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