Usethefollowingassessmentcriteriatogainaclearerunderstandingofyourbusinesscomparativetootherlevelsofperformance,andideasastohow thiscanbeimproved:
Level2 Effortstoreduce thetimetakento preparebudgets. Simpleforecasting. CPMbudgeting system implemented,but thesystem emulatesa spreadsheetbased system,i.e. spreadsheetinputs intobudgetmodel.
Level3 Movedtorolling forecast. Driverbased budgeting,butstill aCFOorientated viewoftheworld. Somecross functional involvementin eitherbudgetingor forecasting operational managersuse budgetingsystem toentertheir businessdrivers.
Level4 Budgetingprocess linksfinanceand operations. CFOand operational managersinvolved andactivelyusing budgets. CPMplanning systemlinkedto operational planningsystems bybusinessdrivers. Financialbudgetis anoutcomeofthe planningprocess.
ProfitabilityModelling andOptimisation [causalmodellingto Noclear understandingof thenonfinancial ABCusedto calculate profitabilityona Activitybased profitabilitymodel exists. Activitybased profitabilitymodel exists.
Level5 Budgetinglinkedto strategyand forwardplansas wellasoperational targetsand activities. Clearcutstrategy planningprocess. IntegratedIS system,linking finance,operations andstrategy. Organisationwide involvementand engagement,top bottomandcross functional. Widespreaduseof eventanalysis. Clear understandingof thefinancialand
driversof profitability. Focusison ABC/activitybased analysisofcost drivers. Usersandanalysts areseenas specialists. Oneoffanalyses arethenormrather thantheexception.
Thesystem supports profitability modellingandback solving. Profitability informationisused inmanagement decisionmaking butonaperiodic basis. Systemsand processesare largelyfinancial based.
Causeandeffect linksbetween financialandnon financialdriversare identified. Profitability informationisused bymanagersto makeresource allocationdecisions toachievebusiness objectives Thesystem supports sophisticated profitability modelling,suchas MonteCarlo analysis.
nonfinancial driversof profitabilityand value. Investmentplans anddecision makingarealigned tothesedrivers Continuousand widespreadeffort tovalidatecausal links. Profitability modellingand analysisis constraintbased weunderstand wherethecritical andcapacity constraining resourcesareand buildtheseintoour models. Coherenttopto bottomframework formeasures. Measuresare mappedtovalue driversand strategic
betweenmetrics. Metricspresented inmanagement meetingsbutissues withdata consistency. Individualtargets setbyfunctional managerswithno coordinationacross functions.
Scorecardusedto trackprogresson strategybut reflectsstrategy ratherthanatool tohelpcreate strategy. Targetsaligned throughstrategy mapbutnotlinked withfinancial targets(budgetstill winsout)
measuringtheright thingintheright ways. Scorecardusedby executiveteamand operational managerstoreview progresson strategy. Consistenttopto bottombusiness drivertargetsto achievestrategic goalsbutstillsome conflictwith financialtargets.
Lotsofdataexists, butmuchofitis conflicting. Itisdifficultifnot impossibletoknow whatthedatais tellingyou. Individualshave theirown spreadsheetswhich
CPMapplications forfinancially oriented management reporting,BP platformforother typesofreporting, butdatais inconsistent. Usersmakemore
Systemshelp understandpoor performance,but usuallyafterthe event. CPMapplications stillseparatefrom BI/operational reportingbut reasonabledegree
CPMsystemsin particularusedto identifygood performanceand bestpractices ratherthanjust focusingon understandingpoor performance. Realtimealerting
objectives. Thecauseand effectlinkages betweenmetrics arevalidated Strategy map/metrics frameworkpartof strategy formulation process,linkedto strategy management. Financialgoalsare outcomesof businessdriver targets.Individuals measuredon businessdriver targets. Operationaland management reportingdata consistentwith CPMfinancialand budgetdata. Predictiveanalytics areusedwecan establishthe impactof
ofconsistency throughsharedETL tools/capabilities. Userscancreate ownreportsand analysiswithout significantIT support. Norealabilityto respondinreal timeand/orpro actively.
Onlycorporate financeisinvolved inconsolidation andreporting. Muchofthe reportingismanual andspreadsheet based. Sometimesthe resultsarea surprise!
Legacyversionof CPMfinancial consolidation applicationused. Systemand processesfocused aroundcorporate finance. Numbersare accurateand auditedbuttake toolongto produce.
Currentgeneration CPMfinancial consolidation application implemented. Consolidationis rapidandtimely, butdataisnot linkedto management reportingsystems. Financialreporting ishighqualityand
Financial consolidation applicationlinked withmanagement reporting. Financialdata consistentwith highlevel management reportingdatabut lackofanalysisto nonGLtransaction dataoutsideCPM
operationalevents inrealtime(ornear realtime)and respond accordingly. CPMsystemslinked withBusiness ActivityMonitoring (BAM)systemsfor realtimesense anddetect capability. Usersatthelocal leveltake correctiveactionin responsetoreal timeevents. Financial consolidationis linkedwith management reportingand budgeting. Realtime consolidation. Alldecisionmakers usethedataona daytodaybasis. Thereporting structuresboth
trusted,usedby executivesto monitorperiodic financial performance. Financial consolidation processesanddata managedacross financefunction.
applications. Financial consolidation system implementedina distributedmanner toprovide managementand statutoryviewto executivesat businessunitlevel.
forconsolidation andmanagement reportingare consistentacross theorganisation. Dataand masterdatais consistentwith otheranalytic applications outsideCPM. Asaresultdrilling downto understandthe driversof performanceis relatively straightforward. LeveragesXBRL.
CopyrightAndyNeely,January2009