Two Views of Truth

Management Consulting Podcast Series

Hello, Im Dick Syatt and Im your host for the Accenture Management Consulting podcast series. Im talking today with Mike Tsapralis and Eric Noren, both executives in Accentures Finance and Performance Management practice. Eric and Mike are here today to talk about the topic of Enterprise Performance Management. Eric and Mike, welcome to the podcast. Enterprise Performance Management, or EPM, appears to be once again attracting a lot of attention among the C-Suite.

And again, an effective enterprise performance management capability, enables the organization to focus and align the key drivers of its strategy, its plans and its forecasts. Enterprises really need to have a clear understanding of the relationships between the drivers and the companys financial performance, and our research indicates that they really dont at this point. Additionally, they need to evaluate their performance management capabilities across the organization, and by this I mean it could be across regions, across units, across product segments, that type of functional view perhaps. And companies need to also identify key gaps against what is common practice, what is best practice, and what we are seeing is an emergence in the marketplace is around a comparison against what is the next practice. To assist our clients to do this we have developed diagnostic tools for EPM (enterprise performance management), for planning, for forecasting, for metrics reporting and analysis, for consolidation, and we have a vast array of methodologies, proven methodologies which contain thought leadership, thought capital, market proved techniques and tools and relevant assets that we can deploy at a moments notice to support our clients projects with execution consistency, and speed to drive value.

Mike, why do you think EPM is so top of mind among these leaders?
Thanks, Dick, thats a really good and important question. As all know the global recession is being drawn out much more than anyone really anticipated, and we continue to have a lot of economic uncertainty and really nobody knows when the economy will come full circle. Increased global competition, a lot of volatility, achieving alignment between strategy, your resource allocation, your planning capabilities, your forecasting and reporting and analysis is critical to creating a high performance business in this type of environment. Over the years, Accenture has done lots of research in high performance finance and enterprise performance management and really we see through that research that only a few organizations have the necessary enterprise performance management capabilities. By way of an example, only 22% of the companies we surveyed that used a balance scorecard approach could really demonstrate a causal, proven link between their scorecard and shareholder value creation. And in fact, what we saw is that current management systems often ignore and under manage the firms value creating assets.

for their internal management reporting needs. Unfortunately for a lot of global companies, those BI capabilities are typically decentralized and inconsistently structured. So we are finding that they are creating operational inefficiencies. So from our client conversations across multiple industries, we see that theres a significant amount of time and cost incurred on the non-value added work to reconcile between the external and internal reporting. So this lack of integration also creates a lack of consistent visibility within the enterprise and a lack of visibility to the growth and profitability drivers. And this situation can be both very costly, in both the short term and the long term. Our research also indicates that a companys ability to manage and analyze their data is directly related to its ability to achieve high performance. This is an area that the C-Suite needs to pay attention to. Mike whats your perspective. Sure Eric, on a more specific basis, I can give you multiple examples where weve been in a situation where there are multiple systems of record at our clients. Theyre spending an incredible amount of time on non-value added activities and they spend a lot of time just aggregating and reconciling data. What they really should be doing is considering an enterprise data warehouse, to help establish a common source, or a common truth of information. Additionally, the data architecture needs to be designed to meet the concurrent needs of both the external and the internal stakeholders in order to match their reporting needs. By doing this effectively, the C-Suite can concurrently manage the firms internal and external reporting needs through a single data source, or as we like to say they can now have multiple views or two views of the truth from that single data source.

Well, gentlemen, over the years, companies have built parallel systems to address their external and internal reporting needs. This would appear to be somewhat inefficient. So, what should the C-Suite be doing to address the issue, and well begin with Eric?
Companies have made significant investments in their enterprise resource planning systems, ERP, to address their external reporting needs and these systems help them drive standardization, and efficient handling of transactions, really for the accounting of the results. Companies have also invested in business intelligence technology capabilities

Great, Mike. So, based on your experience, both with clients and through the research Accenture has conducted in this space, how should firms approach the challenges ahead?

So, Eric, following on from that response, you mentioned that its now possible to effectively serve a companys internal and external reporting needs through

a single platform or, as you put it, to deliver two views of truth from a single data source. What options are available to firms, and are the solutions you propose sustainable?
We see theres a couple of different operating models available to clients to help them manage their enterprise financial management reporting. If the company is focused on the delivery of a standardized, streamlined and integrated reporting, across multiple business units, and their goal is to have a lower cost of finance, then an approach worth exploring is a reporting center of excellence, or a business intelligence competency center. This centralized approach is enabled by the single data source and a data architecture that serves as the hub and facilitates all the information flow between the systems of record and the financial management reporting activities. So, the key benefit of this is that they have improved enterprise reporting control and consistencies. For highly decentralized companies they have the option to maintain all the system of record details at the business unit or subsidiary level and submit summarized financials with far less detail to the corporate or their financial management reporting. And the key benefit of this approach is implementing a strategic portfolio approach for managing the enterprise and corporate functions.

Well, we work with clients across industries at different stages of their development when it comes to their EPM needs. So, we can say with certainty that leading firms in all industries can benefit from a well structured and well managed EPM program. So for example, we work with a multi store retailer, where they were able to increase their individual store operating income by about 5 to 10% and this was all due to establishing a new set of single, enterprise metrics to keep the corporate and the field on the same page. And they also used an analytical support model to identify and organize and link information to individual actions at the store level. In the case of a large utility company, they were able to reduce their finance cost beyond the program objectives. And one of the things they did was to implement a financial data hub. And that now serves as an information integration point to deliver consistent data quality, improved reporting capabilities, and established financial controls that also helped them close their books faster. Their finance and operation employees are now no longer focusing on time consuming activities, such as checking and reconciling numbers between the systems, but these employees are now focusing and investing their time on more strategic activities like decision support or, driving cost reduction programs.

Once we have identified all this, we can then provide them with initial perspective, or potential options that we can jointly and collaboratively explore, and that can help them achieve their business outcomes with pace, certainty, and most importantly strategic agility. We can support them on their journey to high performance with end-to-end solutions. We can help them develop strategy, we can help them translate that strategy into targets, tactics and action plans. And we can finally help them monitor the execution across the organization dimensions to insure that strategy is achieved. How do we do this? Well, we can do this by bringing a proven enterprise performance management assets, with skilled resources, deep client and industry experiences that will help plan, deliver and manage an EPM strategy, planning, budgeting and forecasting methods and solutions, metrics supporting and analysis systems and capabilities that are able to address effectively all areas of and enterprise performance management framework.

Eric and Mike, thank you for taking the time to speak with us on this podcast. And to our listeners, thank you for joining us.
For more information related to the topic discussed in this podcast, or to learn how Accenture can help you achieve high performance, visit us on the web at Accenture.com/ managementconsulting, or email us at consultingpodcasts@accenture.com.

So, based on that, it seems that youd agree with us that there is some skepticism in the marketplace about the effectiveness of the EPM program. Based on your experience with leading clients, what kind of economic value should firms expect to realize, given the approach you referenced earlier in our discussion?

Mike, lets bring you in as we wrap up this podcast. Can you explain what Accenture can offer to a company that wants to move its enterprise performance management to high performance?
Well, let me summarize this if I can. At Accenture, our goal is to help organizations improve their enterprise capabilities. In order to do this, we have to take time to listen, understand our clients challenges, their goals, and really what their needs are.

About Accenture
Accenture is a global management consulting, technology services and outsourcing company, with approximately 211,000 people serving clients in more than 120 countries. Combining unparalleled experience, comprehensive capabilities across all industries and business functions, and extensive research on the worlds most successful companies, Accenture collaborates with clients to help them become high-performance businesses and governments. The company generated net revenues of US$21.6 billion for the fiscal year ended Aug. 31, 2010. Its home page is www.accenture.com.

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