Financial Planning and Analysis Survey Results: Management Prioritizing New Planning Activities to Drive the Business Forward on the Planning Maturity Curve

1. Financial Planning Innovations
Is it REALLY worth it to replace
spreadsheets with a planning tool?
An Insider‘s Guide
Ben Lamorte, VP Marketing, Alight Planning
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2. Today‘s Speaker
Ben Lamorte
 Business Activities
 VP Marketing, Alight Planning
 Principal, Decision Consulting (Adobe, Kaiser)
 Manager, Business Intelligence, planetrx.com
 Management Consultant, APM/CSC Healthcare
 Publications
 Co-author of planning white papers
 Editor of ―The Agile Planner‖ Blog
 Education
 MS Management Science & Engineering, Stanford University
 BS Mechanical Engineering, UC Davis
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3. Feb 8th Agenda
 Part 1 The Planning Maturity Curve
 (Budgeting, Reporting, Forecasting, Agile Planning)
 Part 2 Adventures in Agile Planning
 (…‖The Fun Part‖ of the Planning Maturity Curve)
 BONUS: 3 BIG FREE TIPS FROM AN INSIDER
 Part 3 Announcing the Winner
 FREE PASS to Alight Event in 2012 (<=$2,000 Value)
OR
 FREE SOFTWARE from ALIGHT PLANNING (>$2,000 Value)
APPENDIX 1: WHY SOFTWARE FAILS?
APPENDIX 2: How to Get to Agile Planning!
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4. Part 1: Planning Maturity Curve
 Question! What describes your Planning?
1. Happy with spreadsheets.
2. Not happy with spreadsheets; considering a software tool.
3. Purchased software, it failed; we‘re back in spreadsheets!
4. Purchased a software tool, it was a success!
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5. Part 1: HISTORICAL DATA
Prior Surveys
19%
33% Happy w
Spreadsheets
Looking for tool
Failed with tool
Succeeded w tool
30%
18%
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6. Business Value from Planning
 Insights
 Understanding things we didn‘t see before
 Actionable Knowledge
 Understanding and acting upon operational drivers
 ―Financially-Sound‖ Decisions
 Scenario analysis gives us the financial impact of choices
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7. All Planning Software
Effort All Planning Software Claims
Every Vendor Says They Do Budgeting & Reporting
Reporting
Every Vendor Claims:
• Saves Time
• Adds Business Value
Budgeting
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Business Value

8. Question!
 Small Group Question:
 For those who SUCCESSFULLY replaced spreadsheets
with a financial reporting solution, what best describes
your success:
1. It saves time but does not add Business Value
2. It saves time AND adds Business Value
3. What is this guy talking about?
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9. ―Actual‖ Value of Budgeting & Reporting
Effort Typical Budgeting & Planning Software
―What FP&A Customer Says‖
about Impact of Dedicated
Budgeting & Reporting Tool:
Reporting • Saves Time
• BUT DOES NOT ADD
Business Value
Budgeting
Just Doing Budgeting
is Not Enough
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Business Value

10. The Big ROI – Agile Planning
Effort
THE BIG ROI COMES FROM ADDED BUSINESS VALUE
Forecasting
Reporting
Agile PlanningTM
Budgeting
Real-Time
Scenario Comparison
Budgeting Forecasting
& Reporting Adds Real Value
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Business Value

11. KEY POINT: TYPE 1 and TYPE 2 Benefits
Effort
Type 2: Add Value
Type 1: Save Time
Real-Time
Scenario Comparison
Budgeting Forecasting
& Reporting Adds Real Value
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Business Value

12. Definition: TYPE 1 and TYPE 2 Benefits
SAVE TIME: TYPE 1 Objectives that streamline basic planning
Things that we’re already doing but want to do faster and better as compared to spreadsheets.
“Get out of Excel Hell”
Reduce the duration of the budget cycle
Better visibility into the budget process and have complete control of versions
EASY TO MEASURE BENEFITS – BENEFITS ARE SMALL IN MANY CASES
ADD VALUE: Type 2 Objectives that enable better management decisions.
Things we wish we were doing but are only partially able to or not currently even attempting to do
in Excel.
• Better visibility into the impact of changes in the market on cash flow and profitability
• Be prepared to deal with uncertainties in the market so that they can be proactive rather than
reactive when things don’t happen “as planned”
• Better communicate the business model and answer questions from management team
• Grow the business and be prepared to handle that growth and track key metrics along the way
HARD TO MEASURE BENEFITS – BENEFITS ARE VERY BIG IN MANY CASES
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13. Planning Maturity—Full Matrix
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14. Part 2: 3 Adventures in Agile Planning
The 3 Adventures!
#1 Kaiser
#2 Adams Land and Cattle
#3 Pittsburgh Mercy Health
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15. 1: Larry Van Kuran, Kaiser Permanente
Business Issue: 8 Regions on disparate Pharmacy Management
Systems – Know the old systems need updating, but need to
explore how and when to move to a centralized system but it will
cost $100M +
Agile Planning Solution: Set up a model by 8 regions with inputs for
rollout by region, scenarios set up to analyze ―delay project 1
year‖, ―critical regions only‖, etc.
Outcome: Presented business case to board after getting buy-in
from the 8 regions and now live with (Pharmacy Information
Management System) PIMS – Getting it done on time had a
$400M positive impact to 10-Yr NPV!
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16. KAISER – THE “MEETING”
Scenario: ―Option 2: GO LIVE KEY REGIONS ON TIME‖
NOTE: DATA IS MOCK UP
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17. KAISER – THE “MEETING”, Cont.
Scenario: ―PUSH PROJECT OUT ONE YEAR‖
OUTCOME - CONCLUDE: DO IT NOW!
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NOTE: DATA IS MOCK UP

18. 2: Amy Cyboron, Controller, Adams Land &Cattle
Business Issue: Mitigate risks by maintaining an optimal
inventory
Agile Planning Solution: Set up a model so changes to
the purchase plan for cattle let management see the
numbers flow through.
Outcome: Then work with our procurement group to
instruct a reduction in new purchases which gives us
better management on inventory.
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19. 3: Case Study: Pittsburgh Mercy
 Progress to Date
 Financial Results
 $600K+ in documented revenue increases and cost cuts from MET goals
 Process Results
 No budgeting
 Global updates twice a year – detailed updates quarterly
 Forecast accuracy to 2%
 Manager commitments based on demonstrated best practices
 Understanding the business as an operating entity
 Reaction to issues on a two year horizon, e.g. present cut plan
 Model Status
 Now on third model iteration built from scratch
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20. Case Study: Pittsburgh Mercy
Ray Wolfe
 Business Activities
 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
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21. Case Study: Pittsburgh Mercy
 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 product lines
 260 revenue/cost center
 1,700 employees; 106 Managers & Supervisors
 Funded through traditional insurance billing, government grants and
capitation contracts, Private Foundations
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22. Case Study: Pittsburgh Mercy
 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
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23. Case Study: Pittsburgh Mercy
 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!
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24. Level of Detail
 Technical Issues
 What level of detail? Actuals and plan
 Transportation example
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25. Tips from an Insider: BONUS MATERIALS
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26. Tip 1: DO NOT GO BY General ―RANKINGS‖
2010 Customer Satisfaction (on a Scale of 5.0)
Alight Planning 4.65
Host Analytics 4.63
Tagetik 4.56
Longview/Exact 4.36
Vendors with no data include:
Adaptive Planning 4.15 Centage, XLerant, Clarity, Satori
Prophix 4.07
IBM/Cognos 3.90
Infor 3.73
Oracle/Hyperion 3.71
Microsoft 3.70
SAP/Business Objects 3.69
Source: BPM “Beyond the Hype Survey”
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27. Tip 2: Do Consider Cloud & Web Forms
WEB FORMS?
NO YES
Planning Objective
Source: The Agile Planner Blog
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28. Tip 3: Mitigate Risk of Failure to Replace
Spreadsheets by… Analyzing Potential ROI
Key Question: is your primary objective
Budgeting/Type 1 or Agile Planning/Type 2?
Type1
 Benefits are estimated at about $1,000 per user
adopting the annual budgeting tool
 Note: 2/3 of Non-Finance Personnel do not use
the budgeting tool (See Buttonwood Survey)
Type 2
 Benefits are based on quality of FP&A staff, not
related to #user licenses purchased
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29. PART 3: Who will be the Winner??
Let‘s Talk!
Email: BLamorte@AlightPlanning.com
Call Ben at: (415) 456-8528
Join me: blog.alightplanning.com
AGILE PLANNING

30. APPENDIX Why Budgeting Software Fails?
 Free Resources for In-Depth Analysis of Software Failure
 FOCUS Podcast Featuring Sid Ghatak & Mark Gandy
 www.focus.com/roundtables/avoiding-business-performance-
mangement-software-failure-4-t/
 4 Reasons Budgeting Software Projects Fail, the Private
―Un-Authorized by Alight Blog‖
 http://benonbudgets.blogspot.com/2010/06/4-reasons-budgeting-
software-projects.html
 Talk to Me!
 Email: BLamorte@AlightPlanning.com
 Call Ben at: (415) 456-8528
AGILE PLANNING

31. #1 Worst Practice: Software on the Shelf
 Situation: Management thinks buying software licenses for everyone
will somehow get everyone more involved and create a culture of
collaborative budgeting.
 Problem: Buttonwood Group Survey examined 100 companies who
deployed budgeting software to replace spreadsheets:
 44% of companies reported complete failure to get anybody outside of
Finance to actually log into the system in the past 12 months.
 How to Avoid: Start with a ―Minimal Configuration‖ ADD Non-Finance
USERS LATER!
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32. #1 Software on the Shelf
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Source: Planning Software Usability Survey By Buttonwood Group

33. Worst Practice #2: Go over your budget!
 Problem (Quote below from real customer interview!)
 “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 $18,000 for it to be fully
deployed.‖
 How to Avoid (Send me an email with other ideas)
 Build discounts into pricing if vendor goes over the price!
 Example: ―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.‖
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34. Worst Practice #3: Wrong Consultant
 Problem
 A month after you buy software, you find out you‘ve been assigned to a
consultant who's built one model as practice and recently completed an
MBA degree!
 How to Avoid
 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 may be doomed from the start .
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35. FREE RESOURCES
Free Resources for In-Depth Analysis of Software Failure
 FOCUS Podcast Featuring Sid Ghatak & Mark Gandy
 www.focus.com/roundtables/avoiding-business-performance-
mangement-software-failure-4-t/
 4 Reasons Budgeting Software Projects Fail, the Private
―Un-Authorized by Alight Blog‖
 http://benonbudgets.blogspot.com/2010/06/4-reasons-budgeting-
software-projects.html
 Talk to Me!
 Email: BLamorte@AlightPlanning.com
 Call Ben at: (415) 456-8528
AGILE PLANNING

36. Where Are You on the Curve?
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37. Planning Maturity—Agile Planning
The Happy Team
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38. Planning Maturity—Agile Planning
Effort Planning Maturity Curve (PMC)
Forecasting
Implement driver-based planning
Integrate (don’t just import) actuals
Reporting Implement scenario analysis
Forecasting/Agile Planning
Move out of Excel
Reduce level of detail
Budgeting
Seat of Pants
Business Value
AGILE PLANNING

39. Planning Maturity—Agile Planning
Effort Planning Maturity Curve (PMC)
Forecasting
Implement driver-based planning
Integrate (don’t just import) actuals
Reporting Implement scenario analysis
Forecasting/Agile Planning
Move out of Excel
Reduce level of detail
Budgeting
Seat of Pants
Business Value
AGILE PLANNING

40. 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
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41. 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…
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42. 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.
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43. 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.
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44. 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.
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45. 2. Reduce Level of Detail
 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
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46. 2. Reduce Level of Detail
 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.
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47. 2. Reduce Level of Detail
 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.
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48. 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.
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49. 3. Driver-Based Planning
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
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50. 3. Driver-Based Planning
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
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51. 3. Driver-Based Planning
 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
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52. 4. Integrate Actuals
 Integration Issues
 Data spread across multiple sources
 Actuals and Plan at different levels
 No underlying activity drivers
 Actual and plan structures out of sync
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53. 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
 Any level—line item, natural accounts, cost center, etc.
 Any modeling—simple of complex linking, back calculate rates
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54. 5. Implement Scenario Analysis
 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
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55. 5. Implement Scenario Analysis
 Types of Scenario Analysis
 Manage Resource Allocations: Adjust Short Term ―Who Gets What‖
 Strategic Planning: Extend Time Frames; Same Model As Short Term
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56. 5. Implement Scenario Analysis
 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]
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57. 5. Implement Scenario Analysis
 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
 Real Time Feedback: The Planning Tool is the Presentation Tool
 Scenario Drill Down: Comparison & Analysis at All Levels
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