Most large corporations have embraced some form of “performance management” software – perhaps even multiple forms – including business analytics to help create key performance indicators, reporting systems for graphically presenting information in a useful context (such as dashboards, scorecards or a recurring performance report) as well as planning systems to create budgets and forecasts or handle reviews. These sorts of systems become rarer as the size of the organization gets smaller. One reason is that in smaller organizations the time and effort needed to create and maintain these sorts of systems doesn’t seem to be worthwhile. Having an IT department that is large enough to have (and maintain) the skills support multiple applications and the data infrastructure to feed it can be more than midsize company or the division of a large corporation may be willing to bear. Yet, few of them want to compromise on features and capabilities and so they continue to cobble together their data, reporting and planning and review functions, often using desktop spreadsheets as the backbone. In midsize or large companies this can produce false economies. Our research finds that organizations this size that rely on spreadsheets to handle their performance management requirements waste a considerable amount of time trying to overcome the shortcomings of the technologies they are using and do not achieve the kind of return on the time invested they should. Time is a precious commodity to any business, but especially in any organization that has outgrown more informal systems and yet are not giant enough to be able to afford a large IT department.
There is an alternative. Host Analytics offers a software-as-a-service (SaaS) performance management suite that supports business modeling, performance benchmarking and analysis, strategy management, planning of all kinds and budgeting. It has reporting and finance analytic capabilities that are extensive, offering a wide range of graphical techniques, and which support the drill-down, drill around capabilities users have come to expect (and need) to be able to look at the numbers behind the numbers. In fact our newest research on finance analytics found that nine out of ten indicate the need to improve the process. Host Analytics provides a comprehensive package that also has a statutory consolidation capability that is part of their overall value that I am assessing as part of the Ventana Research Value Index for Financial Performance Management and is the center of making finance effective.
I think that about 90% of the effort needed to create effective performance scorecards has nothing to do with technology and everything to do with management effectiveness. Is there a realistic strategy in place? Do you have a clear idea of how to measure progress to your immediate goals and strategic objectives? (And, BTW are the goals consistent with the strategy?) Is yours the kind of organization that rewards performance or is it really attendance and face time that matters? Are you flexible enough to accept that while some measures and metrics will stay the same, others must change to reflect a changing business environment? That noted, once you have defined your metrics and key performance indicators, the last thing you want to have to do is spend a lot of time and effort getting the numbers together, communicating and reviewing them. Host Analytics address this with its Scorecard application that integrates analytics and metrics to specific objectives and strategies. Our research shows that about half of midsize and larger companies take more than one business week to report their metrics and KPIs to managers and employees, which is just too long to make the information as actionable as it should.
Planning and budgeting remain a challenge for many companies. Even if they have moved from spreadsheet budgeting to a dedicated application, their other business planning activities often remain spreadsheet-based. Consequently, these planning processes remain inefficient because of the usual headaches of rolling up multiple desktop spreadsheets and working with pivot-tables-in-overdrive in order to overcome a desktop spreadsheet’s inability to easily manage more than a few dimensions (such as time, region, product family and so on) and do it dynamically (what happens when product lines or organizations are restructured?). Too often, those inefficiencies prevent companies from doing adequate contingency planning. Host Analytics Budget provides planning and budgeting has the now near-standard spreadsheet interface which gives users the familiar look and feel of Excel but eliminates the hassles. Moreover, for companies that want to integrate their planning efforts, having the sales and revenue forecast, production plans and other operational projections in the same system as the budget allows the data to be shared across planning silos.
SaaS or “cloud computing” has received a great deal of attention and perhaps especially for that reason I think it’s an approach to having and using software capabilities that’s viewed with some skepticism and suspicion in finance departments. To be sure, for a lot of companies I think many, many applications belong on-premises today. But SaaS can be the right choice, especially if an organization is relegated using outdated and inefficient information technology but could afford to improve its systems taking this approach. If your company is feeling the pinch from systems that won’t adequately support your performance management, planning, consolidation and reporting requirement, I suggest you look at Host Analytics.
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Robert D. Kugel - CFA - SVP Research