The Deeper Realities of Implementing Shared Service Costing with Hyperion Profitability and Cost Management
By tobyehatch-Oracle on Jan 10, 2014
Marsh & McLennan Companies are the premier global professional services firms providing advice and solutions for risk management, strategy and human capital management. They are comprised of four companies:
+ Marsh- a global leader in insurance brokering and risk management
+ Guy Carpenter- a global leader in risk and reinsurance intermediary services
+ Oliver Wyman- a global leader in management consulting and
+ Mercer - a global consulting leader in talent, health, retirement, and investments
Mercer helps clients around the world advance the health, wealth and performance of their most vital asset – their people. Over the last several years, Marsh & McLennan Companies has seen transformational change with the establishment of a new shared service center to support the finance and information technology functions. However that did not come easily.
Stuart shared with our listeners that two years ago, Mercer’s senior leadership changed overnight. In the new CEO’s first town hall to the company, he spoke of the urgent need for Profit and Loss statements by line of business and by country level. He could not believe if he asked a business leader in Brazil what his profit was, that he didn’t know the answer.
How were they measuring cost? Previously, all Mercer measurements had been performed on a contribution margin basis; this simply meant that each LOB was judged on how much it contributed to Mercer’s central costs. Function costs were all held centrally and not allocated to the businesses. This was simply unacceptable to the new leadership team because it did not allow them to understand which businesses and countries were truly profitable.
As you might expect, under new management, finance was given the immediate task of implementing business/country level profit and loss statements, as the new CEO had made it one of his top priorities. This meant developing a rapid (like yesterday) solution using Excel. Eventually, with extraordinary effort, they were able to build and deliver a successful solution using many, extremely large MicroSoft Excel workbooks and MicroSoft Access - but they ran into all the usual Excel model based issues, after go live:
+ It was very difficult to answer questions from the business - in other words, why did I get this allocation
+ It was impossible to keep track of changes to the model
+ It was difficult to re run the model for a different scenario -- for example, running it for Budget and now wanting to run it for Prior Year Restated.
What Mercer wanted for the future was to deliver an allocation solution that combined the Oracle Hyperion Planning and Hyperion Profitability and Cost Management approach providing a platform for future growth and the ability to easily run multiple versions. Also key was low IT involvement when running the model -- they wanted Finance to completely own the day-to-day running of the model.
Mike further explained that Marsh & McLennan Companies needed to put together a new shared service center to support the controllership and Financial Planning & Administration within all of their operating companies. A key component of that shared service center was the selection and standardization of a performance management platform to create a consistent user experience for their users, and to lower the firm’s Total Cost of Ownership. For this reason, Hyperion Profitability and Cost Management was evaluated and selected as a tool that could meet the needs of this solution for the F-A-S-T requirements - specifically Flexibility, Audit and Control, Shared Methodology, and Transparency. For most of Mike’s clients, the F & T tend to be the most important.
The flexibility of Hyperion Profitability and Cost Management (HPCM) was critical to Mercer in the development process, because it allowed the business users to see the impact of an allocation methodology or attribution change. Mercer couldn’t have done that with a traditional “take the requirements and build it via a calc script” type approach. Additionally, the traceabilty maps in HPCM were helpful in getting sign off on the allocations, and additionally answering questions that came back from the Planners regarding where a charge came from. Finally, by moving the older model in Excel to an Oracle EPM packaged application, they were able to offer the audit and control needed to ensure confidence in the numbers, and additionally, provide an ability to run the models via shared methodologies for budgets, actuals, and forecast scenarios. Mercer took advantage of features that allowed them to run 2013 budget data through 2012 methodologies and 2013 methodologies, and seeing the impact of methodology change alone on results.
It became apparent quickly that there were deeper realities of implementing Shared Service costing with Hyperion Profitability and Cost Management. To hear more, click here to listen to the entire podcast.
To learn more about Hyperion Profitability and Cost Management, click here.