You are currently browsing the category archive for the ‘Business Collaboration’ category.

The topic of corporate governance received renewed attention recently after the publication of an open letter signed by 13 prominent business leaders, including Warren Buffett of Berkshire Hathaway and Jamie Dimon of JPMorgan Chase. The first principle the group advocated in the letter is the need for a truly independent board of directors. To achieve that aim, the letter suggests having the board meet regularly without the CEO and that the members of the board should have “active and direct engagement with executives below the CEO level.” From my perspective, translating this idea into reality would be helped by a change in the dynamics of most board meetings. I would eliminate the standard presentation of results and begin the meeting with questions and observations from the board members directed to company executives related to its financial and operating results and any other matters on the agenda. This could take place with or without the CEO.

In the best of cases, a company provides board members with information about the topics to be discussed at the meeting, along with supporting data, charts and narratives. Board members are expected to have familiarized themselves with this information ahead of the meeting. But in almost all cases, in order to be sure that everyone is on the same page, there is a presentation of this information by those in charge of preparing the data and analyses. Eliminating the standard presentations would change the tone and dynamics of the board meeting, leading to more active engagement.

There may be a number of companies that dispense with the routine recital of results at board meetings, but I first heard about it from Godfrey Sullivan, chairman of Splunk, a software vendor that provides operational intelligence through analysis of machine data. He described his company’s approach to board meetings at the Adaptive Insights CFO Symposium last spring, which was part of the company’s Adaptive Live user group conference. The management discussion and analysis as well as the accompanying data are sent to Splunk’s board members far enough in advance of the meeting to ensure that they have time to study it. Members are expected to have reviewed the information and formulated their questions and thoughts ahead of time. Those in charge of preparing the analysis are present at the board meeting to answer questions, not to present the data and analysis.

The reason for structuring the process this way, Sullivan said, is that eliminating the traditional briefing saved time at the meeting that could be better spent discussing issues and opportunities as well as ways to address them. I suggest that this sort of active engagement encourages greater participation and orients review and planning more toward action. Eliminating the standard presentation portion of a board meeting is hardly a panacea. However, implementing a format that requires board members to be prepared for the meeting does set a better tone at the top that is necessary to support or develop a more actively engaged board of directors.

Technology also can play a role in such process change, even if it is not immediately obvious. Of course, using their current resources any company can provide board books (documents prepared for the board of directors that present data in graphical and tabular formats as well as the related narratives) to directors far enough in advance to eliminate the need for a performance review at the board meeting. It’s also fair to say that for some companies changing how the board operates is likely to be a far more daunting task than any addressing any technology issues. On those boards, members comfortable with the routine and those who believe they are too busy to devote enough time to corporate matters ahead of the meeting will need to be convinced or replaced.

But technology can facilitate a fundamental shifte in how directors engage if it makes the necessary information available sooner and in a more easily digestible format. For example, reporting packages that automate the creation of board books can shorten the preparation time, enabling companies to get this information to the board members sooner for review. Having these books available on mobile devices (tablets or smartphones) would also streamline access to the information. Reports that enable data exploration – drilling down and around to see the numbers behind the numbers – provides readers with deeper understanding of the business.

Accelerating the accounting close also would also be helpful in getting information to the board sooner. More than half (60%) of companies in our Office of Finance benchmark research reported that it takes them more than six business days to close their books; 26 percent take 11 or more days. Almost all companies that want to accelerate their close said the main reason for doing it is to have more time for analysis of the numbers before having to prepare reports and to make financial and managerial data available. Technology can play an important role in speeding the completion of the close. Our Fast, Clean Close vr_fcc_automation_speeds_the_closeresearch shows a correlation between the degree to which companies automate their close processes – especially handling minutiae such as reconciliations – and how soon they can close their books.

All organizations can benefit from a knowledgeable and engaged board of directors. Almost every company has the capacity to provide its directors with sufficient information before a board meeting, and it’s not unreasonable to expect all directors to come prepared to discuss the agenda so there is no need to present that same information. Chairmen and CEOs ought to consider taking this approach. They should also examine whether they can improve the effectiveness of their communications to board members by making it easier for them to consume the information they provide them and – if the company takes more than a business week to close its books – to accelerate their close. The role of the board of directors is too important to be undermined by sluggish business processes.

Regards,

Robert Kugel

Senior Vice President Research

Follow Me on Twitter @rdkugelVR and

Connect with me on LinkedIn.

Like many other industry observers I’ve heard overblown claims for information technology for decades. However, I’ve also observed that – eventually – reality catches up with vision. Finance and accounting departments are particularly resistant to change, yet because almost no corporations use adding machines or typewriters any more, it’s clear that transformative change can happen. Nonetheless, because users of business computing systems are inundated with “it’s better than ever” promotions by vendors, journalists and industry analysts, may have grown jaded and disbelieving. In the case of ERP systems that help run many organizations, that is too bad because we are finally at the point of a fundamental change in this business-critical software category.

ERP systems themselves have been undergoing transformation, enabled by the growing availability of technologies that can address the shortcomings of established systems and an increasing appetite for multitenant, cloud-based ERP systems. As I noted in my research agenda for the Office of Finance, the demographic shift taking place in the ranks of senior executives and managers – from the baby-boom generation to those who grew up with computer technology – will create demand for more capable software. ERP systems are evolving to deliver a better user experience, greater flexibility and agility, as well as an optimized mobile experience and lower total cost of ownership. The transformation has already started for some vendors and to some degree. The pace of change will increase over the next two years as new releases become available. However, I don’t expect companies to buy a brand-new ERP system just to acquire next-generation features. Our Office of Finance benchmark research finds that on average companies replace their ERP systems only every 6.4 years, mainly because of the cost and difficulty of implementing the software. Moreover, many of these capabilities will be available under maintenance contracts for on-premises systems and incorporated automatically in upgrades of cloud-based systems.

The new generation of ERP systems will be vr_office_of_finance_05_finance_should_take_strategic_roleable to support a more effective approach to managing the functions I call continuous accounting that will benefit finance and accounting departments. By eliminating batch data processing and by supporting analytic as well as transactional operations in a unified system, the next generation of ERP systems will enable companies to provide executives and managers with immediate information, alerts and guidance. It will enable departments to spread workloads more evenly across months and quarters, rather than having to wait until the end of the period. In so doing, many companies will be able to accelerate their close, as I have discussed. Continuous accounting can contribute to providing a strategic focus for the finance organization – a change that organizations will welcome. In our research on finance innovation, nine out of 10 participants said that it’s important or very important for finance departments to take a strategic role in running their company.

In many respects, today’s ERP systems are exactly what people don’t want any more. They are notoriously time-consuming and expensive to set up, maintain and modify. In our ERP research only 21 percent of larger companies said that implementing new capabilities in ERP systems is easy or very easy while one-third characterized it as difficult. For this and other reasons, the current generation of ERP software acts a barrier to innovation and improvement.

To be sure, more than any other type of enterprise software, ERP systems are a challenge because of the complexities of business organizations. This isn’t going to change. I’ve spent decades examining all sorts of businesses from multiple perspectives – from strategic, high-level business models to footnotes in financial statements and the execution of specific manufacturing and financial processes. To the uninitiated, everything about business appears simple until they get into the details. Then, even when you strip out inessential elements, it’s still complicated. ERP is complicated because the underlying business requirements are complicated. For example, in any organization there are competing demands and priorities at work when an ERP system is set up.

Although some aspects of ERP will always be complex and require experienced assistance to design and maintain, techniques for mass customization can make it easier to implement and change, thereby eliminating a significant portion of the cost of ownership. To be sure, software companies have tried to minimize deployment costs. For a couple of decades, ERP vendors have offered packages aimed at specific industries such as aerospace and pharmaceuticals. Those addressing midsize companies, which have tighter budgets than large ones, offer out-of-the-box configurations aimed at even more specific types of business, such as steel service centers, manufacturing job shops or brewers. For more generic businesses, today’s cloud-based ERP systems are one solution to the problem of costly updates and reconfiguration. However, this option still may not be attractive if an organization is in a business that has very specific customization requirements that more generic ERP systems cannot support well (for instance, process-manufacturing industries such as specialty chemicals manufacturing).

One positive development in the ERP category is the increasing attention vendors have been paying to the user experience in the design of screens and workflows. The dull, cluttered and difficult-to-navigate interfaces that have been the norm up to now were the result of inexperience in design and constrained computing resources. The next generation of ERP systems is being designed with decades of experience and far more powerful computing platforms and tools than the current ones. In the 1930s, Raymond Loewy and others revolutionized the design of everyday objects, from soda fountains to locomotives and automobiles so that form and function combined to produce a better product. Today, it’s even more important to apply basic concepts of industrial design and ergonomics to creating user interfaces. This goes beyond making old code bases pretty. Largely because of tablets and mobile computing platforms, people now work with multiple types of interfaces and use a wider range of methods and gestures to interact with their devices. The next generation of ERP software must incorporate these advances and ensure that the screens and their flows are optimized for the device. The emerging generation of finance executives and ERP users won’t put up with the inconveniences and awkwardness that their predecessors reconciled themselves to.

It’s also clear that ERP systems will be faster in the future, as redesigning the software’s underlying data structure and utilizing technology such as in-memory processing will eliminate nearly all batch routines. Faster systems enable shorter cycle times, which promote corporate agility because up-to-date information is available sooner. Another important change that is already under way is the ability to do analytics in real time or near real time on data held in an ERP system. The business intelligence (BI) software category was invented two decades ago to enable companies to get useful information from newly implemented ERP software. While BI addressed this shortcoming, it also added to the cost and complexity of a company’s IT operations.

Another focus of new ERP systems will be collaboration. In-context collaboration provides an important set of capabilities that can improve performance. Rather than following a general broadcast model, social collaboration capabilities in ERP and other business applications understand that individuals belong to multiple groups. For example, people in a company typically have a general role (“I’m in Finance”) and one or more task-specific ones (“I’m the director of financial planning and analysis”). Some relationships are persistent while others begin and end with a project. Issues that arise may be open to all or confined to specific groups, subsets of groups or a private dialogue. Queries or comments may be general, specific or anywhere in between. Some conversations, especially in finance and tax departments, must be tightly controlled. Software that understands the context of the work performed and automates the process of managing the who, what and when of communications will support more effective collaboration, faster completion of tasks, greater situational awareness within the organization and as a result better decision-making. Over the past three years, ERP vendors have been introducing more in-context collaboration capabilities in their software.

Mobile enablement is already an important capability of some ERP systems. However, it’s important that ERP vendors focus on those elements where mobility is important and optimize the user experience for the task and platform. Unlike CRM and sales force automation systems, where sales and service information must be accessible anytime and anywhere, mobility’s importance in ERP depends on who uses it and why. Certain tasks such as data entry are not well suited to mobile devices, while routine reviews and approvals are. These must be simple to configure and deploy as well as use.

vr_erpi_01_implementing_new_capabilities_in_erpMore generally I am convinced that the worst aspect of today’s ERP systems is that they inhibit change in corporations. The lack of adaptability in these systems has infused a “set it and forget it” mindset that inhibits companies from making necessary changes in processes and stifles innovation. The inability to make changes easily to an ERP system inhibits improvements in corporate functions that run on ERP. This is ironic, since one of the factors driving corporations to buy the first ERP systems in the 1990s was their desire to do business process re-engineering, a business strategy of the time. More useful is developing a culture of continuous process improvement, one of the pillars of continuous accounting, in the finance organization. Making ERP more easily configurable by business users supports continuous process improvement efforts.

As the business software market, including ERP, increasingly moves to the cloud, a major challenge facing software vendors is designing their applications for maximum configurability. By this I don’t mean offering the ability to select modules from a menu, but enabling only moderately trained line-of-business users to make granular adjustments to process flow and data structures in a multitenant setting. This lack of flexibility is an important barrier inhibiting adoption of cloud-based ERP. Although user organizations that are more able to adapt to an as-is version of an ERP system are more likely to take the cloud-based option, this covers only some of the potential market. The cloud ERP vendors that offer greater flexibility in allowing individual customers to modify their implementation to suit their specific needs will have a competitive advantage. Multitenant cloud ERP vendors already have had to pay attention to configurability, and on-premises ERP vendors also would benefit from enhancing the configurability of their systems.

Today’s corporations have been willing to put up with the deficiencies in their ERP systems because everyone was in the same boat. That won’t be the case much longer. The cost and complexity of ERP systems has meant that IT departments, not business users, have had the fullest involvement in managing them. This, too, will change. Business users and finance departments in particular will need to be involved in periodic assessments of how well their ERP system supports their responsibilities and objectives. Finance executives in particular should begin this process now by understanding how the application of new technologies can drive fundamental changes in the way they manage their department. Vendors that offer ERP systems that are much easier to configure, use and update, support in-context collaboration and mobility and provide timely, reliable analysis and reporting will survive. Those that excel in these areas will win market share.

Regards,

Robert Kugel

Senior Vice President Research

Follow Me on Twitter @rdkugelVR and

Connect with me on LinkedIn.

Twitter Updates

Stats

  • 126,535 hits
%d bloggers like this: