Is it really worth it to replace spreadsheets with a planning tool

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Financial Planning Innovations

Is it REALLY worth it to replace

spreadsheets with a planning tool?

An Insider‘s Guide

Ben Lamorte, VP Marketing, Alight Planning

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Ben Lamorte Business Activities

VP Marketing, Alight Planning

Principal, Decision Consulting (Adobe, Kaiser)

Manager, Business Intelligence, planetrx.com

Management Consultant, APM/CSC Healthcare

Today‘s Speaker

Publications

Co-author of planning white papers

Editor of ―The Agile Planner‖ Blog

Education

MS Management Science & Engineering, Stanford University

BS Mechanical Engineering, UC Davis

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Feb 8th Agenda

Part 1 The Planning Maturity Curve

(Budgeting, Reporting, Forecasting, Agile Planning)

Part 2 Adventures in Agile Planning

(…‖The Fun Part‖ of the Planning Maturity Curve)

BONUS: 3 BIG FREE TIPS FROM AN INSIDER

Part 3 Announcing the Winner FREE PASS to Alight Event in 2012 (<=$2,000 Value)

OR

FREE SOFTWARE from ALIGHT PLANNING (>$2,000 Value)

APPENDIX 1: WHY SOFTWARE FAILS?

APPENDIX 2: How to Get to Agile Planning!

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Part 1: Planning Maturity Curve

Question! What describes your Planning?

1. Happy with spreadsheets.

2. Not happy with spreadsheets; considering a software tool.

3. Purchased software, it failed; we‘re back in spreadsheets!

4. Purchased a software tool, it was a success!

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Part 1: HISTORICAL DATA

19%

30%

18%

33%

Prior Surveys

Happy w Spreadsheets

Looking for tool

Failed with tool

Succeeded w tool

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Business Value from Planning

Insights

Understanding things we didn‘t see before

Actionable Knowledge

Understanding and acting upon operational drivers

―Financially-Sound‖ Decisions

Scenario analysis gives us the financial impact of choices

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All Planning Software

All Planning Software Claims

Budgeting

Reporting

Effort

Business Value

Every Vendor Says They Do Budgeting & Reporting

Every Vendor Claims:

• Saves Time

• Adds Business Value

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Question!

Small Group Question:

For those who SUCCESSFULLY replaced spreadsheets

with a financial reporting solution, what best describes

your success:

1. It saves time but does not add Business Value

2. It saves time AND adds Business Value

3. What is this guy talking about?

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Typical Budgeting & Planning Software

Budgeting

Reporting

Effort

Business Value

―Actual‖ Value of Budgeting & Reporting

―What FP&A Customer Says‖

about Impact of Dedicated

Budgeting & Reporting Tool:

• Saves Time

• BUT DOES NOT ADD

Business Value

Just Doing Budgeting

is Not Enough

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The Big ROI – Agile Planning

Budgeting

Forecasting

Reporting

Effort

Business Value

Agile PlanningTM

THE BIG ROI COMES FROM ADDED BUSINESS VALUE

Budgeting

& Reporting

Forecasting

Adds Real Value

Real-Time

Scenario Comparison

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KEY POINT: TYPE 1 and TYPE 2 Benefits

Effort

Business Value

Budgeting

& Reporting

Forecasting

Adds Real Value

Real-Time

Scenario Comparison

Type 1: Save Time

Type 2: Add Value

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Definition: TYPE 1 and TYPE 2 Benefits

SAVE TIME: TYPE 1 Objectives that streamline basic planningThings that we’re already doing but want to do faster and better as compared to spreadsheets. “Get out of Excel Hell”Reduce the duration of the budget cycleBetter visibility into the budget process and have complete control of versionsEASY TO MEASURE BENEFITS – BENEFITS ARE SMALL IN MANY CASES

ADD VALUE: Type 2 Objectives that enable better management decisions. Things we wish we were doing but are only partially able to or not currently even attempting to do in Excel.

• Better visibility into the impact of changes in the market on cash flow and profitability• Be prepared to deal with uncertainties in the market so that they can be proactive rather than reactive when things don’t happen “as planned”• Better communicate the business model and answer questions from management team• Grow the business and be prepared to handle that growth and track key metrics along the wayHARD TO MEASURE BENEFITS – BENEFITS ARE VERY BIG IN MANY CASES

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Planning Maturity—Full Matrix

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Part 2: 3 Adventures in Agile Planning

The 3 Adventures!

#1 Kaiser

#2 Adams Land and Cattle

#3 Pittsburgh Mercy Health

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1: Larry Van Kuran, Kaiser Permanente

Business Issue: 8 Regions on disparate Pharmacy Management

Systems – Know the old systems need updating, but need to

explore how and when to move to a centralized system but it will

cost $100M +

Agile Planning Solution: Set up a model by 8 regions with inputs for

rollout by region, scenarios set up to analyze ―delay project 1

year‖, ―critical regions only‖, etc.

Outcome: Presented business case to board after getting buy-in

from the 8 regions and now live with (Pharmacy Information

Management System) PIMS – Getting it done on time had a

$400M positive impact to 10-Yr NPV!

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KAISER – THE “MEETING”

Scenario: ―Option 2: GO LIVE KEY REGIONS ON TIME‖

NOTE: DATA IS MOCK UP

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KAISER – THE “MEETING”, Cont.

Scenario: ―PUSH PROJECT OUT ONE YEAR‖

OUTCOME - CONCLUDE: DO IT NOW!

NOTE: DATA IS MOCK UP

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2: Amy Cyboron, Controller, Adams Land &Cattle

Business Issue: Mitigate risks by maintaining an optimal

inventory

Agile Planning Solution: Set up a model so changes to

the purchase plan for cattle let management see the

numbers flow through.

Outcome: Then work with our procurement group to

instruct a reduction in new purchases which gives us

better management on inventory.

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Progress to Date

Financial Results $600K+ in documented revenue increases and cost cuts from MET goals

Process Results

No budgeting

Global updates twice a year – detailed updates quarterly

Forecast accuracy to 2%

Manager commitments based on demonstrated best practices

Understanding the business as an operating entity

Reaction to issues on a two year horizon, e.g. present cut plan

Model Status

Now on third model iteration built from scratch

3: Case Study: Pittsburgh Mercy

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Ray Wolfe Business Activities

Chief Financial Officer, Pittsburgh Mercy Health

System 2006-present

Director of Fiscal and Information Systems– Mercy

Behavioral Health 1996-2006

Chief Fiscal Officer, Summit Center for Human

Development, 1988-1996

St. Francis Medical Center, Patient Account

Manager, 1986-1988

Awards: Ventana Leadership 2010

Education

Juris Doctorate, West Virginia University 1977

BA, Marshall University, 1974

Case Study: Pittsburgh Mercy

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Community Mental Health and Health Care Related

Mental Health, Mental Retardation, Drug/Alcohol, Homeless

Prevention Services and a Private Foundation

Serving Southwestern Pennsylvania

Business Metrics

Pittsburgh Mercy Health System has

3 subsidiary corporations

60 community locations

27 major programs product lines

260 revenue/cost center

1,700 employees; 106 Managers & Supervisors

Funded through traditional insurance billing, government grants and

capitation contracts, Private Foundations

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Demographic Problems

Managers with only clinical backgrounds/ no business skills

60 sites yielded communication barriers and no common language

Excel based —

Overload mode of worksheets with link and formula errors

Too much time to maintain and no certainty of integrity

No way to import and compare actual data to the budget design

Budgeting became a ritual without meaning

Budgeting full year totals with no seasonality

Tops down budgets w/o manager buy in

No P&L visibility by critical factors

No operational integration


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Organization of Forecast Groups and Processes

Group managers by functional areas—e.g. Community Treatment Teams

Outpatient Clinics

Child Services

15 Groups each meet once a quarter 3 to 12 managers per group

4 members from accounting/finance

Real time process elements Alight Planning displayed on Overhead Projector with Smart Board

CFO is facilitator; Alight Admin on the mouse and keyboard

Review/ make changes in real time

Everyone sees everything!


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Level of Detail

Technical Issues

What level of detail? Actuals and plan

Transportation example

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Tips from an Insider: BONUS MATERIALS

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Tip 1: DO NOT GO BY General ―RANKINGS‖

2010 Customer Satisfaction (on a Scale of 5.0)

Alight Planning 4.65

Host Analytics 4.63

Tagetik 4.56

Longview/Exact 4.36

Adaptive Planning 4.15

Prophix 4.07

IBM/Cognos 3.90

Infor 3.73

Oracle/Hyperion 3.71

Microsoft 3.70

SAP/Business Objects 3.69

Vendors with no data include:

Centage, XLerant, Clarity, Satori

Source: BPM “Beyond the Hype Survey”

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Tip 2: Do Consider Cloud & Web Forms

Source: The Agile Planner Blog

YES

WEB FORMS?

NO

Pla

nn

ing

Ob

ject

ive

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Tip 3: Mitigate Risk of Failure to Replace

Spreadsheets by… Analyzing Potential ROI

Key Question: is your primary objective

Budgeting/Type 1 or Agile Planning/Type 2?

Type1

Benefits are estimated at about $1,000 per user

adopting the annual budgeting tool

Note: 2/3 of Non-Finance Personnel do not use

the budgeting tool (See Buttonwood Survey)

Type 2

Benefits are based on quality of FP&A staff, not

related to #user licenses purchased

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PART 3: Who will be the Winner??

Let‘s Talk!

Email: [email protected]

Call Ben at: (415) 456-8528

Join me: blog.alightplanning.com

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APPENDIX Why Budgeting Software Fails?

Free Resources for In-Depth Analysis of Software Failure

FOCUS Podcast Featuring Sid Ghatak & Mark Gandy

www.focus.com/roundtables/avoiding-business-performance-

mangement-software-failure-4-t/

4 Reasons Budgeting Software Projects Fail, the Private

―Un-Authorized by Alight Blog‖

http://benonbudgets.blogspot.com/2010/06/4-reasons-budgeting-

software-projects.html

Talk to Me!


Call Ben at: (415) 456-8528

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#1 Worst Practice: Software on the Shelf

Situation: Management thinks buying software licenses for everyone

will somehow get everyone more involved and create a culture of

collaborative budgeting.

Problem: Buttonwood Group Survey examined 100 companies who

deployed budgeting software to replace spreadsheets:

44% of companies reported complete failure to get anybody outside of

Finance to actually log into the system in the past 12 months.

How to Avoid: Start with a ―Minimal Configuration‖ ADD Non-Finance

USERS LATER!

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#1 Software on the Shelf

Source: Planning Software Usability Survey By Buttonwood Group

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Worst Practice #2: Go over your budget!

Problem (Quote below from real customer interview!) “Our software will be just $2,000. We forgot to tell you it costs $10,000 for

consulting help to build your model – oh yeah, it‘s really easy to use. Of

course, that‘s just to get you going, it could take $18,000 for it to be fully

deployed.‖

How to Avoid (Send me an email with other ideas) Build discounts into pricing if vendor goes over the price!

Example: ―Great! So, if we do in fact pay $10,000 upfront for the 50 hours, can we get a

bill-rate of $100/Hr thereafter if additional consulting is requested? After all, it is unlikely we

will need more than 50 hours.‖

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Worst Practice #3: Wrong Consultant

Problem A month after you buy software, you find out you‘ve been assigned to a

consultant who's built one model as practice and recently completed an

MBA degree!

How to Avoid Do not agree to purchase any software until you’ve at least met the

consultant assigned to your project. If you don‘t click with your consultant,

the project may be doomed from the start .

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FREE RESOURCES

Free Resources for In-Depth Analysis of Software Failure

FOCUS Podcast Featuring Sid Ghatak & Mark Gandy

www.focus.com/roundtables/avoiding-business-performance-

mangement-software-failure-4-t/

4 Reasons Budgeting Software Projects Fail, the Private

―Un-Authorized by Alight Blog‖

http://benonbudgets.blogspot.com/2010/06/4-reasons-budgeting-

software-projects.html

Talk to Me!


Call Ben at: (415) 456-8528

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Where Are You on the Curve?

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Planning Maturity—Agile Planning

The Happy Team

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Planning Maturity—Agile Planning

Planning Maturity Curve (PMC)

Budgeting

Forecasting

Seat of Pants

Reporting

Effort

Business Value

Move out of Excel

Reduce level of detail

Forecasting/Agile Planning

Implement driver-based planning

Integrate (don’t just import) actuals

Implement scenario analysis

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1. Move Out of Excel

Deal with structure issues

Deal with modeling issues

2. Reduce Level of Detail

Plan the way managers think; not the Happy Accountant

Reduce detail to better integrate strategy

3. Implement Driver-Based Planning

Reduce direct input data volumes

Increase ‗modeled elements‘—operational/driver based planning

4. Integrate (Don‘t Just Import) Actuals

―Rolling over‖ actuals in plan files—apples to apples

Using actuals to understand trends—focus on rates

5. Implement Scenario Analysis

You can‘t predict the future, but you can construct scenarios

You‘re looking for easy maintenance and comparisons at all levels

Guidelines for Agile PlanningTM

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1. Out of Excel

Structure Issues Bound by templates: can‘t add line items on-the-fly

Rollup structures with dimensions are difficult to create and maintain

No multi-user security/process controls

Importing (rekeying) actuals is error prone/cumbersome

Structure problems

relate to budget

templates where you

need to build in

structure and

financial intelligence

from scratch.

Version A Version N…

Save As

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1. Out of Excel

Modeling Issues Formula and structure errors—aka #Refs

Dependency on key individuals—Lone Ranger Syndrome

Line manager spreadsheet skills are limited; untrained/dangerous.

Modeling problems: cell-

based linking which

discourages driver-based

planning which is the

source of most errors.

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1. Out of Excel

What to Look for in Planning Applications You can build rollup structures with multiple dimensions/attributes

Application incorporates multi-user security and process controls

Users can create line items on-the-fly without breaking things

A fundamental deliverable

of a Planning Application is

user security and process

controls.

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1. Out of Excel

What to Look for in Planning Applications You can build rollup structures with multiple dimensions/attributes

Application incorporates multi-user security and process controls

Users can create line items on-the-fly without breaking things

Importing capabilities—aka ETL (Extract, Transform & Load)

Object-based linking with audit trails

Object-based linking is

critical for implementing

driver-based planning.

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Plan at the Right Level Lowest level natural class accounts create too much detail

Let managers plan the way they think

Set the stage for driver-based planning

It‘s the data that‘s the killer

7 T&E accounts *

100 cost centers *

12 months = 8,400

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Guidelines for ―Right Level‖ Plan/report at a higher level—especially for natural accounts; or

Set up a dual system: traditional budgeting plus forecast at higher level.

Do the math for various alternatives; test imports for a ‗visual picture‘.

Go step-by-step: not everything need be done all at once.

The planning application must have line item detail

Example of an account

structure at a higher

level with line items

created by managers.

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Benefits of Reducing Level of Detail Better operational connection for line managers

Reduces overall data volumes; better visibility

Set the stage for driver-based planning

Reducing level of detail

along with moving out of

spreadsheets reduces

Effort and enhances

Business Value.

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3. Driver-Based Planning

What Is Driver-Based Planning? A series of sub-models for revenues and expenses based on drivers

Drivers are typically units of things: unit sales, customers, transactions

The fundamental structure is: Units * Rate = Amount

The spending focus is on big ticket items and large departments

Example of a driver

model that calculates

amount of explosives for

a gold mining operation.

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Software

Licenses

Sold

Conversion

rate

# Services

Customers

Predictive logic

diagram for a

software/services

business

It’s about

Activities & Rates

Hours Per

Customer

Billable

Services

Hours

Bill Rate Billable

Services

Revenues


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Software

Licenses

Sold

Conversion

rate

# Services

Customers

Services

Staffing

Hours

Services Expenses

Salaries

PR taxes/ benefits

Supplies

Travel

Recruitment

Training

Etc.

Predictive logic

diagram for a

software/services

business

It’s about

Activities & Rates

Hours Per

Customer

Billable

Services

Hours

Staff

Utilization

Rate

Bill Rate Billable

Services

Revenues

Hours Per

Month

Services

Staffing

Heads

Services

Profitability


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Benefits of Driver-Based Planning? Tight turn-around for forecasting has a chance

Enforces focus on important operational drivers

Visibility into the numbers—allows meaningful causal analysis of variances

Sets up ―real time planning‖ for scenario analysis

Driver-based planning

delivers a significant

increase in Business

Value

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4. Integrate Actuals

Integration Issues Data spread across multiple sources

Actuals and Plan at different levels

No underlying activity drivers

Actual and plan structures out of sync

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4. Integrate Actuals

Import Actuals Metadata and data imports based on chart of accounts structures

Monthly updates from the general ledger

Automated with ―connectors‖ or semi-automated with ETL tools

Integrate Actuals Any source—GL,HR, CRM, RDBMS, OLAP

Any data type—text, number, currency, percentage

Any level—line item, natural accounts, cost center, etc.

Any modeling—simple of complex linking, back calculate rates

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Deliverables Insights: What‘s Going On with the Numbers

Actionable Knowledge: What Are Our Choices Between Things To Do

Decisions: ―OK gang, here‘s what we‘re going to do!‖

About the Future

“Trying to predict the future is like driving down acountry road at night with no lights while looking

out the back window.”

Peter Drucker

“The future ain’t what it used to be…”

Yogi Berra

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Types of Scenario Analysis Manage Resource Allocations: Adjust Short Term ―Who Gets What‖

Strategic Planning: Extend Time Frames; Same Model As Short Term

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Types of Scenario Analysis Manage Resource Allocations: Adjust Short Term ―Who Gets What‖

Strategic Planning: Extend Time Frames; Same Model As Short Term

Black Swan Planning: Understand Improbable Events [Nassim Taleb]

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Implementation Guidelines Easy to Create: On-the-Fly; No IT; Selectively Include Line Managers

Easy to Maintain: Change Data and Structure in Near Real Time

Real Time Feedback: The Planning Tool is the Presentation Tool

Scenario Drill Down: Comparison & Analysis at All Levels

Is it really worth it to replace spreadsheets with a planning tool

Economy & Finance

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