a higher level with line items created by managers.AGILE
  46. 46. 2. Reduce Level of Detail  Benefits of Reducing Level of Detail  Better operational connection for line managers  Reduces overall data volumes; better visibility  Set the stage for driver-based planning Reducing level of detail along with moving out of spreadsheets reduces Effort and enhances Business Value.AGILE
  47. 47. 3. Driver-Based PlanningAGILE
  48. 48. 3. Driver-Based Planning Software Conversion # Services Hours Per Billable Bill Rate Billable Licenses rate Customers Customer Services Services Sold Revenues Hours Staff Utilization RatePredictive logic Services Hours Services Staffingdiagram for a software Hours Per Staffing Heads Month& services business Services Expenses  SalariesIt‟s all about Activities  PR taxes/ benefits  Supplies  Travel& Rates  Recruitment Training  Etc. Services ProfitabilityAGILE
  49. 49. 3. Driver-Based Planning  Benefits of Driver-Based Planning?  Tight turn-around for forecasting has a chance  Enforces focus on important operational drivers  Visibility into the numbers—allows meaningful causal analysis of variances  Sets up ―real time planning‖ for scenario analysis Driver-based planning delivers a significant increase in Business ValueAGILE
  50. 50. 4. Integrate Actuals  Integration Issues  Data spread across multiple sources  Actuals and Plan at different levels  No underlying activity drivers  Actual and plan structures out of syncAGILE
  51. 51. 4. Integrate Actuals  Import Actuals  Metadata and data imports based on chart of accounts structures  Monthly updates from the general ledger  Automated with ―connectors‖ or semi-automated with ETL tools  Integrate Actuals  Any source—GL,HR, CRM, RDBMS, OLAP  Any data type—text, number, currency, percentage  Any level—line item, natural accounts, cost center, etc.  Any modeling—simple of complex linking, back calculate ratesAGILE
  52. 52. 5. Implement Scenario Analysis  Deliverables  Insights: What‘s Going On with the Numbers  Actionable Knowledge: What Are Our Choices Between Things To Do  Decisions: ―OK gang, here‘s what we‘re going to do!‖ About the Future “Trying to predict the future is like driving down a country road at night with no lights while looking out the back window.” Peter Drucker “The future ain’t what it used to be…” Yogi BerraAGILE
  53. 53. 5. Implement Scenario Analysis  Types of Scenario Analysis  Manage Resource Allocations: Adjust Short Term ―Who Gets What‖  Strategic Planning: Extend Time Frames; Same Model As Short TermAGILE
  54. 54. 5. Implement Scenario Analysis  Implementation Guidelines  Easy to Create: On-the-Fly; No IT; Selectively Include Line Managers  Easy to Maintain: Change Data and Structure in Near Real Time  Real Time Feedback: The Planning Tool is the Presentation Tool  Scenario Drill Down: Comparison & Analysis at All LevelsAGILE
  55. 55. Planning Maturity—Full MatrixAGILE
  56. 56. Agile Planning: How to do it 5-Minute OverviewAGILE
  57. 57. The 4 Steps to Agile PlanningTM 4. Implement Scenario Analysis 2. Implement Driver-Based Planning 3. Integrate (Don‘t Just Import) Actuals 1. Reduce Level of DetailAGILE
  58. 58. Agile Planning in the Cloud WEB FORMS? Planning Objective Private Cloud Public Cloud NO YES Annual Budget Agile PlanningAGILE Source: The Agile Planner Blog
  59. 59. Finance on ―Agile Planning over the Web‖ “I have used SaaS [Requires Web Forms] planning programs - and dislike them for a few reasons: 1. Latency 2. They can be ‘squirrely’- in terms of saving/not losing entered data (notably copied and pasted) 3. File access without having to be connected” -Stu Abrams, CFO/Controller, Magnet Systems (Former User of Cloud-Based Planning App) Source:
  60. 60. Follow Up with Alight Planning Follow up with Alight   Telephone: (415) 456-8528  Join us! The Agile Planner Blog  Webinar Resources  Transforming Planning at Pittsburgh Mercy   Application Requirements for Rolling Forecasts  FOCUS Podcast Featuring Sid Ghatak & Ben Lamorte  mangement-software-failure-4-t/  6% is not enough! The Case for Driver-Based Planning in 2012 with Rob Kugel, Ventana Research and John Miller, Arkonas moderated by Ben LamorteAGILE
  61. 61. Why 1 in 3 Budgeting Software Solutions Fail, What to do about it! A 5-Minute OverviewAGILE
  62. 62. Worst Practice #1: Software on the Shelf  Situation: Management thinks buying software licenses for everyone will somehow get everyone more involved and create a culture of collaborative budgeting.  Problem: Buttonwood Group Survey examined 100 companies who deployed budgeting software to replace spreadsheets:  44% of companies reported complete failure to get anybody outside of Finance to actually log into the system in the past 12 months.  How to Avoid: Start with a ―Minimal Configuration‖ ADD Non-Finance USERS LATER! NOTE: Get a analysis of % users of ALIGHT who actually use itAGILE
  63. 63. #1 Software on the Shelf Source: Planning Software Usability SurveyAGILE By Buttonwood Group
  64. 64. Worst Practice #2: Go over your budget!  Problem (Quote below from real customer interview!)  “Our software will be just $2,000. We forgot to tell you it costs $10,000 for consulting help to build your model – oh yeah, it‘s really easy to use. Of course, that‘s just to get you going, it could take $18,000 for it to be fully deployed.‖  How to Avoid (Send me an email with other ideas)  Build discounts into pricing if vendor goes over the price!  Example: ―Great! So, if we do in fact pay $10,000 upfront for the 50 hours, can we get a bill-rate of $100/Hr thereafter if additional consulting is requested? After all, it is unlikely we will need more than 50 hours.‖  THINK OF HOW TO DEAL WITH TOC and POSSiBLY INCOLVE DON BEFORE GETTING INTO THISAGILE
  65. 65. Worst Practice #3: Wrong Consultant  Problem  A month after you buy software, you find out you‘ve been assigned to a consultant whos built one model as practice and recently completed an MBA degree!  How to Avoid  Do not agree to purchase any software until you’ve at least met the consultant assigned to your project. If you don‘t click with your consultant, the project may be doomed from the start .AGILE