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The Planning Maturity Curve Where Are You?

Where Do You Want to Be?

Ben LamorteVP Marketing, Alight Planning

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Why Agile Planning?

3-Minute Overview

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The Value of Traditional Planning Over Time

Source: The Agile Planner Blog

TIME

VALUE

High ROI at the early stages of planning…

But ROI diminishes quickly over time.

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The Value of Agile PlanningTM Over Time

Source: The Agile Planner Blog

ROI remains high in the early stages of planning…

Long-term value from planning increases significantly

TIME

VALUE

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.

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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?

The Subtle Message

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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?

The Subtle Message

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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?

The Subtle Message

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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

Rand Heer (He’s “Heer” In Spirit)

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.

Education MBA degree Harvard Business School

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Business Activities VP Marketing, Alight Planning VP Business Development, Alight Planning Principal, Decision Consulting (Adobe, Kaiser) Manager, Business Intelligence, planetrx.com Management Consultant, APM/CSC Healthcare

Ben Lamorte (He’s a Talker)

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 Davis

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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? Cocktails

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Follow up with Alight BLamorte@AlightPlanning.com Telephone: (415) 456-8528 Join us! The Agile Planner Blog

Blog.alightplanning.com

Webinar Resources Transforming Planning at Pittsburgh Mercy

www.Alightplanning.com/Webinars/PM/Video.html

Application Requirements for Rolling Forecasts www.AlightPlanning.com/Workshop/Requirements-for-Rolling-Forecasts/Video.html

FOCUS Podcast Featuring Sid Ghatak & Ben Lamorte http://www.focus.com/roundtables/avoiding-business-performance-man

gement-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 Lamorte

Stuff for After this Presentation -- Slides Coming in Email and posted to SlideShare

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GoalsWhy Do It? Effectiveness

Key Process Areas Who Drives Who Participates FrequencyCycle Time

FeaturesData Type Data EntryLevel of Detail

PracticesModelingData IntegrationIteration ToolsPresentation

The Capability Maturity ModelCarnegie Mellon University

First described by Watts Humphrey

Capability Maturity Model applied to financial planning and analysis.

Budgeting Forecasting Agile PlanningSeat of Pants

Capability Maturity Model for FP&A

Reporting

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Business Value from Planning

Insights Understanding things we didn’t see before

Actionable KnowledgeUnderstanding and

acting upon operational drivers

Financially-Sound DecisionsScenario analysis gives us

the financial impact of choices

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KEY POINT: TYPE 1 & TYPE 2 Benefits

Business Value

Effort

Budgeting Type 1: Streamline Existing ProcessesReduce Effort

Type 2: Introduce New Processes to Add Value

Reporting

Forecasting

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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 Reporting

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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 making

Type 2 Benefits of Planning Systems

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What “They Say”

All Planning Software Claims

Budgeting

Reporting

Effort

Business Value

Every Vendor Says They Do Budgeting & Reporting

Every Vendor Claims:• Saves Time• Adds Business Value

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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 time

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Typical Budgeting & Planning Software

Budgeting

Reporting

Effort

Business Value

“Actual” Value of Budgeting & Reporting

“What FP&A Customer Says” about Impact of DedicatedBudgeting & Reporting Tool:• Saves Time• BUT DOES NOT ADD Business Value

Just Doing Budgetingis Not Enough

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The Big ROI – Agile Planning

Budgeting

Forecasting

Reporting

Effort

Business Value

Agile PlanningTM

THE BIG ROI COMES FROM ADDED BUSINESS VALUE

Budgeting& Reporting

ForecastingAdds Real Value

Real-Time Scenario Comparison

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Planning Maturity—Seat-of-Pants

The Happy Caveman

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Planning Maturity—Budgeting

The Happy Accountant

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Planning Maturity—Reporting

The Reluctant Managers

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Planning Maturity—Forecasting

The Grumpy CFO

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Where Are You on the Curve?

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Planning Maturity—Agile Planning

The Happy Team

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The Excel PowerPoint Cycle

The Need for Real Time

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Let’s Hear from You!

Turn to your neighbor for the 3-minute drill

Is 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.

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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 Analysis

Examples of Type 2 Benefits

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Planning Maturity—Agile Planning

Planning Maturity Curve (PMC)

Budgeting

Forecasting

Seat of Pants

Reporting

Effort

Business Value

Move out of ExcelReduce level of detail

Forecasting/Agile Planning

Implement driver-based planningIntegrate (don’t just import) actualsImplement scenario analysis

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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, 1974

Case Study: Pittsburgh Mercy

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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 MetricsPittsburgh 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 Foundations

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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 integration

Case Study: Pittsburgh Mercy

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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 Planning Case Study: Pittsburgh Mercy

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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:

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Using Actuals “Rates” to Drive Plan “Rates”

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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 scratch

Case Study: Pittsburgh Mercy

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“It is not the strongest of the species that

survive, nor the most intelligent, but the one most responsive to

change.”

Advantage from responsiveness and adaptability rather than scale

Source: Commonly misattributed to Darwin, this quote was actually written/said by Clarence Darrow

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1. Move Out of Excel Deal with structure issues Deal with modeling issues

2. Reduce Level of Detail Plan the way managers think; not the Happy Accountant Reduce detail to better integrate strategy

3. Implement Driver-Based Planning Reduce direct input data volumes Increase ‘modeled elements’—operational/driver based planning

4. Integrate (Don’t Just Import) Actuals “Rolling over” actuals in plan files—apples to apples Using actuals to understand trends—focus on rates

5. Implement Scenario Analysis You can’t predict the future, but you can construct scenarios You’re looking for easy maintenance and comparisons at all levels

Guidelines for Agile PlanningTM

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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 relate to budget templates where you need to build in structure and financial intelligence from scratch.

Version A Version N…

Save As

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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.

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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.

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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.

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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 killer7 T&E accounts *100 cost centers *12 months = 8,400

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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.

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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.

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3. Driver-Based Planning

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Software Licenses

Sold

Conversion rate

# Services Customers

Services Staffing Hours

Services Expenses Salaries PR taxes/ benefits Supplies Travel RecruitmentTraining Etc.

Predictive logic diagram for a software & services business

It’s all about Activities & Rates

Hours Per Customer

Billable Services

Hours

Staff Utilization

Rate

Bill Rate Billable Services

Revenues

Hours Per

Month

Services Staffing Heads

Services Profitability

3. Driver-Based Planning

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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 Value

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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 sync

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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 rates

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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 Berra

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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 Term

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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 Levels

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Planning Maturity—Full Matrix

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Agile Planning: How to do it

5-Minute Overview

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The 4 Steps to Agile PlanningTM

1. Reduce Level of Detail

2. Implement Driver-Based Planning

3. Integrate (Don’t Just Import) Actuals

4. Implement Scenario Analysis

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Agile Planning in the Cloud

Source: The Agile Planner Blog

WEB FORMS?P

lann

ing

Obj

ectiv

e Public CloudYES

Private CloudNO

AnnualBudget

AgilePlanning

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Source:http://www.capterra.com/budgeting-software/reviews/52811/Alight%20Planning%20Enterprise/Alight

Finance on “Agile Planning over the Web”

“I have used SaaS [Requires Web Forms] planning programs - and dislike them for a few reasons:

1. Latency2. 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)

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Follow up with Alight BLamorte@AlightPlanning.com Telephone: (415) 456-8528 Join us! The Agile Planner Blog

Blog.alightplanning.com

Webinar Resources Transforming Planning at Pittsburgh Mercy

www.Alightplanning.com/Webinars/PM/Video.html

Application Requirements for Rolling Forecasts www.AlightPlanning.com/Workshop/Requirements-for-Rolling-Forecasts/Video.html

FOCUS Podcast Featuring Sid Ghatak & Ben Lamorte http://www.focus.com/roundtables/avoiding-business-performance-man

gement-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 Lamorte

Follow Up with Alight Planning

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Why 1 in 3 Budgeting Software Solutions Fail, What to do about it!

A 5-Minute Overview

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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 it

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#1 Software on the Shelf

Source: Planning Software Usability SurveyBy Buttonwood Group

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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 THIS

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Worst Practice #3: Wrong Consultant

Problem A month after you buy software, you find out you’ve been assigned to a

consultant who's 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 .