Aligning Strategy and Execution with Enterprise

Performance Management (EPM)

Today’s Speakers

Jim Perry

Director, EPM Enablement, InforJim is a Director in Infor’s EPM and BI practice. With a background in strategy and corporate finance, Jim has lectured

extensively on best practices in FP&A and BI. Jim has an MBA in Finance from Rutgers Business School, a certificate in

Data Science from MIT Sloan School of Management, and is a registered Six-Sigma Black Belt.

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Today’s Speakers

Lee Johnston

VP, Finance and Corporate Strategy, LT Apparel GroupLee is responsible for providing insight that enables timely, mission-focused decision-making in addition to ensuring

investments and enterprise architecture are aligned with LT’s strategic goals. Lee is passionate about communicating

data and eliminating inefficient business processes via technology.

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Infor EPM Practice Overview

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No single

source of truth

Too much data

Too little insights

Strategy

disconnected

from results

Lack of visibility

into performance

and risk

Business challenges we see …

4

Single

Integrated

data platform

Business

Intelligence

everywhere

Combined

planning

and

analytics

Focused

automated

insights

What if you could have …

Strategy alignment and execution

framework

Organizational Strategy Alignment

Organizational

strategy is intended

to align individuals,

teams, and business

units to achieve

corporate goals.

Corporate Strategy

Individuals

TeamsBusiness

Units

Organizational Strategy AlignmentChallenge:

• When it comes to strategic execution, organizations can run into trouble, especially during times of significant change.

• The reasons for the strategy -execution gap vary by organization, but typically include the following:

– Insufficient executive sponsorship

– Poor communication of strategy to employees

– Unclear delegation of duties

– Lack of alignment between corporate strategy and organizational incentive programs

Solution:

• Alignment is needed to embed a framework for strategic execution deep within the operational fabric of the organization.

Two in three CFOs say that

their companies do not yet

have the capabilities for agile

decision making, scenario

planning, or decentralized

decision making that are

required to remain competitive

in the coming years.”

McKinsey & Company

December 2016

Organizational strategy alignment

According to an April 2016 report by pwc, more than half of all

organizations studied are not ready to execute new business strategies in

response to rapid, transformational change.

Organizational Strategy Alignment

1. Discuss how to engender a metrics-driven organization

2. Explore the value of deploying an Enterprise Performance Management (EPM) solution to bridge the gap between strategy and execution in business planning and consolidation; profitability management; and governance, risk, and compliance (GRC)

Execution framework

Execution framework

• In order to create a link between

strategies, budget, forecasts,

operational plans, and actions,

McKinsey & Company

recommends that firms utilize

best-in-breed software

solutions to systematize best

practices across the entire

enterprise.

Organizational strategy alignment

• EPM is broadly used to

reference a system that

controls a set of integrated

financial planning and

performance management

processes: EPM

Multi-year Financial

Forecasting

Capital Planning

Detailed Budgeting

KPI Definition

Scorecards

Financial Reporting

Managerial Reporting

Profitability Management

Execution Framework• Planning and measurement activities are often supported by spreadsheets

and proprietary applications based on incomplete and fragmented data sets.

• This requires Finance to manually manipulate data, leading to data integrity

issues and less time available for more value-added analysis that can

enable better decision support.

• As the business logic and drivers for these plans gets more complex,

existing desktop applications (and even many new EPM technologies)

simply do not have the horsepower and in-memory system architecture

required to support the business.

Execution FrameworkToday:

Focus on reporting

• Insights are hard to uncover and locked underneath an abundance of disparate reports

• Use of Microsoft Excel which has limited analytical and collaboration capability

• Focus on descriptive analytics using a hindsight lens (rear view mirror)

Tomorrow:

Focus on analytics

• Generate value out of existing databases where insights can be buried amongst a veritable mountain of data

• Liberate the data to enhance decision support and drive profitable outcomes

• Focus on the future using predictive analytics and “what if” scenario analysis as you move forward

• Faster access to insights, quicker response to market shifts, and more innovation

Defining an overall corporate strategy

Defining an Overall Corporate

StrategyMany organizations use Microsoft Excel to define strategy and develop KPIs to measure success.

• What Excel won’t give you:– Support for collaboration among stakeholders who need to participate in ongoing

discussion, work together on financial documents, and gain insight for actionable decision support

– Scalability or efficiency necessary to be sustainable to perform the complex analyses required for effective execution

• While Excel is useful for a quick ad hoc analysis, a secure and scalable EPM platform is preferable to address the evolving business modeling, data insights, and scenario planning now required by strategic Finance.

Integrated Enterprise Performance

Management (EPM) Process

Integrated EPM Process• Having the right data insights is critical for leaders to

drive business growth, navigate risk, and optimize value creation in complex and uncertain environments.

• Finance organizations that support these needs are embracing financial performance analytics.

• The use of data, structure analysis, and systematic reasoning to make decisions that drive performance is a pivotal capability, powering EPM processes including budgeting, forecasting, and action planning.

Integrated EPM Process

The ability to anticipate and react quickly to changes in

the market can yield rewards in terms of new business,

higher customer satisfaction, and greater customer

retention.

Integrated EPM Process

As a strategic partner to

the business, Finance is

now responsible for

providing meaningful,

actionable insights to

facilitate informed

decision support.

Modern CFO

Why is this happening?

Work to understand what actions are needed

Focus on what will happen

next?

Traditional CFO

What happened?

Review of static reports

Reactive analysis of

historical data

I. Define and Plan

Strategic planning

Plan:

Develop a multi-year plan (usually 3 to 5 years) to establish the organization’s strategic positioning and long-term goals

Challenges:

Inability to clearly articulate strategic goals

Poor understanding of key

drivers of business value

Internally focused objectives that

don’t align with the external

market or stakeholders’

expectations

Solution:

Focus on strategic alignment

utilizing driver-based planning

and forecasting

II. Execute and Operate

A. Business planning

Plan:

Develop key strategic initiatives by BU to demonstrate how to execute strategies and reach targets, including identifying gaps to execution

Challenges:

Failure to align BU plans to overall corporate strategy

Ignoring intangible assets such

as employee engagement and

brand value in the planning

process

Underplaying planning

significantly

Solution:

Link business unit objectives closely to corporate strategy and targets

Balance planned investments

between tangible and intangible

assets

Achieve agreement on all key

initiatives at the BU level

B. Forecasting• This encompasses the prediction of the expected performance of the

organization over a predetermined time horizon and is performed

periodically to reflect changes in the internal and external

environment.

• Organizations may undertake forecasting without a clear purpose in

mind and fail to differentiate it from target setting and resource

allocation.

• Many Finance professionals focus on lagging gaps between forecasts

and actual performance, depriving themselves of the much-needed

lead time to pivot to changes in the business.

C. Driver-based Approach to

Execution

Financials

• Reported actuals are outcomes and are by nature lagging indicators on past performance.

Key Activities/ Drivers

• The activities or drivers that generate financial outcomes must be identified in order to understand and model the enterprise. They are, in modeling terms, the independent or predictor variables.

Plan Execution

• There needs to be a focus on the main causal factors that should be highlighted and leveraged for financial planning.

C. Driver-based Approach to

ExecutionBenefits of incorporating operational drivers:

1. Enable organizations to design financial models that focus on the leading versus lagging indicators. Note: Too often budget systems are constructed by keying in financial outcomes with no real insight into how those outcomes will be achieved.

2. Provide much greater insight into what’s actually going on in the organization. Note: All BvA reports can and should include not only financial variances, but operational variances as well.

3. Enable planners to evaluate alternative scenarios. Note: No one knows the future, but a well-constructed driver-based model enables planners to understand and model the sensitivity to key assumptions.

4. Increase the predictive accuracy of your forecasts and models. Note: Once drivers are collected and incorporated into the business logic of your budget or forecast, one can back-test and fine-tune the logic based on actual experience, improving the predictive quality of your planning model through time.

C. Driver-based Approach to Execution

• Driver-based and history-driven logic can help to seed the plan mathematically in alignment with corporate goals, greatly reducing the amount of input required by planners and ultimately helping to automate and shorten budgeting cycles.

• The nuances of driver-based planning models are especially difficult to manage using conventional desktop applications like Excel.

Strategy execution & corporate

goals alignment

Driver-based logic

History-driven logic

III. Analyze and Monitor

A. Data Aggregation

Plan:

Gather and present data in a report-based summary to support business objectives

Challenges:

Building consistency in data structures and centralizing data quality management

Local performance responsibilities mean that BUs and functions may develop their own master data, reporting and analytics capabilities

Risk of moving away from focusing on information that is linked to measuring overall enterprise strategy execution

Solution:

Under an EPM framework individuals involved in the setup and maintenance of master data elements are educated in the need for increased consistency in data structures and improved quality management

More consistent and broad-based data can ultimately be used to generate insights focused on internal measures and/or combined with third-party information, which can multiply the value of information exponentially

A. Data Aggregation

Plan:

Collect and organize information and present insights drawn from review

Challenges:

Key information may be made available in reports and dashboards, but regular performance review routines may not be established

Lack of structured agenda when reviewing information during meetings, derailing decision process

Key documentation to support decision making may not be available before the meeting, or may be too lengthy and/or detailed to be of real value

Solution:

Focus instead on performance

reviews which determine specific

actions to close gaps between

forecasts and committed targets

The reviews should then articulate

how strategies are executed. The

health of the business should be

tracked at all levels, with a focus on

trend analysis of actual performance

C. Action Planning

• The final element of Analyze and Monitor is action planning, the process of identifying specific activities intended to close the gaps between forecasts and targets.

• The action plan includes recommendations for reducing the gap to target, with the expected outcomes from decided upon actions added to the forecast for the remaining months of the year and beyond fiscal year-end.

D. Conclusion

• More is being asked of Finance professionals than ever before.

• The complexities and uncertainty of today’s global economy is

demanding that Finance be more agile and responsive to

organizational needs.

• As performance management frameworks become increasingly

more integrated across financial and operational sources, the

level of modeling sophistication required will continue to

increase.

EPM Best Practices at LT Apparel Group

1. Why not Excel?

2. Three keys to strategy alignment1. Integration and collaboration

2. Business intelligence

3. Transparency & agility

3. Successes, challenges and next steps

1. Why not Excel?

2. Three keys to strategy alignment1. Integration and collaboration

2. Business intelligence

3. Transparency & agility

3. Successes, challenges and next steps

Let’s Be Fair

Updating

Models With

Current Data

ERP GL AP

VLOOKUP() INDEX((MATCH))

SUMIF()

Workbook Maintenance

– or Lack Thereof

Formula and Link

Errors

Version Control

Frustration

1. Why not Excel?

2. Three keys to strategy alignment1. Integration and collaboration

2. Business intelligence

3. Transparency & agility

3. Successes, challenges and next steps

Integration

Collaboration

Enterprise

Performance

Management

1. Why not Excel?

2. Three keys to strategy alignment1. Integration and collaboration

2. Business intelligence

3. Transparency & agility

3. Successes, challenges and next steps

Leverage

Your Data &

Identify KPI’s

and KPD’s

Good News

or

Bad News?

1. Why not Excel?

2. Three keys to strategy alignment1. Integration and collaboration

2. Business intelligence

3. Transparency & agility

3. Successes, challenges and next steps

Budgets

Or

Promote a

Culture of

Transparency

Re-forecast

Often

Continuously

Improve

Project Far

Enough Into

the Future to

Allow for Action

Concept Consumer

1. Why not Excel?

2. Three keys to strategy alignment1. Integration and collaboration

2. Business intelligence

3. Transparency & agility

3. Successes, challenges and next steps

Single Source of Truth

for Financial Information

Inter-departmental

collaboration

Successes:

Reporting Time

Agility and Decision

Making

Successes:

Data Management

Culture Shift

Challenges:

Expand User-base

Balance Sheet, Cash

Flow Modeling

Next Steps:

Thank you for attending today