Over the last 18 years, I have witnessed a strong correlation between the success of a Enterprise Performance Management (EPM) implementation and the degree of executive involvement in the implementation. The decisions made during the implementation are strategic and will impact almost everyone in the organization.
I’ve outlined the 4 main reasons that executives ought to be significantly involved in the implementation of EPM:
Opportunity for Business Process Improvement
At many companies, especially those that are looking to purchase and implement a new EPM application, the annual budget process is a cumbersome and tedious affair that generates frustration without returning much value. The enabling technology of EPM immediately relieves much of the frustration (a future blog will discuss how analytical systems are able to deliver what a transactional system cannot). Because of this enabling technology, business process improvement concerning planning, budgeting, and forecasting can be adopted. Workflow can be redesigned and incorporated into the planning process. Collaborative planning across multiple departments is suddenly possible. Many companies eliminate unused or unneeded elements in their chart of accounts. Often, companies will develop consistent definitions for the KPIs to be calculated and communicated with the new system. These are decisions requiring the input of high level management. When business process improvement considerations are included, before and during a EPM implementation, the qualitative return on investment usually exceeds the already substantial quantitative return.
New Reporting Transparency
Without EPM, report production is generally accomplished through a combination of ERP/GL data extraction and Excel wizardry; the results are underwhelming, yet time consuming. There may be some information delivered among the glut of numbers, but one cannot drill down into the data. Comparisons are, at best, made between Actual and Budget and/or This Year to Last Year. With EPM, drilling into the data is out of the box. Variance analysis can be performed on any business dimensions, e.g., Customer Group One to Customer Group Two, Sales Region A to Sales Region B, Product X to Product Y, etc. The data becomes information and there is suddenly one version of truth. Some managers, accustomed to opaque reporting, may be uncomfortable with the new transparency. Executives need to be visibly associated with the project to lead the company through this cultural change.
Management bonuses are often determined by actual performance reported against the budget. Since the major reason many companies purchase and implement EPM is to alleviate deficiencies in the budgeting and reporting process, executive involvement for this aspect requires no further elaboration.
Architectural Design affects All Users
I was once involved on a EPM implementation for a global software vendor that developed and sold dozens of applications. The CTO had his IT responsibilities. He also had product development responsibilities for one line of software. Additionally, he owned a sales target for software sold in EMEA. He would’ve liked the EPM application to be optimized for tracking progress in meeting his MBOs across three business dimensions. To architect the application, allowing him with one click of the mouse to aggregate all his KPIs, would have compromised the system for other users. Lower level managers can’t override the wishes of a CTO. Thankfully, the CFO was directly involved on this project. She made sure the system was optimized for the company as a whole; the CTO would have to perform three mouse clicks to monitor his incentive progress.
There are other reasons that prescribe the involvement of executives on EPM implementations. After all, it is a strategic tool. Future blogs will continue this discussion.