Overview of Key Research Findings

Overview of Key Research Findings
Ventana Research recently completed a benchmark research study that examines
some important issues companies face – or think they face – in FPM. We conducted
the study over the Internet and promoted it through our media partners, our
membership community and the sponsor’s community. The targeted respondents
were finance managers and IT professionals who support finance departments. Here
are the key points we gleaned from analyzing the results:
• Companies have made considerable progress in addressing their basic
information needs (which we call 20th century reporting requirements), but
most are a long way from providing the more complete, next level of
information that can be used to improve performance (their 21st century
requirements).
• Companies have strategies, but people don’t necessarily manage to them,
often because these strategies are poorly communicated by executive
management. Also, people find it difficult to understand how to align their
daily activities to longer-term strategy, and the incentives executives set for
managers and employees do not always work in parallel with the stated
strategy.
• Accuracy of information is important, but those who participated in this
research reported that they are more concerned with increasing the
timeliness of the information they receive. Timely, accurate and relevant
information is the lubricant that smoothes the interaction of individual
business and functional groups within an organization. Timeliness is critical to
a company’s ability to react quickly and cohesively to changing conditions.
• Managing information is a vital component of executing core finance
processes, particularly closing, forecasting and planning. Addressing
information issues in these processes is key to improving them.
• The complexity of the information technology infrastructure is a consistent
(and often overlooked) barrier to improving financial performance
management. For larger companies, this complexity is almost impossible to
avoid. Reducing it is an ongoing task, and since it cannot be eliminated,
companies must adapt their systems to deal with it.
This white paper focuses on the information and technology elements of financial
performance management; we also seek to make visible the sometimes hidden
connections between these elements and the people and process aspects of issues
businesses commonly face. In this regard, we have found that a company’s complex
information infrastructure almost always impacts negatively its ability to execute
financial performance management effectively.
Our field observations confirm that when it comes to FPM, most companies are not
deriving full benefit from their information technology, usually for three main
reasons.
• First, there is too little focus on addressing current and evolving information
requirements to eliminate barriers to better execution. Companies must link
operational and financial data more, improve the timeliness of information
and extend reporting to include a richer set of data such as leading indicators
of their and their competitors’ performance.
• Second, there are information technology barriers – such as inflexible
enterprise resource planning (ERP) systems and a fragmented IT
infrastructure – that prevent organizations from improving process execution
(speeding the accounting close or improving forecast accuracy, for example).
• Third, there is a disconnect between strategy and execution caused by an
inability to share information easily, to coordinate activities across functions
and to adapt quickly to change.
Our research programs repeatedly find that a number of the root causes of major
business issues lie in how companies deploy or use information technology.
Sometimes they are missing important components, or the ones they are using are
obsolete or inappropriate. In other instances they are not using their existing
information and technology assets to their fullest advantage. Frequently both
situations exist.
Moreover, larger companies usually have complex IT environments, and complexity
is a common barrier to the best use of information technology. If IT infrastructures
had evolved according to some master plan, complexity would not be the problem it
is today. But they did not. Rather, companies typically make perfectly valid software
and hardware decisions based on a range of business requirements and objectives at
various times in their history.
Thus, an important step – indeed, often the first step – a company must take is to
address its information complexity issues. This may involve efforts to work around
the data fragmentation that exists in any large company (by, for example,
establishing a data warehouse that pulls together a range of enterprise information
from multiple systems) or structural changes (reducing the number of systems) or a
combination of these efforts. We find that companies trying to reduce information
complexity usually have concrete business objectives – providing managers with
actionable information sooner, giving them leading indicators to enable them to
anticipate changes and ensuring that the information everyone uses is accurate and
consistent. Reducing information complexity can set the stage for these objectives
and more.
As senior executives ponder how to improve the connection between their strategy
and their organization’s ability to execute it, our research indicates that they must
address a number of key issues in the interplay between processes, information and
technology. While these may have to be acquired incrementally, we recommend that
companies intent on best-practice financial performance management manage their
information infrastructure with a focus on acquiring the following key capabilities:
• Ensure the availability of a complete, ready-to-use view of the entire business
– one that integrates ERP, CRM, Supply Chain and other operational data.
• Enable management decisions through direct links between non-financial
business drivers and financial results in order to support provision of leading
performance indicators and coordination of workflows across functions and
entities.
• Develop the flexible reporting and analytical capabilities that ERP systems
typically are not designed to address, freeing ERP