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Independent platforms bring "significant" rewards: CFO Research

September 2008

Editor's note: The following is excerpted from the Research Reports, Managing Performance Amid Complexity, prepared by CFO Research Services in collaboration with Cognos. In this excerpt, we examine the benefits to Finance in choosing an independent platform for performance management. Download the PDF

Finance executives overwhelmingly expect that their companies will call upon them to be more involved with performance management. The question, then, is whether they will have the tools and resources that will allow them to become performance management experts for their organizations.

Our survey found that, overall, respondents whose companies have invested in technology report wider use of performance data and greater satisfaction with that data.

System complexity affects data timeliness, quality

Finance managers, business managers, and C-suite executives are all able to use performance data more effectively when the right data is available when they need it.

However, automation by itself is not the "magic bullet" in performance management.

Some companies that rely on primarily manual processes still say they are satisfied with the data they have to work with, and some companies that have partially or even fully automated systems still see the need to improve their performance management capabilities.

Many of the problems that remain stem from complexity; finance executives tell us that complexity in their information systems and in business processes affects both the timeliness of performance data, and the quality and utility of that data.

The need for detailed metrics

Managers need high-quality, timely information to manage complex businesses and solve a diversity of business problems. They are looking for more detailed metrics that are tailored to their individual companies.

For example, in our survey a CFO in the health care industry says he is looking for better measurement of the sales pipeline and order forecasting; a VP of finance in the same industry says he needs to capture revenues per employee; and a third finance executive from a health care company says he is concerned about timeliness (planned vs. actual) for getting his company’s products to the marketplace.

Collecting, analyzing, and disseminating this kind of granular data, across business and product lines and across geographies, is a massive undertaking when it is being done manually.

Nearly one-third of the companies in our survey are still laboring to get the data they need through manual processes and Excel spreadsheets; more than half of the companies we surveyed have at least begun to automate, but more could still be done.

Looking for systems and solutions

It does not appear that the time or cost of implementing the technology is the main barrier in their efforts. Rather, finance executives tell us that organizational and management issues are the biggest obstacles.

As they see their own role expanding more and more into performance management, finance executives are looking for systems, solutions, and resources that will allow them to manage the complexity inherent in their own organizations.

The case for an independent performance management system

As the variability and pace of business increase, finance and business executives are under growing pressure to make better decisions faster.

It should be no surprise that 68 percent of finance executives are hearing the clarion call to become the performance management experts in their corporations.

This means defining and establishing tools, disciplines, and renewed processes to help finance and business managers identify performance gaps with enough lead time to assess alternatives quickly and then enable effective execution aligned with corporate objectives.

Some of the tools require the use of performance management technology.

Rewards can be "significant"

Rewards can be significant: C-level executives are 2.5 times more likely to use key performance indicators (KPIs) to make day-to-day decisions in companies that use highly automated performance management technology to develop, execute, and monitor business strategy compared with companies that are only partially automated or primarily manual.

Yet less than 15 percent of organizations see themselves as highly automated in their use of performance management technology.

Information technology itself, however, can be part of the challenge. According to The Hackett Group, average finance organizations operate 11 finance systems per billion dollars of revenue.

In most cases, these comprise multiple ledger systems and data marts that provide source data for performance measurement. Add to this list the multiple systems that are required to deliver operational performance information, and IT complexity can grow exponentially.

More than half (55 percent) of companies with manual performance management systems describe the complexity of underlying transaction systems as a major inhibitor of performance information timeliness.

Finance in a "unique" position

In the face of such pressures, finance is in a unique position to drive the adoption of an independent performance management system that sits on top of all heterogeneous data and application environments.

An independent performance solution helps finance better cope with IT complexity. Today, most organizations have operational and mission-critical data spread across disparate data and application environments, creating silos of information.

The danger of data silos

These silos let you view only slices of performance, but tend to obscure the entire picture – and its true value. As a result, Finance is less able to manage the business. An independent performance management system, not tied to any one ERP vendor, can gather data across all data sources.

A performance management solution attached to an application and data stack, over time, becomes another silo that needs to be bridged. Another benefit of an independent performance management system is the ability to adapt quickly to new and evolving business requirements and conditions – from new management processes to mergers and acquisitions.

An independent performance management system is flexible enough to help you automate and transform critical processes in response to business change.

A performance management solution that is tied to an application and data stack works best within the stack and its management process, but will, over time, struggle to support change as it occurs.

User satisfaction high

At companies that pursue a best-of-breed IT vendor strategy – one vendor for transaction systems and one for performance management solutions – approximately 90 percent of finance executives say they are satisfied or very satisfied with the amount, utility, and timeliness of performance information available to the finance function.

This level of satisfaction is 10 percentage points higher than for finance executives from companies employing a single vendor (for both transaction and PM systems), and 18 points higher than for those at companies with a patchwork of home-built and commercial systems.

Now is the time for finance to proceed with confidence and make the case for an independent performance management system.

Find Out More Cognos Performance 2008: Sign up now! Best-practice advice at the Cognos Innovation Center for Performance Management™ Lean how to automate your processes Virtual Cognos Finance Forum [On-demand]

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