Independent Research on 1500 Companies Reveals Challenges in Performance Visibility – Part 2

My blog article on the first part of this study focused on profitability and cost management.  In this second blog I am going to look at the findings around planning and budgeting.

Just to remind you, or if you haven’t read my first blog here is some background: At the end of May 2011 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 management, planning and reporting.

For the planning section we started off with a question to get an idea of just how prevalent the use of spreadsheets actually is for planning and reporting. I guess we should not have been surprised when the results were consistent with what we have seen for many years with 71% - 80% (depending on company size) using spreadsheets for financial planning and budget control. There are many well documented consequences of this, one of which came through clearly in our results, with 54% of managers saying they spend more time gathering information that analyzing it. When we looked at how much of their time managers spend on spreadsheets, finance managers spent the longest at 45% but surprising the next was the CEO at 40%. Our conclusion is that organizations and more importantly their managers are still ‘drowning in spreadsheets’!

This was further confirmed when we looked specifically at ‘enterprise’ planning. Less than a third of organizations confirmed they had specialist software for any one of the specific categories of planning we defined. It gets noticeable worse when considering those that confirm they have specialized software for ‘all’ the categories, just 11%. The result is a catalogue of confirmed problems with planning that include - gaps in data, data not standardized, data being provided late and data inaccuracies.  In fact 95% of our respondents said they encountered problems of some form with their planning process. These results concur with what we hear when we talk to organizations about their planning and budgeting which are often described as a collection of ‘fragmented’ systems and processes most often stitched together with email and spreadsheets.

‘Fragmentation’ is confirmed in this study with only 16% of organizations saying their management processes are linked through specialist software and 71% actually stating that the links between strategic goals and operational plans and budgets are fragmented. This has an impact on communication and management commitment with 72% of managers criticizing communications from senior management and 89% of non-finance managers stating they would feel more committed if communication on performance were improved.

Given all of the above findings, when it came to asking about how long it takes to implement strategic change it is no wonder the average came out to 6.5 months. Fragmentation of management processes introduces time and errors that no organization can afford.  It reminds me of the situation often seen with fragmented operational processes 15 years ago before the wide adoption of ERP. It really is time organizations took a serious look at integrated Enterprise Performance Management (EPM) solutions to help them create consistent, end-to-end management processes.

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 Alternatively if you would like to know more about Oracle’s Enterprise Performance Management solution go to: http://www.oracle.com/us/solutions/ent-performance-bi/051191.html

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