The impact of the database, data warehouse and related technologies on the management process has been profound. The combined effect of integrated transactional systems and database information systems provides management with a depth of detail that many could once only dream about. The electronic commerce revolution is now extending the sources of meaningful business information beyond the boundaries of the corporation. However, the benefits of this flood of information can be illusory, since much of it simply tells us more about things that are less important to business operations.
In many instances, the additional information only offers more ways to explain flawed decisions or worse, makes it easy to avoid making decisions at all. As one CFO complained to me, "All my analysts do now is stare at spreadsheets on their PCs. They've stopped thinking about why the numbers look the way they do."
In contrast, companies that are successfully leveraging the promise of increasingly flexible, functional and affordable technology are focusing on reducing the time it takes to make informed decisions that is, they have learned to make better decisions faster. They're leveraging technology to quickly filter and deliver only the information that is critical to pinpointing an opportunity or foreshadowing a risk. That kind of rapid, targeted insight provides a competitive advantage in a marketplace where virtually all players are comparable on price, customer service and innovation. Such insight enables a company to be more agile, a key requirement in outdistancing increasingly intense competition.
From Database to Dashboard
Think of effective decision support in this way: When driving, your dashboard provides just the right amount of information to help you make informed decisions without bogging you down in data that you don't need to have to operate the car. Certainly some metrics, i.e., speed and fuel, need to be monitored continuously. Other sensors monitor a myriad of areas of your automobile, yet only alert you when there's a problem. The dashboard gives you the right information at the right time, but doesn't inundate you with all the information all the time.
Effective management reporting should follow a similar model. It needs to identify the right source for the data and define the relevant reporting criteria, yet allow the end user to keep an eye on areas of the business that can cause problems or affect other links in the management chain. The change in focus allows one to make faster decisions and ensures the alignment of resources and energies with strategy and market opportunities. The combination of database and related analytical tools can easily deliver the same capability throughout an organization.
According to Hackett Bench-marking solutions, approximately 80 percent of companies have not effectively integrated their management reporting systems with their transactional and operational systems, and fewer than half of their regular reports are generated automatically. This is a surprising statistic given the massive investments in database technology by many companies. It likely reflects a bias toward data collection rather than information delivery. One need only look closely at world-class companies to understand how to employ technology so that it compounds a company's strengths, not its weaknesses.
The general ledger continues to be the key information source for most companies, so management reporting cycle time is largely dependent on the closing of the accounting books. While the average company takes 5.5 days to close, the poorest performers are taking as long as three weeks. By leveraging technology investments to automate routine processes, world-class companies are closing books in a day.
Cycle times for producing and distributing reports at most companies are about the same as closing times. World-class companies can turn around reports in about a day, while the poorest performers are taking as many as two weeks. The average company produces management reports in 3.5 days, taking nearly two weeks to close and report. Considering that most companies close on a monthly basis, a problem can exist for 40 days before it shows up on a manager's radar screen. World-class companies facing the same problem are working on a solution after only two days.
Advanced technology, which is just now starting to make inroads into performance reporting, is capable of helping companies overcome these problems. Data warehousing, data mining and collaborative software have all generated lots of attention; and the use of the Internet, intranets and extranets is increasing. The key is the effective combination of these tools to provide just-in-time rather than just-in-case delivery of critical information to decision-makers.
For decision making, at least, technology has been more of a problem than a solution. But for world-class companies, technology is a powerful tool for speeding and simplifying the business of making decisions.
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