Ben lamorte asmi san diego 9 21-11v2

September 21
ASMI Summit
The Planning Maturity Curve: Where are you?
Where do you want to be?

Ben Lamorte, VP Marketing, Alight Planning

© 2011 Alight Planning Slide 1

Key Contributor

Rand Heer
 Business Activities
 CEO, Alight Planning (Planning software)
 Co-Founder, Aspirity (Microsoft BI consulting)
 Founder, FP&A Train (Essbase training)
 Founder, Pillar Corporation (Enterprise budgeting)
 CFO for 2 public companies
 Rockwell Int‘l, Biz Unit CFO and Corporate
 Publications
 Coauthor: “Business Intelligence: Making Better Decisions Faster”
 Author of 10 white papers on planning/reporting topics
 Education
 MBA degree Harvard Business School


Today‘s Speaker

Ben Lamorte
 Vice President, Marketing & Sales, Alight Planning
 Principal, Decision Consulting (Adobe, Kaiser)
 Manager, Business Intelligence, planetrx.com
 Management Consultant, APM/CSC Healthcare

 Publications
 Author of 2 research papers, American Mathematics Society
 Co-author of planning white papers
 Editor of Alight Planning Blog
 Education
 Doctoral Candidate, Management Science, Stanford University
 MS Engineering, Stanford University
 BS, Engineering & Math, UC Davis

Fun Agenda

 Part 0: Quick Simulation and Warm Up
 1: Sensitivity Analysis for the Consulting Model
 2: Do we hire more consultants?

 Part 1: The Planning Maturity Curve

 Part 2: Why 1/3 Software Fails and How to Avoid

 Part 3: Fun Stuff
 Guidelines for Agile Planning
 ROI of Budgeting Software: Vendor Vs User
 RAFFLE: Submit business card to front row and write
 ―FREE ASMI PASS‖ or ―Free Assessment‖ on the back
 2 WINNERS TODAY (Each Prize is approx $1,750 value)

Part 0: Quick Simulation

 CASE 1: So, are those consultants spending too
much on travel? What is it that really drives profits
and what can we do about it?

 CASE 2: Consulting Margins were supposed to be
40% but are down. Why? What do we do to bring
that back up?


Business Value from Planning

 Insights
 Understanding things we didn‘t see before
 Actionable Knowledge
 Understanding and acting upon operational drivers
 Decisions
 Planning scenarios gives us the financial impact of
choices
 Having choices sets up decision making


The Planning Maturity Curve

Effort

Forecasting

Reporting
Agile Planning
Budgeting

Scenario Analysis

Budgeting Forecasting
& Reporting

Business Value

Planning Maturity—Budgeting

The Happy Accountant


Planning Maturity—Reporting

The Reluctant Managers


Planning Maturity—Forecasting

The Grumpy CFO


#4: Introducing Agile Planning

Agile Planning Team


2-Minutes: Turn to Your Neighbor

Effort

Forecasting

Reporting
Agile Planning
Budgeting

Scenario Analysis

& Reporting

Business Value

The Need for Real Time

 The Excel PowerPoint Cycle


Agile Planning Example

 CFO at Pittsburgh Mercy Health

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

 Process Results
 No budgeting
 Forecast Accuracy within 2%
 Manager commitments based on demonstrated best practices

 Model Status
 Now on third model iteration built from scratch


Part 2: Why Budgeting Software Fails?

 Research Brief:
 www.focus.com/briefs/why-budgeting-software-fails-
and-what-do-about-it/

 Podcast Featuring Sid Ghatak:
 www.focus.com/roundtables/avoiding-business-
performance-mangement-software-failure-4-t/


#0 Software on the Shelf

 Problem: The software company wants to sell as many seats as
possible. This is a recipe for buying TOO MANY SEATS!
 Solution: Remind the vendor of the Buttonwood Group Survey that
examined 100 companies who deployed budgeting software to replace
spreadsheets:

 The study examined what percent of non-finance employees who received
a license to use the budgeting/planning application actually logged into the
system in the past year.

 44% of companies reported complete failure to get anybody outside of
Finance to actually log into the system in the past 12 months.

 Looking across the board, on average 2/3 of all seats purchased for non-
finance managers go unused.


#0 Buying too many Seats!

Source: Planning Software Usability Survey By Buttonwood Group © 2011 Alight Planning Slide 17

#1 Going Over Budget:

 Problem: 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
$12,000 for it to be fully deployed.

 Solution: Ask for a ridiculously low bill-rate once the total project cost
hits a certain number. For example, if the vendor estimates you will
need 50 hours at $200/Hr which is $10,000. Then say: ―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.‖


#2: The Problematic Consultant

 Problem: A month after you buy software, you find out you‘ve been
assigned to a consultant who turns out to be a 3rd party partner who's
built one model as practice and recently completed an MBA degree

 Solution 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 is doomed, and in this case, you should either
 1) ask for an alternate consultant
 2) simply choose not to make the software purchase.

 The bottom line here is that you are better off building your model in
Excel with a top-notch consultant's help than building a model in some
budgeting tool with a second-rate consultant


#3: Project Takes Too Long

 Problem: ―They said it would take 4 weeks, but 6 months later, we‘re
still not done!‖ The software vendor has case studies featured on their
website that say ―I was up and running in just 4 weeks!‖ What actually
happened was the customer paid for 160 hours of consulting by the
time the project was considered complete. Since 160 hours divided by
40 hours per week amounts to 4 weeks, one way to break this down is
that "...it took 4 weeks."

 Solution: Ask for a project timeline with key milestones defined prior
to making the purchase decision. Review this project timeline with
your boss and get a sign off and ensure there are no questions from
your management team prior to the software purchase.


Fun Stuff: 3 Steps to Positive Change

 Step 1: Awareness
 Where are you in the Planning Maturity Curve?
 Rate your planning process across 4 planning activities

 Step 2: Critique
 Where do you want to be?
 Define what the improvement looks like and prioritize which
planning area to improve

 Step 3: Realign
 In Spreadsheets or leverage Dedicated Solution?

Source for 3 steps: Critical Reflection Process inspired by J. Habermas

ROI of ―Planning‖ Software

Effort All Planning Software Claims

Every Vendor Says They Do Budgeting & Reporting

Reporting

Every Vendor Claims:
• Saves Time
• Adds Business Value
Budgeting

Business Value

―Actual‖ ROI ―Budgeting & Reporting‖

Effort Budgeting & Reporting Software

―What FP&A Customer Says‖
about Impact of Dedicated
Reporting
Budgeting & Reporting Tool:
• Saves Time But…
• No Added Business Value

Budgeting
Just Doing Budgeting
is Not Enough

Business Value

THE BIG ROI – Agile Planning

Effort
Alight Customers: ―Our overall planning process is a bit streamlined;
however, The Big ROI is Added Business Value”

Forecasting

Reporting Only Alight Does
Agile Planning
Budgeting

Only Alight
Does Scenarios this
effectively
& Reporting Adds Real Value
In Alight

Business Value

Fun Stuff: Guidelines for Agile PlanningTM

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

Driver-Based Planning: URA


Object-Based Linking

• No more spreading
formulas to the right

• Much easier to audit

•Robust line items: No
more broken formulas
since impossible to
―hardcode‖ over
formulas)


Integrated Actuals: Back-Calc


Scenarios: Change multiple in 1 step


Scenarios: Compare Side by Side


So, what about tomorrow?

2-Minutes Talk to your Neighbor

Step 1: Awareness
Rate your planning process across the 4 planning activities

Budgeting:

Reporting:

Forecasting:

Agile Planning:

Will the Sun Come Out Tomorrow?

 Step 2: Critique
 Where do you want to be?
 Define what the improvement looks like and prioritize which
planning area to improve

 Step 3: Realign
HOW ARE YOU GOING TO DO IT?


Oct 27th ASMI Webinar with CFO

 Best (and Worst) Practices in Budgeting and
Forecasting: The story of a successful CFO.
 Arlin Hall, Chief Financial Officer at The Blood &
Tissue Center, will reflect on his real-world
experience moving out of spreadsheets into Prophix
and MS Forecaster which did not work out
 Arlin attended an ASMI Budgeting and Forecasting
Conference in San Diego in 2010, and ended up
installing Alight Planning. ―Finally, I‘m a happy
camper after years of searching for the right
planning solution.‖

Follow Up with Alight

 Follow up with Alight
 BLamorte@AlightPlanning.com
 Telephone: (415) 456-8528

 Resources
 Transforming Planning at Pittsburgh Mercy:
 www.Alightplanning.com/Webinars/PM/Video.html
 Application Requirements for Rolling Forecasts
 www.AlightPlanning.com/Workshop/Requirements-for-Rolling-
Forecasts/Video.html
 Focus Expert Podcast:
 Google ―How to Avoid BPM Software Failure‖


APPENDIX


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
Save As
relate to budget
templates where you
need to build in
structure and
financial intelligence
from scratch.

Version A Version N…


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.


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.


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.



 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



 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.



 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.


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.



Software Conversion # Services Hours Per Billable Bill Rate Billable
Licenses rate Customers Customer Services Services
Sold Hours Revenues

Predictive logic
diagram for a
software/services
business
It’s about
Activities & Rates



Software Conversion # Services Hours Per Billable Bill Rate Billable
Licenses rate Customers Customer Services Services
Sold Hours Revenues

Staff
Utilization
Predictive logic Rate

diagram for a Services Hours Per Services
Staffing Month Staffing
software/services Hours Heads
business Services Expenses
 Salaries
It’s about  PR taxes/ benefits
 Supplies
Activities & Rates  Travel
 Recruitment
Training
 Etc.

Services
Profitability



 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


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, currency
 Any level—line item, natural accounts, cost center, etc.
 Any modeling—simple of complex linking, back calculate rates



 Integration Issues
 Data spread across multiple sources
 Actuals and Plan at different levels
 No underlying activity drivers
 Actual and plan structures out of sync



 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 a
country 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



 Types of Scenario Analysis
 Manage Resource Allocations: Adjust Short Term ―Who Gets What‖
 Strategic Planning: Extend Time Frames; Same Model As Short Term



 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]



 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
 Scenario Drill Down: Comparison & Analysis at All Levels
 Real Time Feedback: The Planning Tool is the Presentation Tool


Spreadsheet Issues

 Spreadsheets Don‘t Do the Job
 Not multi-user: security and process control issues
 Not a database: consolidation and reporting issues
 Not multi-dimensional: reporting and analysis issues
 Cell based modeling: limitations on driver-based planning
 Save As for versions and scenarios: just not viable!

Scenario A Scenario B Scenario C

Case Study: Pittsburgh Mercy

Ray Wolfe
 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



 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

 260 revenue/cost center

 1,700 employees; 106 Managers & Supervisors

 Funded through traditional insurance billing, government grants and
capitation contracts, Private Foundations



 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



 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!


Level of Detail

 Technical Issues
 What level of detail? Actuals and plan
 Transportation example


Using Actuals to Drive Plan

 Technical Issues
 Visibility into Units/Rates/Amounts
 Revenue and Allowance Rate Example


Change is not rapid, business stable

The Happy Caveman


Agile Planning Simulation

 Background
 Wombat, Ltd: mid market ERP for verticals: healthcare, manufacturing,
technology
 Bongo is main competitor in manufacturing
 Event driver: Bongo cuts prices 30% in manufacturing
 The Players
 Ben, Sales Guy
 Rand, Finance Guy
 Sid, Services Guy
 Phyllis, CEO (not present)
 What You‘ll See
 Real Time Collaboration
 Driver-Based Financial Model
 Scenario Planning


The 4 Planning Activities


Where Are You on the Curve?


Ben lamorte asmi san diego 9 21-11v2

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