Apqc CPPM Excerpt

Corporate Planning and Performance Management
MAKI NG FI NANCI AL ANALYSI S MORE EFFECTI VE

2010 APQC. ALL RIGHTS RESERVED.
page 1
EXCERPTED VERSION, PREPARED EXCLUSIVELY FOR
BUSINESS FINANCE MAGAZINE

Contents
Participant Information 4
Executive Summary 5
Study Focus 8
Study Methodology 10
Key Findings 14
Effective Methodologies and Processes 14
Developing and Understanding the Skills Requirement 15
Leveraging the Most Appropriate Technology Solutions 19
Outcomes 21
A Final Word 22
Acknowledgments 23
About APQC 23
Contact Information 23
Giant Eagle Case Study 24
John Wiley & Sons Case Study 30

page 2
Project Personnel
STUDY TEAM
Angelica Wurth, senior project manager
Alex Hawkins, project manager
SUBJ ECT MATTER EXPERTS
Mary Driscoll, senior research fellow, APQC
Jack Alexander, founder, Jack Alexander and Associates LLC
EDI TOR
Paige Leavitt


page 3
MEMBERSHI P I NFORMATI ON
For information about how to become a member of APQC, and to receive
publications and other benefits, call 800-776-9676 or +1-713-681-4020, or visit our
web site at www.apqc.org.
COPYRI GHT
2010 APQC, 123 North Post Oak Lane, Third Floor, Houston, Texas 77024-7797
USA
All terms such as company and product names appearing in this work may be
trademarks or registered trademarks of their respective owners. This report cannot
by reproduced or transmitted in any form or by any means electronic or mechanical,
including photocopying, faxing, recording, or information storage and retrieval.
ISBN-10: 1-60197-152-4 ISBN-13: 978-1-60197-152-4
STATEMENT OF PURPOSE
The purpose of publishing this report is to provide a reference point for and insight
into the processes and practices associated with certain issues. It should be used as
an educational learning tool and is not a recipe or step-by-step procedure to be
copied or duplicated in any way. This report may not represent current
organizational processes, policies, or practices because changes may have occurred
since the completion of the study.


page 4
Sponsor Organizations
Alyeska Pipeline Service Co.
Aramco Services Co.
Baylor College of Medicine
General Electric Co.
General Dynamics Corp.
Sterling Commerce

Partner Organizations
Bank of Canada
Giant Eagle Inc.
John Wiley & Sons Inc.

Research Champion
IBM Corp.


page 5
Executive Summary
All too often, performance management systems are geared to replace, or at least
constrain, front-line managers in their ability to offer intuition, judgment, and
experience as performance plans are set in place by senior managers. This is a
mistake. In fact, there is no better way to shut down performance improvement.
The key to success lies in the ability to link vital operating decisions and activities
directly to shareholder value creation. Senior management can do this by providing
the methods and tools to capture valuable perspectives from the front lines. At the
same time, senior management can systematically guide managers to investment
choices that represent the most efficient use of shareholder capital. The point is to
equip front-line managers with reliable facts and analyses they can use to ensure that
strategic aims are achieved.
How can CFOs make financial planning and analysis processesand the people
who run themmore relevant to the strategic goals of their organizations? It is not
easy. The typical finance function at a large, complex organization does not excel
when it comes to advising business decision makers on how to optimize resources
and create sustainable, profitable growth (Figure 1). As this pie chart shows, the
typical financial analyst spends much more time on data cleaning and process
management than on producing sophisticated analytical work.

Figure 1


page 6
How did this situation arise? The cost of financial management operations has
substantially dropped at most large organizations since 2000, thanks to business
process redesign, automation, shared services centers, and so on. However, those
costs savings were rarely channelled back into efforts to upgrade analytical
capabilities. The pursuit of efficiency gains was the top priority for many CFOs for
many yearsand that made sense, until the recession of 200809 darkened the
skies. That event made long-held financial planning assumptions obsolete. Suddenly,
robust financial analyses were needed to reassess choices for growing the top and
bottom lines.
A closer look at the implications of the recent recession further illustrates the value
of upgrading financial planning and analysis processes. In December 2007, the
official start of the economic contraction in the United States, CFOs who had
neglected to improve financial analysis capabilities found themselves in a precarious
position. Demand for goods and services seemed to dry up overnight. Consumer-
based businesses, in particluar, were caught with large amounts of unsold inventory.
In the business-to-business arena, customers began ordering in shorter bursts, and
then they delayed payments to their vendors for months beyond invoice due dates.
Conservation of cash became the paramount concern for buyers and sellers.
In such times, a CFO needs to be able to advise senior managers on what course
corrections make sense. The CFO needs to be armed with strong evidence that
outlines significant financial risks, along with various scenarios for confronting
those risks. A well-equipped and well-trained financial planning and analysis team
can adroitly examine:
risks in the revenue streamviability of customers customers, volatility in
demand for products/services, and channel disruption (e.g., a primary reseller
goes bankrupt);
risks in the cost structuresuppliers going bankrupt and prices skyrocketing,
increasing cost of capital and commodities, staff redundancy in the wake of
decreased demand for products/services, and state and local taxes increasing as
municipalities come under financial pressure; and
risks to the cash conversion cyclelimited access to external capital to finance
inventory and operations, suppliers tightening terms, higher incidences of trade
credit default, and customers slowing down payments.

Ideally, a financial analysis team can outline such risks and offer carefully modelled
solutions. A senior management team can then move with confidence to protect
profits. When demand starts to rebound, key resourcescash, capital, people, and
knowledgecan be allocated in ways that align with the overal strategic plan and
actually drive shareholder and stakeholder value.

page 7
That is the ideal state. Unfortunately, APQC research shows that the majority of
large organizations have a lot of work to do before they reach that state.
In late 2008 APQC surveyed 290 large organizations and discovered that their
financial analysts are severly hampered in their ability to outline and address such
risks. As shown in Figure 1 on page 5, 47 percent of their time is spent collecting
and cleaning data. And 30 percent is spent running the process. The typical analyst
spends just 23 percent of his or her time creating the detailed analytical models
organizations need to understand performance risks and opportunities and shape
appropriate responses.
Many large organizations still struggle to gather and analyze fast-changing
information from operating and transaction systems and use it to navigate around
hidden obstacles or capture unexpected opportunities. Those organizations most in
need of improvement identify with at least four of the following statements:
1. The budget is used as the primary performance management tool.
2. Re-forecasts occur to show variances from annual plan targets.
3. Forecasts lack focus on underlying business drivers.
4. It is difficult to obtain manageable and/or fresh transaction data for
profitability analyses.
5. Too much time is spent gathering, reconciling, and cleaning data.
6. Presenting or analyzing data from different perspectives is difficult.
7. Spreadsheets are the main tool used to plan/measure performance.
8. Not enough dedicated and skilled staff members are available for financial
analysis.
9. It is difficult to integrate growth initiatives into annual planning and
monitoring systems.
10. It takes 10 days or more to produce a reliable financial forecast.

THE PATH TO PROGRESS I N CORPORATE PLANNI NG AND
PERFORMANCE MANAGEMENT (CPPM)
APQCs research also indicates that organizations committed to improving
corporate planning and performance management processes envison a path to
progress that traverses the states from left to right in Figure 2 on page 8.


page 8
Improving Corporate Planning and Performance
Management Processes

Figure 2

Progress through these three states involves an evolution from low-impact tools
such as spreadsheets to high-impact tools and capabilities meant to improve
organizational performance. As a financial planning and analysis team matures, it
discards obsolete tools and takes on the task of enabling fast, reliable, and
comprehensive collaboration and negotiation over growth targets and resource
requirements. Such progress implies a deliberate and deep commitment that spans a
number of years.
The detailed case studies in this report demonstrate that making such a commitment
to improving corporate planning and performance management processesand
making the financial analyst more relevant to the strategic aims of the
organizationwill protect organizations in downturns and help them excel when
growth opportunities present themselves.
Study Focus
In August 2009 APQC launched a consortium learning project to discover how
corporate planning and performance management practices are evolving.
Specifically, APQC documented how large organizations use relatively advanced
managerial concepts and software applications to perform complex and data-
intensive analyses of the operating drivers of enterprise financial performance.
APQC also examined how these organizations inform plan targets with strategy and
vice versa.

page 9
The APQC project teams hypothesis was: To thrive in an increasingly volatile
environment, organizations need their financial analysts to identify, analyze, and
educate managers on the granular drivers of sustainable, profitable growth. Implicit
in this statement is the assumption that the favored analytical tool of yesterday, the
spreadsheet, is no longer up to the task.
Consequently, the studys scope focused on effective methodologies and processes,
developing and understanding the skills requirements, leveraging the most
appropriate technology solutions, and understanding results. APQC developed a
model to illustrate the areas of accountability for the CFO of a typical large,
complex organization (Figure 3). This study focuses on the second level from the
bottom: that is, turning information into insights that decision makers can use to
optimize scarce resources. This is the analysis that provides crucial financial
perspectives to senior managers on business risks, operating constraints, and
options for leveraging resources to compete effectively and profitably.
CFO Accountability

Figure 3

APQCs project team selected three best-practice organizations that demonstrate
significant progress in improving the planning and performance management
capabilities within their finance functions. They also have moved beyond the
boundary of finance to help key decision makers across their organizations.
The study findings demonstrate how these best-practice organizations make
financial analysis more effective, as well as how they use that analysis within a
volatile economy. This resulting report includes the managerial frameworks,
methodologies, and leadership factors they use. The report also details how mature
corporate planning and performance management capabilities can enable an
organization to:

page 10
focus on anticipating the future instead of just reporting past performance;
more ably advise on the relationships between performance drivers and likely
financial outcomes;
reposition periodic business reviews to focus on trends, risks, and opportunities;
shift gears quickly when conditions change;
train business managers to analyze value-based trade-offs and risks when
reallocating resources;
standardize financial management information systems and data definitions;
ensure sufficient skill-building and career development for analysts; and
implement appropriate information management strategies, platforms, and
tools.

The primary theme of this report is that, as decision makers attempt to stabilize
their organzations in the wake of severe economic turbulence, investments in
relatively advanced strategies, talent, IT platforms, and tools for planning and
performance management are imperative.

Study Methodology
The Corporate Planning and Performance Management financial management
consortium study was designed to provide a fast track to leading corporate planning
and performance management practices that finance managers can apply in their
organizations. APQC employed its proven, four-phased benchmarking
methodology (Figure 4, page 11) to gather data and discover leading practices for
the Corporate Planning and Performance Management study.
Step 1: PlanIn summer 2009 APQC conducted online and phone surveys and
interviews to understand the key issues and challenges that its members and
customers face, as well as their corresponding needs, regarding best practices in
financial management. As a result of this feedback, and with input from the
internal subject matter expert Mary Driscoll, APQC drafted the study scope.
During this phase, APQC began the process of identifying 78 potential best-
practice organizations. Each candidate was invited to participate in a screening
process. Based on the results of the screening process, as well as organization
capacity or willingness to participate in the study, a final list of potential partner
candidates was developed. The planning phase of the project culminated in
September 2009 with a virtual kickoff call attended by APQC, the special
adviser, and the study sponsors.

page 11
Step 2: CollectUsing feedback from the interviews, secondary research,
subject matter experts, and the study sponsors, APQC drafted a site visit guide
that served as the agenda for each of the three virtual site visits conducted in
October and November 2009 to gather qualitative data. After each virtual site
visit, APQC drafted a case study that was subsequently approved by the best-
practice organization. These case studies are included as appendices to this
report. Pending partner approval, these case studies will also be available for
download on the APQC knowledge base.
Step 3: AnalyzeIn October and December 2009, APQC worked with internal
and external subject matter experts to analyze the qualitative information
collected via the virtual site visits and generate key themes and leading practices
to communicate to participants at a knowledge transfer session.
Step 4: Report/AdaptThe presentation of key themes and leading practices
took place in December 2009 via a virtual knowledge transfer session. Study
participants can learn from these key themes, validate their own practices, and
adapt and apply the leading practices, where appropriate, to their own specific
circumstances and organizational cultures.

APQCs Four-Phased Benchmarking Methodology

Figure 4


page 12
Best-Practice Partner Introductions
APQCs project team selected three organizations worthy of study. The selection
process focused on two main criteria:
1. That the selected company demonstrated significant progress in evolving
the planning and performance management capabilities within the finance
function
2. That the selected company moved beyond the boundary of finance, having
clearly begun to raise analytical I.Q. of key decision makers across the
enterprise
Each of these organizations shared its process-improvement narratives with study
participants over three separate virtual site visits. Case studies were prepared based
on each of these presentations; they can be found in the appendix of this report.
These case studies show how finance can move into a value-adding role by investing
in the right mix of high-quality talent, information management strategies, and
analytical tools and techniques. Please refer to the case studies for a more in-depth
look at individual practices.
The leading practices from the case studies as well as input from internal and
external subject matter experts helped to shape the key findings of the study, which
are outlined in the next section of this report.
BANK OF CANADA
The Bank of Canada is Canada's central bank. Unlike a commercial bank offering a
wide range of banking services to the public, the nonprofit Bank of Canada is
responsible for Canada's monetary policy, bank notes, financial system, and funds
management. A Crown Corporation belonging to the federal government, it is the
sole issuer of bank notes in Canada. Its mandate, legislated in the Bank of Canada
Act, is to promote sound economic performance and higher living standards for
Canadians by keeping inflation low, stable, and predictable. As the fiscal agent for
the Government of Canada, the Bank of Canada promotes the safe and efficient
operation of the countrys financial system and has regulatory oversight of the
countrys clearing and settlement systems. With 1,400 employees, the organizations
corporate administration unit is a main business line that supports its primary
functions, both in terms of technology and securing the human capital needed to
meet its responsibilities.
GI ANT EAGLE
With more than 80 years of experience and $7.1 billion in sales, Giant Eagle Inc. is a
leader in the U.S. grocery store industry. Headquartered in Pittsburgh, Giant Eagle
has 5 million unique customers annually visiting its 376 grocery stores and fuel
stations spanning four states. Giant Eagle enjoys a dominant market share in both
Pittsburgh and Cleveland. With 32,000 employees, the family-owned and operated
organization ranks 40th on Forbes list of the largest private companies in 2009.

page 13
Giant Eagles senior management is diversifying market districts and geographic
centers, as well as implementing customer loyalty programs. Giant Eagle also has
made it a priority since 2006 to integrate a strategic focus into its plannin`g and
budgeting capabilities.
The case study contained in this report details how the strategic planning team at
Giant Eagle has made improving the corporate planning and performance
management function a top initiative across the organization and implemented a
more mature model.
J OHN WI LEY & SONS
John Wiley & Sons Inc. is a publisher of nonfiction print and electronic products. It
specializes in scientific, technical, medical, and scholarly journals; encyclopedias;
books; online products and services; subscription products; training materials; online
applications and Web sites; and educational materials. Wiley operates in three core
businesses: its scientific, technical, medical, and scholarly business known as Wiley-
Blackwell; its professional/trade business; and Wiley Higher Education. With 4,900
employees working across 15 countries, the global organization reported $1.7 billion
in revenue in 2008.
The case study contained in this report details how Wileys global planning and
analysis capability standardizes data, processes, reporting definitions, formulas,
assumptions, and tool sets. The organization also integrated global and local
planning models, enabled online contributions at all levels, and implemented a
global data warehouse and business intelligence platform.

OUTCOMES
APQC contends that a number of positive outcomes arise from implementing more
advanced planning and performance management systemsmost importantly,
greater visibility, increased accountability, and a higher organizational IQ for better
decision making.
Greater visibilityAdvanced planning and performance management helps
identify and explain what drives the bottom line. A clearer understanding of
internal and external performance drivers allows planning and analysis teams to
better forecast in a volatile economy. And better systems and data give way to
better analysis and decision making.
Increased accountabilityIn many organizations, accountability for meeting
targets and strategic goals is unevenly and unfairly distributed. Advanced
planning and performance management systems require involvement of all
levels of an organization. From the input provided by business line leaders to

page 14
the analysis and goal setting performed by a planning team, each stakeholder in
the system shares greater ownership of the process, which creates more relevant
goals. By including more stakeholders in the planning process, organizations will
achieve greater buy-in, and all parties will be more motivated to achieve the
targets that they helped to create.
Higher organizational IQAs seen among the best-practice organizations,
namely in Giant Eagles sales decomposition exercise, advanced planning and
performance management systems serve to increase the business intelligence of
the entire organization. In APQCs experience, systems that can clearly identify
the drivers of bottom-line performance help to educate functional staff on
strategic aims. Concepts such as cash flow and economic value added, which
may seem like business school jargon to some, can be easily communicated and
described to all stakeholders. Advanced systems educate all levels of staff about
the key drivers of margin; this creates a more strategically focused enterprise
with a greater ability to generate sustainable, profitable growth.

The heightened visibility achieved by improvements in planning and performance
management work in conjunction with a greater understanding of how higher
margins are extracted from consumers to facilitate a work force better equipped to
compete in todays marketplace.
A FI NAL WORD
The global markets for goods, services, and capital will remain volatile as North
American and western European economies enter a new growth cycle. Although
there are encouraging signs for consumer spending and employment in the United
States, financial risks still loom large in a number of sectors because many
businesses need to refinance loans in the coming months. Thanks to the recession,
revenue levels in many cases are now lower in proportion to operating profit. For
some organizations, that implies a deterioration in credit profile and the inability to
refinance under any terms. More business failures, more divestiture of
underperforming units, and more industry consolidation all point to ongoing
economic turbulence. Global business trends will likely remain difficult to predict
for some time as rapidly growing markets such as China impactand are impacted
byrecovery in long-established economies such as the United States , Britain, and
Germany.
Going forward, APQC expects to see strong interest in improving the relevance of
the financial analyst and embracing best practices in planning and performance
management. Organizations based in fast-growing economies such as China have as
much to gain as their counterparts in mature economies by enhancing planning and
performance management processes.

page 15
In the months and years to come, large, complex organizations will see a steadily
accelerating pace of change, both internally and externally. Consequently, predictive
analysis is taking center stage in planning and performance management. The most
advanced financial analysts already focus to a great degree on modeling and
predicting options for resource allocation, growth investing, and risk management.
They are indeed already building, testing, and perfecting innovations such as
predictive analytics.
In a more predictable environment, regular demand-generation assessments from
the sales and marketing functions form the basis for finances estimate of costs and
net contribution for the current reporting period. However, organizations facing
extreme variability in demand will find that the traditional approach is no longer
relevant. As this report illustrates, finance executives need to embrace innovations in
performance management so they can better respond to operating conditions.

The document is an excerpt from APQCs Corporate Planning and Performance
Management (2010) best practices report.

Apqc CPPM Excerpt

Enviado por

Dados do documento

Título original

Direitos autorais

Formatos disponíveis

Compartilhar este documento

Compartilhar ou incorporar documento

Opções de compartilhamento

Você considera este documento útil?

Este conteúdo é inapropriado?

Direitos autorais:

Formatos disponíveis

Apqc CPPM Excerpt

Enviado por

Direitos autorais:

Formatos disponíveis

Corporate Planning and Performance Management

MAKI NG FI NANCI AL ANALYSI S MORE EFFECTI VE

Você também pode gostar