Ben lamorte asmi san diego 9 21-11v2

© 2011 Alight Planning Slide 1

September 21

ASMI SummitThe Planning Maturity Curve: Where are you?

Where do you want to be?

Ben Lamorte, VP Marketing, Alight Planning


Rand Heer Business Activities

CEO, Alight Planning (Planning software)

Co-Founder, Aspirity (Microsoft BI consulting)

Founder, FP&A Train (Essbase training)

Founder, Pillar Corporation (Enterprise budgeting)

CFO for 2 public companies

Rockwell Int‘l, Biz Unit CFO and Corporate

Key Contributor

Publications

Coauthor: “Business Intelligence: Making Better Decisions Faster”

Author of 10 white papers on planning/reporting topics

Education

MBA degree Harvard Business School


Ben Lamorte Business Activities

Vice President, Marketing & Sales, Alight Planning

Principal, Decision Consulting (Adobe, Kaiser)

Manager, Business Intelligence, planetrx.com

Management Consultant, APM/CSC Healthcare

Today‘s Speaker

Publications

Author of 2 research papers, American Mathematics Society

Co-author of planning white papers

Editor of Alight Planning Blog

Education

Doctoral Candidate, Management Science, Stanford University

MS Engineering, Stanford University

BS, Engineering & Math, UC Davis


Fun Agenda

Part 0: Quick Simulation and Warm Up

1: Sensitivity Analysis for the Consulting Model

2: Do we hire more consultants?

Part 1: The Planning Maturity Curve

Part 2: Why 1/3 Software Fails and How to Avoid

Part 3: Fun Stuff Guidelines for Agile Planning

ROI of Budgeting Software: Vendor Vs User

RAFFLE: Submit business card to front row and write ―FREE ASMI PASS‖ or ―Free Assessment‖ on the back

2 WINNERS TODAY (Each Prize is approx $1,750 value)


Part 0: Quick Simulation

CASE 1: So, are those consultants spending too

much on travel? What is it that really drives profits

and what can we do about it?

CASE 2: Consulting Margins were supposed to be

40% but are down. Why? What do we do to bring

that back up?


Business Value from Planning

Insights

Understanding things we didn‘t see before

Actionable Knowledge

Understanding and acting upon operational drivers

Decisions

Planning scenarios gives us the financial impact of

choices

Having choices sets up decision making


The Planning Maturity Curve

Budgeting

Forecasting

Reporting

Effort

Business Value

Budgeting

& Reporting

Forecasting

Scenario Analysis

Agile Planning


Planning Maturity—Budgeting

The Happy Accountant


Planning Maturity—Reporting

The Reluctant Managers


Planning Maturity—Forecasting

The Grumpy CFO


#4: Introducing Agile Planning

Agile Planning Team


2-Minutes: Turn to Your Neighbor

Budgeting

Forecasting

Reporting

Effort

Business Value

Budgeting

& Reporting

Forecasting

Scenario Analysis

Agile Planning


The Excel PowerPoint Cycle

The Need for Real Time


CFO at Pittsburgh Mercy Health

Financial Results $600K+ in documented revenue increases and cost cuts from MET goals

Process Results

No budgeting

Forecast Accuracy within 2%

Manager commitments based on demonstrated best practices

Model Status

Now on third model iteration built from scratch

Agile Planning Example


Part 2: Why Budgeting Software Fails?

Research Brief:

www.focus.com/briefs/why-budgeting-software-fails-

and-what-do-about-it/

Podcast Featuring Sid Ghatak:

www.focus.com/roundtables/avoiding-business-

performance-mangement-software-failure-4-t/


#0 Software on the Shelf

Problem: The software company wants to sell as many seats as

possible. This is a recipe for buying TOO MANY SEATS!

Solution: Remind the vendor of the Buttonwood Group Survey that

examined 100 companies who deployed budgeting software to replace

spreadsheets:

The study examined what percent of non-finance employees who received

a license to use the budgeting/planning application actually logged into the

system in the past year.

44% of companies reported complete failure to get anybody outside of

Finance to actually log into the system in the past 12 months.

Looking across the board, on average 2/3 of all seats purchased for non-

finance managers go unused.


#0 Buying too many Seats!

Source: Planning Software Usability Survey By Buttonwood Group


#1 Going Over Budget:

Problem: 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

$12,000 for it to be fully deployed.

Solution: Ask for a ridiculously low bill-rate once the total project cost

hits a certain number. For example, if the vendor estimates you will

need 50 hours at $200/Hr which is $10,000. Then say: ―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.‖


#2: The Problematic Consultant

Problem: A month after you buy software, you find out you‘ve been

assigned to a consultant who turns out to be a 3rd party partner who's

built one model as practice and recently completed an MBA degree

Solution 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 is doomed, and in this case, you should either

1) ask for an alternate consultant

2) simply choose not to make the software purchase.

The bottom line here is that you are better off building your model in

Excel with a top-notch consultant's help than building a model in some

budgeting tool with a second-rate consultant


#3: Project Takes Too Long

Problem: ―They said it would take 4 weeks, but 6 months later, we‘re

still not done!‖ The software vendor has case studies featured on their

website that say ―I was up and running in just 4 weeks!‖ What actually

happened was the customer paid for 160 hours of consulting by the

time the project was considered complete. Since 160 hours divided by

40 hours per week amounts to 4 weeks, one way to break this down is

that "...it took 4 weeks."

Solution: Ask for a project timeline with key milestones defined prior

to making the purchase decision. Review this project timeline with

your boss and get a sign off and ensure there are no questions from

your management team prior to the software purchase.


Fun Stuff: 3 Steps to Positive Change

Step 1: Awareness

Where are you in the Planning Maturity Curve?

Rate your planning process across 4 planning activities

Step 2: Critique


Define what the improvement looks like and prioritize which

planning area to improve

Step 3: Realign

In Spreadsheets or leverage Dedicated Solution?

Source for 3 steps: Critical Reflection Process inspired by J. Habermas


ROI of ―Planning‖ Software

All Planning Software Claims

Budgeting

Reporting

Effort

Business Value

Every Vendor Says They Do Budgeting & Reporting

Every Vendor Claims:

• Saves Time

• Adds Business Value


Budgeting & Reporting Software

Budgeting

Reporting

Effort

Business Value

―Actual‖ ROI ―Budgeting & Reporting‖

―What FP&A Customer Says‖

about Impact of Dedicated

Budgeting & Reporting Tool:

• Saves Time But…

• No Added Business Value

Just Doing Budgeting

is Not Enough


THE BIG ROI – Agile Planning

Budgeting

Forecasting

Reporting

Effort

Business Value

Only Alight Does

Agile Planning

Alight Customers: ―Our overall planning process is a bit streamlined;

however, The Big ROI is Added Business Value”

Budgeting

& Reporting

In Alight

Forecasting

Adds Real Value

Only Alight

Does Scenarios this

effectively


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

Fun Stuff: Guidelines for Agile PlanningTM


Driver-Based Planning: URA


Object-Based Linking

• No more spreading

formulas to the right

• Much easier to audit

•Robust line items: No

more broken formulas

since impossible to

―hardcode‖ over

formulas)


Integrated Actuals: Back-Calc


Scenarios: Change multiple in 1 step


Scenarios: Compare Side by Side


So, what about tomorrow?

2-Minutes Talk to your Neighbor

Step 1: Awareness

Rate your planning process across the 4 planning activities

Budgeting:

Reporting:

Forecasting:

Agile Planning:


Will the Sun Come Out Tomorrow?

Step 2: Critique


Define what the improvement looks like and prioritize which

planning area to improve

Step 3: Realign

HOW ARE YOU GOING TO DO IT?


Best (and Worst) Practices in Budgeting and

Forecasting: The story of a successful CFO.

Arlin Hall, Chief Financial Officer at The Blood &

Tissue Center, will reflect on his real-world

experience moving out of spreadsheets into Prophix

and MS Forecaster which did not work out

Arlin attended an ASMI Budgeting and Forecasting

Conference in San Diego in 2010, and ended up

installing Alight Planning. ―Finally, I‘m a happy

camper after years of searching for the right

planning solution.‖

Oct 27th ASMI Webinar with CFO


Follow up with Alight [email protected]

Telephone: (415) 456-8528

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 Expert Podcast:

Google ―How to Avoid BPM Software Failure‖

Follow Up with Alight


APPENDIX


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


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.


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.


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.



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 = 8,400



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.



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.


3. Driver-Based Planning

What Is Driver-Based Planning? A series of sub-models for revenues and expenses based on drivers

Drivers are typically units of things: unit sales, customers, transactions

The fundamental structure is: Units * Rate = Amount

The spending focus is on big ticket items and large departments

Example of a driver

model that calculates

amount of explosives for

a gold mining operation.


Software

Licenses

Sold

Conversion

rate

# Services

Customers

Predictive logic

diagram for a

software/services

business

It’s about

Activities & Rates

Hours Per

Customer

Billable

Services

Hours

Bill Rate Billable

Services

Revenues



Software

Licenses

Sold

Conversion

rate

# Services

Customers

Services

Staffing

Hours

Services Expenses

Salaries

PR taxes/ benefits

Supplies

Travel

Recruitment

Training

Etc.

Predictive logic

diagram for a

software/services

business

It’s 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




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


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, currency

Any level—line item, natural accounts, cost center, etc.

Any modeling—simple of complex linking, back calculate rates



Integration Issues Data spread across multiple sources

Actuals and Plan at different levels

No underlying activity drivers

Actual and plan structures out of sync



Integration Issues Data spread across multiple sources

Actuals and Plan at different levels

No underlying activity drivers

Actual and plan structures out of sync



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 acountry 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



Types of Scenario Analysis Manage Resource Allocations: Adjust Short Term ―Who Gets What‖

Strategic Planning: Extend Time Frames; Same Model As Short Term



Types of Scenario Analysis Manage Resource Allocations: Adjust Short Term ―Who Gets What‖

Strategic Planning: Extend Time Frames; Same Model As Short Term

Black Swan Planning: Understand Improbable Events [Nassim Taleb]



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

Scenario Drill Down: Comparison & Analysis at All Levels

Real Time Feedback: The Planning Tool is the Presentation Tool


Spreadsheet Issues

Spreadsheets Don‘t Do the Job Not multi-user: security and process control issues

Not a database: consolidation and reporting issues

Not multi-dimensional: reporting and analysis issues

Cell based modeling: limitations on driver-based planning

Save As for versions and scenarios: just not viable!

Scenario A Scenario B Scenario C


Ray Wolfe 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

St. Francis Medical Center, Patient Account

Manager, 1986-1988

Awards: Ventana Leadership 2010

Education

Juris Doctorate, West Virginia University 1977

BA, Marshall University, 1974

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

260 revenue/cost center

1,700 employees; 106 Managers & Supervisors

Funded through traditional insurance billing, government grants and

capitation contracts, Private Foundations


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



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!



Level of Detail

Technical Issues

What level of detail? Actuals and plan

Transportation example


Using Actuals to Drive Plan

Technical Issues

Visibility into Units/Rates/Amounts

Revenue and Allowance Rate Example


Change is not rapid, business stable

The Happy Caveman


Agile Planning Simulation

Background Wombat, Ltd: mid market ERP for verticals: healthcare, manufacturing,

technology

Bongo is main competitor in manufacturing

Event driver: Bongo cuts prices 30% in manufacturing

The Players Ben, Sales Guy

Rand, Finance Guy

Sid, Services Guy

Phyllis, CEO (not present)

What You‘ll See Real Time Collaboration

Driver-Based Financial Model

Scenario Planning


The 4 Planning Activities






Where Are You on the Curve?

Date post:	15-Jul-2015
Category:	Technology
Upload:	ben-lamorte
View:	440 times
Download:	0 times

Ben lamorte asmi san diego 9 21-11v2

Technology