Last month's column ( http://www.dmreview.com/master.cfm?NavID=193&EdId=7440), began a critical look at the benefits of implementing business performance management (BPM) systems both the lofty, strategic objectives that vendors advertise and the concrete payoffs that users can measure. In this issue, we give examples of companies where BPM delivered greater profits, better decision making, actionable information and greater accountability and ownership.
Ownership and Accountability
Companies often seek to involve more employees in the planning process, but without turning budgeting into their full-time job. If budgeting and planning draw on knowledge sprinkled throughout the company, you can avoid a top-down, forecast-by-decree situation. In theory, that's good because it tends to join strategic goals with reality. Here's an example. Winn-Dixie, a major retailing chain, has approximately 120,000 employees and 1,100 stores located mainly in 12 southeastern states. Barry McMenamy, financial analyst, represented the finance department during Winn-Dixie's implementation of a BPM system beginning in late 2002.
Excel-based budgeting at Winn-Dixie was a problem that called for a cure. "Some of those spreadsheets would go missing," says McMenamy, "and not everyone got their numbers in. It was a real struggle."
Contributors to the budget were also frustrated because they were unclear as to what happened to their numbers when the final budget was issued. Choosing Outlooksoft's EAP for its combination of budgeting and reporting, Winn-Dixie targeted budgeting at the administrative level across all its divisions. Next, they enabled the district managers to build their store budgets on the new system. "These early phases required approximately five weeks. As a result, most end users finished their budget work earlier, and that," McMenamy notes, "gave our management extra time to tweak the budget for several weeks."
"By 2004, every Winn-Dixie store will prepare its budget on the system," says McMenamy. "We'll have thousands of users with every level of management involved. At that point, we will really see the benefits in terms of budget buy-in and sense of ownership."
As a side note, Winn-Dixie's finance group tallied up the time, paper, printing and mailing costs of the previous budgeting and reporting methods and found that over five years, more than $1.1 million would be saved, easily paying for its BPM initiative. This leads to our next topic.
Cost Savings and Revenue Gains
It's still difficult to find examples of BPM usage leading to new revenue. This is no surprise because these are the early days of BPM. BPM is more heavily used by finance than by product marketing or sales. There are numerous examples of BPM saving money for companies, including one area that vendors tend to gloss over, but you shouldn't: the sensitive area of head count reduction. A BPM system may demand from 10 to 200 IT man-months during implementation, and it needs ongoing maintenance; however, it may sharply reduce the need for junior number crunchers to do rote work on budgets and reports. A compelling example is Lockheed Martin's use of Longview's Khalix system.
We estimate that Lockheed Martin is saving an impressive $50 million annually using their new BPM system. Mike Gabaly, managing director of Lockheed Martin Financial Shared Services, tells us the aerospace company can attribute a finance-related head count reduction of 1,000 to its BPM project and related accounting changes.
After years of acquisitions and mergers, in 1998 Lockheed Martin had a large variety of transactional systems, and nothing seemed to match. Lockheed's answer to the problems stemming from this heterogeneous environment was to conduct one of the largest BPM implementations of which we are aware.
While Lockheed Martin saw a number of important benefits Gabaly speaks enthusiastically about getting "one version of the financial truth" and dramatically speeding up reports, restatements and consolidations its cost savings truly stand out. The savings reflect the ambitious scope of the project; the challenges were sizable. "Ninety-nine percent of the effort was accounting changes, rather than technical," explains Gabaly. "The transactional systems had different data structures, and each of the 350-plus entities within Lockheed Martin had multiple, differing charts of accounts." Lockheed Martin not only bit the bullet on enforcing standardization with one master corporate chart of accounts, but it was a BPM pioneer in tackling the three major functions of financial accounting, tax reporting and planning at the same time.
Next month's column will share examples where BPM delievered actionable information and better decision making. Stay tuned!
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