A majority of business decision makers don’t have ready
access to high-quality, reliable, useful information on operating
and financial performance at their companies — so say senior
finance and IT executives in this global study of information
quality (IQ). As a result of this IQ shortcoming, decision
makers are forced to spend time building special reports
and analyses and reconciling the “multiple versions of the
truth” provided by their disparate, non-integrated business
processes and IT systems.

But finance and IT executives see real value and investment
return in improving the quality of their management
information — in boosting its timeliness, accuracy, and
transparency. They foresee broad benefits, including the
ability to make better operating decisions more quickly,
better annual planning, and greater confidence in business
process controls.

To remedy their uneven quality of information, companies
are investing in process simplification and tighter integration
of their IT systems. Doing so, say survey respondents and
executives interviewed for this study, requires not just
time, money, and attention, but also a new and much closer
collaborative relationship between the CFO, the CIO, and
their teams. This new relationship calls on finance to take
greater responsibility for information quality and for companies
to instill accountability for IQ throughout their organizations.
Collaboration, responsibility, and accountability may not
be enough, however, to solve the IQ problem effectively.

Companies’ IQ and the collaborative relationship between
finance and IT will benefit from the CFO and the CIO building
their real knowledge of the other’s discipline. When
finance comes to understand IT — its capabilities, limits,
and role within modern enterprise — and when IT comes to
see robust financial thinking as a source of business value,
and not just of cost control, companies will be on a path toward
higher IQ and sustained operating and financial improvement.

In the summer of 2005, CFO Research Services (a unit of
CFO Publishing Corp.) launched a research program to
explore the quality of management information and its
proficiency in meeting information needs at large companies
around the world. Through a survey and interview program
among senior finance executives in North America, Europe,
and China, we sought to understand how companies rate
their information quality — its accuracy, timeliness,
reliability, and transparency — and their capabilities in
providing information relevant to achieving governance and
performance objectives. We also sought to document how
the chief financial officer and the chief information officer
are working together in new ways in an effort to boost
information quality. This report contains our findings and
was prepared in collaboration with Deloitte Consulting LLP.

All told, we gathered 385 responses to the survey, two-thirds
of which were from executives at companies with more
than $1 billion in annual revenue. Seventy percent of
respondents are from North American companies, 22 percent
are from European companies, and 8 percent are from
Chinese companies. We sought to include both finance and
information technology executives in this study. Executives
with top finance titles such as CFO, controller, and vice
president of finance make up 64 percent of respondents,
while IT executives — including CIOs, VPs of IT, and directors
of IT — comprise 18 percent of respondents.

Companies Still Have Trouble Delivering Basic Information

If information is the lifeblood of business, the corporate
vascular system appears to be blocked.

It has been more than 50 years since the introduction of
the first electronic computer, a generation since the debut
of resource management applications for manufacturing,
and a decade since the advent of performance management
software. Over the past five decades, companies have
poured tens of billions of dollars into information technology
aimed at automating business processes, improving data
management, enhancing customer interactions, digitizing
records, and enabling E-business.

But what about information for making decisions, monitoring
performance, reporting financial performance, and governing
the enterprise? Despite massive IT investments, today
when executives reach for the accurate, timely information
that they need to make well-informed decisions and to
report performance, they often come up empty-handed. In
what might surprise many observers and confirm the views
of their more skeptical peers, this study finds that fewer
than half of finance and IT executives surveyed believe
they have achieved their IQ objectives. Indeed, in a recent
survey of senior finance and IT executives around the world,
61 percent of respondents say they could still do a better job
of just making sure the financial information they generate
accurately reflects the performance of their businesses.
The business impact of this poor IQ, say respondents,
includes widespread decision-making problems that are
often tied to inaccurate, untimely, and irrelevant information.

Queried on ten categories of information quality — combinations
of the utility, timeliness, and accuracy of financial and
operating information — a majority of the senior financial
executives responding to this survey report room for
improvement in every category. The most common problem
area, cited by more than 80 percent of respondents, is the
utility of operating and financial information as a foundation
for forward-looking planning and strategy (see Figure 1).
This analytical ability to gain insight from experience — to
learn what has and what hasn’t worked well — should drive
better modeling, planning, and forecasting.

Daniel Ladenberger, president of SPX Air Filtration, a
German-based air filtration distributor — and until recently
CFO of its parent company, SPX Corp. — is among the CFOs
who recognize that many companies still have an information
problem. “We want to provide a greater breadth of information
to the business, not just data,” Ladenberger says. “And, we
want to provide it in a timely manner so we’re not reactive but
proactive when trends are impacting the business.” For Jan
Timmermans, too, the challenge revolves not just around the
quality of information, but also its timeliness. “Yes, we are
trying to reduce the gap between forecasts and actual figures,”
says the finance director for NV Roche SA, a Belgium-based
subsidiary of Switzerland’s $27.6 billion Roche Holding Ltd.
“But we also want to reduce the time required to produce
financial reports.” Similarly, Larry Michieli, vice president,
financial systems, for Toronto-based Rogers Communications,
Inc., says the company’s goals in installing an enterprise
resource planning system in 2005 were equally weighted on
improved data accuracy and more timely access to data.

That companies are still struggling with turning data into
useful performance information speaks both to the enormity of
the task and an ever-shifting goal line. Many companies,
especially those that can attribute some of their growth to
acquisitions, find themselves wrestling with multiple,
disparate information systems and, in some cases, decades of
process sprawl and inertia. Can reliable information emerge
from such a system? Perhaps. But not with optimal speed or
accuracy, particularly when definitions for key metrics might
easily vary from one part of the business to the next.

“The
reason for the difficulties of producing timely, consistent,
transparent information today is that we have lots of legacy
systems that have been patched together over the last 30
years,” says Gerry Lord, vice president, finance and strategy, for
the North American division of $7.5 billion Campbell Soup Co.
“Understand, people learn to live with the best tools they’ve
got; it’s not like the world stops. Ultimately, we are able to get
the information we need to make decisions. But when that
information is difficult to get or takes too long to get, or when
people don’t necessarily trust the source because there are
alternate sources of theoretically the same information, they
sometimes try to make decisions without it. Clearly, that is
suboptimal.”

Asked to identify the drivers of poor IQ, nearly half the survey
respondents — 45 percent — cite disparate, non-integrated
IT systems and the variability of business processes as an
acute problem that constrains management’s ability to work
effectively and focus on high-value activities. Approximately
the same number agree that finance and business units alike
spend too much time developing special reports and analysis
to supplement system-generated reports. Other disappointing
and productivity-sapping by-products of poor information
quality include “multiple versions of the truth,” misguided
incentive programs, and unrealistic plans and budgets (see
Figure 2).

These are particularly evident at companies with a
“very thin” corporate structure in which business units operate
independently with different business models. For example, 46
percent of the survey respondents who operate under a “very
thin” corporate model say their planning and budgeting
information is unrealistic or loses relevance quickly, versus only
26 percent of all respondents.

Meanwhile, even as companies have made progress in refining
their information-gathering and reporting processes, the
expectations of end users have grown, too, making yesterday’s
success stories today’s shortfalls. “As IT organizations have
become more and more mature, the bar has continued to rise
for quality of information,” says Diana Melick, vice president
and chief information officer for Siemens Energy &
Automation, the $2 billion U.S. unit of German manufacturer
Siemens AG. Feike Brouwers, chief financial officer for global
banking institution ING Direct, agrees. “More and more, when
we get questions, people expect an answer within hours, or at
least the next business day,” Brouwers says.

Milton Johnson,
executive vice president and CFO of $23.5 billion hospital
operator HCA, Inc., says the demands being placed on his IT
team had become so great five years ago that the company was
in danger of losing its ability to effectively manage IT
initiatives. To bring the process back under control, it created a
formal program-management office which, among other
things, now helps the organization set priorities for its IT
activities. Global specialty chemicals company Rohm & Haas Co.
found it necessary to create an entirely new position —
director of finance IT — to help it better align its finance
and IT organizations.

Multiple Forces Drive Demand for Better IQ

Finance executives are being pushed to improve IQ by
CEOs and corporate directors anxious to reach and sustain
compliance with new financial reporting legislation such
as the Sarbanes-Oxley Act in the United States or
Bill 198 in Canada; by business units eager for better
decision-making support; by Wall Street analysts
demanding better insight into company performance;
and, in some cases, by government regulators overseeing
heavily monitored industries such as health care.

Beth Summers, chief financial officer for Toronto-based
electric utility operator Hydro One Inc., says managers at
her company realized just how inefficient their systems
were for gathering operational data when about 1,000 of
Hydro One’s engineers went on strike for 14 weeks in the
summer of 2005. “We used to be able to rely on these
people to get data for us, and when other people had to
find it themselves, they realized it wasn’t as accessible as
they had thought it was,” Summers says. “It forced us to
think about the inefficiencies and helped us realize we
needed to streamline certain processes and do things in a
different way.”

“We’re not going back to the way we did work,” seconds
Hydro One chief information officer Sandy Struthers, who
notes that the company is now in the process of searching
for systems that will give its operational managers faster
access to data about the company’s physical assets — from
poles to transformers — and help them develop more
efficient and effective maintenance programs for those
assets. In many ways, this new effort will do for
operational data what the implementation of corporate
performance management software did for financial data a
few years ago — allow management to spend less time
searching for data, and more time acting on it.

Not surprisingly, though, CFOs themselves see real
business benefits from improving information quality.
Eighty-one percent of survey respondents say timely
access to higher quality information would improve
profitability, and 82 percent say it would reduce costs. A
healthy majority also see a direct link between having
access to better information and enjoying better
investment returns, improved inventory management, and
greater asset productivity. And a majority of respondents
say the benefits of improving IQ more than offset the costs
(see Figure 3).

At Campbell Soup, where the IT group is in the midst of
implementing enterprise resource planning software in
North America, Gerry Lord is counting on reaping “almost
real-time access to financial information, structured in a
way that allows us, with full transparency, to see the
information we need to understand how the business is
doing.” At present, he concedes, the company’s multiple
information systems sometimes take days to reveal what
actually has been happening. “I think this will be a
huge enabler for us to run our operations more efficiently,”
he says.

At Jones Lang LaSalle, Inc., a $1.2 billion real-estate and
money-management organization, chief operating officer
and chief financial officer Lauralee Martin anticipates
similar rewards from her company’s implementation of a
global ERP system. It will, she predicts, provide management
with faster access to more robust business information,
more consistent management reporting, faster monthly
closings, and greater insight into the profitability of each
of the company’s customers so that it can tailor better
service to them.

“In a world where you are managing risk of any kind —
financial, operational, quality — the ultimate tool is perfect
information,” concludes Dan Pavlick, vice president,
information technology services, for $912 million Respironics,
Inc., a maker of respiratory products. “That’s an elusive
goal; perfect information doesn’t exist. But arriving at as
much information as you possibly can digest, and having it
available in nearly real-time in a simple form that allows
you to make decisions, is the goal.”

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