VideoKurtzweil of ON Semiconductor suggests that finance partner with the CIO and enlist the support of a co-champion for a system-implementation project from outside the finance department. At his own firm, he says, the senior VP of operations co-sponsors, with him, the installation of each new module of the performance management system his company is implementing.
3. Consider Process Changes Before Technology Changes
Finance executives who have installed new performance management software stress that it is also good practice for companies to make any necessary changes to their business processes before trying to implement a new system. "In most cases, if you don't change your process, you have probably missed out on some opportunity to really make an improvement," says Picek of Alliant Techsystems. "When you don't change your process, you always end up doing custom enhancements to your software, which costs you in the long run. The more you can use off-the-shelf stuff and the more you can conform your processes to the software — assuming you can conform them to align with best practices — I think that's the direction to go, even though it's probably the path that will meet with the most resistance within the organization."
Our survey found that only 30 percent of companies assess and adjust processes before implementing new technology. Most either implement technology and change processes simultaneously (44 percent) or change processes after the fact, if necessary (27 percent). High tech/telecommunications firms are more likely than others to assess processes beforehand (44 percent), perhaps reflecting greater experience with technology implementations.
4. Demonstrating Financial Benefits
Finally, there may be a need to show a business case before embarking on a significant effort to improve performance management. Despite the many tools available that claim to measure ROI, measuring an accurate return is tricky to do. Tracking headcount reduction resulting from a new software package is one thing, but measuring other, equally important benefits such as better decision-making or improved employee productivity is unlikely to be as precise. Some companies do attempt to put a dollar value on a project's various intangible benefits, but in most cases the effort is still mostly qualitative.
For instance, Benco Dental believes the firm's new performance management system is paying for itself just in saving the time of finance personnel who previously had to assemble budgets and forecasts using systems, procedures, and processes that were hopelessly time-consuming and didn't produce reliable results anyway. "You spent 90 percent of your time just gathering data, and very little time analyzing it or challenging it or reacting to it," Hromisin says. "We're trying to make data accumulation be 10 percent and analysis be the other 90 percent."
The cost of implementing a new performance management system, however, was not cited as a major hurdle by most of the senior financial executives in our survey. Only 29 percent said that a lack of funds poses an obstacle. And while approximately half of the financial executives we spoke with who had implemented a new system said they had to make a business case for their decision, many were not required to provide a hard ROI projection. "We did develop a business case, but we didn't do it using a traditional ROI methodology," says Kim Schwartz, VP of finance for the American Red Cross, talking about the organization's decision to implement a new performance management system beginning in January 2003. "It wasn't a particularly hard sell," she continues. "I think everybody knew we needed something better."
Caputo's experience at Computer Associates was similar. "Certainly we had to justify our case, but there was a pretty obvious need and we'd decided internally, as a company, that we wanted to get more sophisticated and involve more people in the process so that we could provide better internal forecasting," says Caputo. Hromisin notes that he wasn't required to develop a hard ROI projection at Benco Dental, either, in part because senior management recognized that they and their front-line managers were "starved" for information — the cost of missing and incomplete information was so obvious that calculating an ROI would have been an unnecessary formality.
Still, our interviewees agreed that it is possible to demonstrate tangible non-financial benefits from implementing a new performance management system once it is up and running. "We judge our success by the fact that we've been able to get to more detailed information and make better decisions, and also by the fact that we're able to compile and close our accounting periods more quickly," says Caputo. "We're issuing our 10-Qs on the same day we're announcing our results and holding our investors' calls, within 25 days following the quarter's end."
Case Study: How Taubman Centers Streamlines Financial Analysis
One of the biggest benefits of performance management software is the ability to analyze data in ways that otherwise wouldn't be possible. Esther Blum, SVP, controller, and chief accounting officer for Taubman Centers, says that since installing performance management software at her firm, tasks that once took days now take minutes or hours. Prior to installing the new software, for example, comparing actual versus budgeted rents began with individual analysts entering the actual results for each of the company's 4,000 tenants into Excel spreadsheets and then summarizing the variances. Once that was done, another person would take the files from each individual analyst and summarize them on a corporatewide basis. Now, actual rents for each tenant are uploaded in the performance management system one time when the billing system is closed monthly. "Immediately, actual versus budgeted rent is calculated and can be displayed and/or sorted," Blum says. "You can quickly see a portfoliowide rent variance."
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