Independent Research on 1500 Companies Reveals Challenges in Performance Visibility – Part 1

At the end of May I was joined by Professor Andy Neely of Cambridge University on a webinar, with an audience of over 700, to discuss the results of this extensive study which covered 13 countries and nearly every commercial and industrial sector.  What stunned both of us was not so much the number listening but the 100 questions they asked in just 1 hour.  This certainly represents a record in my experience and for those that organized the webinar.

So what was all the fuss about?  Well, to begin with this was a pretty big sample and it represented organizations with over $100m sales across the USA, Europe, Africa and the Middle East. It also delivered some pretty interesting results across a wide range of EPM subjects such as profitability, planning and reporting.  Let’s look at some of those findings.

We kicked off with profitability, one of the key factors in driving performance, or that is what you would think, but in fact 82% of our respondents said they did not have complete visibility into the profitability of their organization. 91% of these went further to say that, not surprisingly, this lack of knowledge into the profitability has implications with over half citing 3 or more implications.  Implications cited included misallocated resources, revenue opportunities not maximized, erroneous decisions made and impaired financial performance.  Quite a list of implications, especially given the difficult economic circumstances many organizations are operating in at this time.

So why is this?  Well other results in the study point to some of the potential reasons.  Firstly 59% of respondents that use spreadsheets use them for monitoring profitability and 93% of all managers responding to the study use spreadsheets to gather and analyze information.  This is an enormous proportion given the problems with using spreadsheets based performance management systems that have been widely talked about for many years.  For profitability analysis this is particularly important when you consider the typical requirement will be to allocate cost and revenue across 6+ dimensions based on many different allocation methods.  Not something that can be done easily in spreadsheets plus it gets to be a nightmare once you want to change allocations, run different scenarios and then change the basis of your planning and budgeting!

It is no wonder so many organizations have challenges in performance visibility.

My next blog will look at the fragmented nature of many organizations’ planning.  In the meantime if you want to read the complete report on the research go to:

http://www.oracle.com/webapps/dialogue/ns/dlgwelcome.jsp?p_ext=Y&p_dlg_id=10077790&src=7038701&Act=29

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