I wonder what the king is doing tonight

Yes, that’s me, as Don Quixote, singing ‘Dulcinea’ from’ Man of La Mancha’ in a Broadway-themed variety show benefit concert (sort of like "Glee" for forty-to-fifty-somethings) raising money for anti-malaria netting in Africa (I did this as a medley along with ‘I, Don Quixote’). The total amount raised was over $20,000 (including a donation from SAS), which will buy about 2,000 nets. Undoubtedly the heaviest Don Quixote you will ever see; looks more like Sancho Panza to tell the truth, but it was a low-budget production and I was the best they could get.

Originally I was going to do a medley from some of the great Broadway shows of the early 60’s – Camelot, My Fair Lady, West Side Story and Man of La Mancha, but the director wanted me in costume, so I had to stick with one show and one role. Still, my mind has recently been on the songs from these other shows, Camelot in particular, which provided the inspiration and title for this week’s post.

Gartner has their five stages of maturity for Corporate Performance Management (CPM):
1) Unaware
2) Opportunistic
3) Standardization
4) Enterprise
5) Transformative …

… and at SAS we use the acronym SMILE to illustrate the evolving nature of the use of analytics in CPM:
1) See
2) Manage
3) Improve
4) Learn
5) Evolve

Either way you cut it, most organizations, 85% or so, find themselves in one of the first three Gartner stages or the first two levels of SMILE, struggling to simply See “one version of the truth”, understand cost and profitability at the product and customer level, and then use that data for the basic Management of the firm. That they find themselves in this position is not always due to poor financial management, often it’s the result of mergers and acquisitions that set a company that was making good progress back to square one on the learning curve as they digest and integrate yet another new business. In other cases the business is in high growth mode with finance laboring valiantly to keep up with the increasing volume and complexity.

While we may find ourselves mired in the tribulations of our day-to-day functions and objectives, most of us have higher aspirations, for ourselves and our organizations. All of the conferences I chair and attend are focused on improving the FP&A function, on piecing together the components of a greater vision for the finance organization. And when I present to clients myself, the question I am most often asked is, “What are the best practices, what are the top 15% doing”? After I’ve got my budget season under 90 days, or my close down to 3 days, or implemented rolling forecasts, activity-based costing, detailed operational planning, dashboards, KPI’s and a balanced scorecard (BSC), what’s next? Or, to phrase it musically, What IS the king doing tonight? And as Richard Burton responded,” I’ll tell you what the king is doing tonight (he’s wishing he were in Scotland, fishing, tonight”):

1) Integrated Business Planning: Linking strategy to financial plans, then linking those with S&OP and marketing/capital spend (hint: consider using the BSC and strategy maps as the bridge).

2) Strategy Development:  You began in the middle, with KPI’s and a scorecard, now you want to go back and link those with strategic goals and objectives, where you should have started in the first place.

3) Risk Management:  When it comes to analyzing the risk/reward equation, we’re quite good at the reward part, with NPV and IRR and TCO, but often have no idea how to assess the associated risk (see my “How Much, How Soon, How Certain” post)

4) Cost and Profitability Optimization: Knowing your cost and profitability at the product and customer level is a great first step, now you need to put that valuable information to use, applying it to marketing and customer relationship decisions, to production and quality and market mix decisions, and to activity-based budgeting where you plan for capacity and resources based on forecasted outcomes.

5) Analytical Forecasting: Driver-based budgeting and forecasting, for greater accuracy, faster scenario plan devleopment, more detailed forecasts available more quickly with fewer resources.

6) Scenario Planning: If we learned only one thing out of the global economic calamity of 2008-09 it was that we need agility in our financial and business planning process. Budgets can become obsolete before they’re even rolled out, and laying 12 months of budget railroad track is no way to be agile in today’s economic environment; not only do you need Plans “B” and “C”, but up also may need a Plan “V”. (stay tuned for NEXT WEEK's POST! - I'd provide a link to the future if it were possible).

7) Closed-loop Performance Management: The upward-trending “Information-to-Insight” arrow is only half the story. Best practice is to feed your performance metrics back into strategy formulation and adjustment, and into scenario planning and resource allocation.

This is what the king is doing tonight - the list of what the top companies are focusing on in their pursuit of financial and operational excellence. These are the performance management best practice objectives of the best organizations. This is the vision that SAS envisions for you.