Who They Gonna Call?

Business headlines in the last few years have been awash in horror stories of major executives on trial for failures in corporate governance. No matter the details of a particular scandal, one popular defense has been: “I didn’t know.”

Didn’t know? In the Information Age? When today’s sophisticated technology moves data literally at the speed of light?

Well, actually, the excuse is not as outrageous as it may sound. Not to apologize for any one particular suspect exec or another, but the reality is financial information in many corporate organizations is not always as timely and accurate as it’s presumed to be. Why, you ask? Because the technology infrastructure that provides financial data is not always as sound as it could be.

A few years ago, this wasn’t much of a crisis. Having good business intelligence was a more of a “nice to have” than “need to have.” But now, not only are C-level officers faced with the scrutiny of government regulation, they also must survive the withering competition of business at Internet speed.

The heat is radiating from the board rooms and corner offices onto the finance departments. CEOs are relying on CFOs to provide solid financial intelligence to support today’s business imperatives.

But when confronting these challenges, many CFOs often find their financial house is haunted by the four ghosts of the weak business intelligence practices of the past. The specters go by these names:

  • Isolation. Most financial analysis in a corporation is concentrated in the finance department, away from 80-to-90 percent of the managers responsible for the operations of the business.
  • Myopia. The finance department sees only a limited slice of the business and the data produced by it.
  • Scarcity. Little time is available to the finance department for analysis and strategic thinking as the tactical rigors of data collection, preparation and formatting tasks consume mindshare.
  • Ignorance. Due to the mischief of the first three ghosts, decisions are made in ignorance as analysts draw conclusions with little more than a glimmer of insight into financial implications.
  • When information is the problem, technology is often the solution. So, CFOs need to call on CIOs to bust the ghosts of weak financial business intelligence. For guidance, top technology officers, in turn, can look to the best practices of world-class companies that already have exorcised the phantoms from their organizations.

    A study by the benchmarking firm The Hackett Group has identified five best practices for financial management:

  • Simplification of finance processes.
  • Automation of routine or repetitive tasks.
  • Consolidation of redundant resources.
  • Standardization of data and processes.
  • Strategic alignment of finance activities with overall corporate goals.
  • By following these best practices, the world-class companies in the study doubled the productivity of the finance staff, shortened the closing cycle by 50%, spent significantly more time on analysis and forecasting than on data collection and preparation, and gained 50% greater control over expenses as compared to “average” companies.

    The finance-labor costs of these world-class companies were nearly half those of average companies. In addition, the world-class companies were able to generate 20% more financial analysis from half the staff of average companies.

    CIOs at these world-class organizations enabled these results by establishing and maintaining financial intelligence systems that fostered predictability, profitability, and flexibility.

    Theses are the cornerstones of a financial data warehouse (FDW) foundation, and the business intelligence superstructure that is built upon it must meet these requirements:

    A Single Version of Truth. This does not mean one pile of all the “stuff” in your systems today. It means data that is integrated and cleansed so that it is accurate, timely and tied directly to the general ledger system.

    Analytical Capabilities. At a minimum, decision-makers need to be able to drill down from key metrics to greater detail, slice it by any relevant business dimension and perform root-cause analysis. An additional capability should be trend analysis with time-series data to identify trends and improve forecasting accuracy.

    Alerts and Notifications. Timely data means little without timely notification. Tools that support alerting management to current events that require immediate attention are a must. Alerts should uncover opportunities as well as point out threats.

    Organizational Alignment. Because multiple sources of organizational information will be combined in a FDW, the entire organization must be involved in the process of defining analysis requirements.

    Data Stewardship. Establishing a program where there is clear business ownership of the data quality ensures accountability and develops trust in veracity of the information. The old data processing chestnut of “garbage in, garbage out” has not lost its potency.

    With a FDW that meets the requirements described above, CIOs can begin delivering value in multiple ways:

    Rapid Analysis. An FDW can dramatically reduce analysis time from days to minutes by removing the number of steps required to assemble paper reports and re-key information into spreadsheets.

    Self-service Intelligence. An FDW creates a source of regularly refreshed information that can be accessed by knowledge workers across the organization.

    Optimization and Standardization. An FDW fosters process optimization and standardization by providing standard reports with standardized metrics (key performance indicators).

    Agility. An FDW allows operational managers to react to changes quickly, with the latest accurate information, particularly during business cycle closings.

    In light of these tremendous benefits, it’s important to keep in mind that even the best FDW is no substitute for disciplined corporate governance.

    Some of the executives involved in the latest round of business scandals actually had information and, for one reason or another, ignored it. But there definitely is one thing a solid FDW makes certain: when crisis calls, the CIO is prepared to answer.

    Mark Robinson is a Business Intelligence practice manager at Greenbrier & Russel and a regular contributor to CIO Update. During his more than 20 years working with business technology, he has been a consultant for companies in the financial services, retail, manufacturing, healthcare, software and professional services sectors. He can be reached at [email protected].