Meet the award-winning organizations and financial visionaries who are taking business performance management to higher peaks of productivity.
Business performance management (BPM) technology, as deployed by its most successful adopters, has reached the final phase of what Gartner Inc. calls the "hype cycle." This conceptual framework charts the maturation of emerging technologies through five distinct phases: an initial appearance or "trigger," a peak of inflated expectations, a trough of disillusionment, a slope of enlightenment, and a high plateau of enhanced productivity.
Firmly entrenched on the sunny uplands of that fifth phase are the winners of the seventh annual Business Finance/Hyperion Vision Awards for Excellence in Business Performance Management: Best Buy Company Inc., Fujifilm, St. John's Hospital and United Asset Coverage Inc. These organizations have demonstrated their success at navigating the ups and downs of BPM initiatives and managing the resources that enable that success. They share several other crucial characteristics, including performance metrics that are tightly tied to strategic planning; relatively short closing processes; and frequent, flexible, accurate forecasting and budgeting.
The fact that more and more companies are seeing their BPM practices advance to the promised land of enhanced productivity made choosing this year's Vision Award winners a tough challenge for the panel of judges, which comprised Marvin Balliet, first vice president and director of business programs and solutions, global private client, Merrill Lynch & Co. Inc.; Cody Chenault, senior director, The Hackett Group; Connie Debbink, regional vice president of budget and site support, Covenant Healthcare System Inc.; Carl Goossen, CFO, Spray Equipment & Service Center Inc.; John F. Morrow, vice president, the new finance, AICPA; Todd Naughton, vice president and controller, Zebra Technologies Corp.; John O'Rourke, senior director of product marketing, Hyperion Solutions Corp.; and John Pancoast, executive director, Exult Inc.
Chenault, who is based in Atlanta, notes that the scoring was tighter this year than in previous years' contests. "In the past, you often saw one company way out front, followed by a group of companies that were lagging behind," he says. "This year, it seems as if there are more companies that are out in front in terms of shortening their financial reporting cycles and generally making it easier for end users by equipping them with the right planning tools." He thinks most companies can improve their BPM practices by scaling back the number of metrics in their scorecards and focusing on those that correlate most strongly with critical performance areas.
Other judges point out that organizations are implementing or expanding their BPM programs in a broader and more strategic fashion than they have in the past. "Overall, I saw an excellent mix of financial and operational performance measures," says O'Rourke. "Plus, those measures are now linked to the company's strategic plan, which is vital. These companies are ensuring that their measures add up to where they want to go strategically." At Fujifilm, for example, director of business development Scott McNulty used BPM logic to reengineer his company's consumer rebate process, greatly reducing its costs and turnaround time.
What's more, BPM functionality is becoming increasingly important to companies' efforts to meet looming Sarbanes-Oxley deadlines. The winners in the top three revenue categories report that their BPM system is providing significant support to their compliance campaign. Darren Jackson, Best Buy's executive vice president and CFO, notes that his company leveraged its BPM capabilities to reduce the time it takes to file its quarterly financial reports from an average of 45 days to the 35 days required by Sarbanes-Oxley.
Performance management expert David A.J. Axson, a co-founder of The Hackett Group who is now a corporate planning executive with Bank of America, believes that business technology is entering an "age of convergence," in which companies will finally achieve success in integrating their software systems with their people and processes.
"Only the combination of the judicious use of technology, optimized business processes, and suitable trained and motivated people can realize the true value of a technology investment," Axson notes in his book "Best Practices in Planning and Management Reporting: From Data to Decisions" (John Wiley & Sons, 2003). This year's Vision Award honorees have demonstrated the reality of that convergence -- and its rewards -- in their innovative applications of BPM technology.
Revenue Category: More than $5 billion
Location: Richfield, Minn.
In the book "Big Change at Best Buy: Working Through Hypergrowth to Sustained Excellence" (Davies-Black Publishing, 2003), co-authors Elizabeth Gibson and Andy Billings detail how the consumer electronics retail giant transformed itself from an $8 billion company in 1998 to an estimated $24 billion operation six years later. The key, according to Gibson and Billings, was cultural change. They make a compelling case for the thesis that behavioral adjustments can drive a corporation's financial rejuvenation.
Best Buy's metrics-rich approach to BPM is primarily a cultural movement, despite its financial and technical precision. "Buy-in wasn't a question because our [internal] customers were asking for this," says Bruce Besanko, vice president, performance management. "We're very focused on being as efficient as possible with our presentation of the information. We could bombard [users] with 1,000 metrics, but we don't. Instead, we cater the information to each user and then hold them accountable by putting their name on the report next to the status -- green, yellow or red -- of each metric."
Best Buy's corporate software infrastructure includes multiple enterprise resource planning (ERP) suites, various chart-of-accounts and financial performance management tools, and systems that incorporate Balanced Scorecard and Economic Value Added methodologies. The BPM software sits atop this foundation and relies on a management information portal to update users on the status of nearly 40 categories of performance measures that include industry, customer and shareholder metrics, as well as financial and operational indicators.
Jackson says the BPM system has helped Best Buy better understand how its short-term results relate to long-term goals, and that has helped the company achieve its objectives with fewer surprises along the way. "Senior management spends more time reviewing and discussing forward-looking information rather than reviewing historical results," he says. "This emphasis on future results includes a focus on leading external macroeconomic factors and longer-term business trends, issues and opportunities."
That orientation has boosted organizational agility. When the economic downturn and a significant decrease in consumer confidence hit Best Buy's sales in July 2002, the company's leading metrics indicated that the slowdown would persist through the remainder of its fiscal year. The executive team responded by exceeding its cost-reduction and cost-avoidance targets. The result: Best Buy produced an 11 percent increase in operating income, despite the challenging market conditions.
Revenue Category: $1 billion to $5 billion
Location: Valhalla, N.Y.
Images don't lie -- at least, not at a company that's recognized for its innovations in imaging and recording-media technology. Fujifilm's BPM capabilities give the company a crystal-clear picture of its financial performance, markets and customers.
In 2002, McNulty brought financial management thinking to bear on a brand-oriented challenge -- widespread customer dissatisfaction with the protracted response time of Fujifilm's consumer rebate programs, which took six to eight weeks to mail out checks. McNulty saw that applying BPM capabilities to the rebate process could deliver substantial sales, marketing and customer-satis-faction benefits.
Fujifilm partnered with Roseland, N.J.-based Cohn Consulting Group to apply principles of business performance management to the rebate program. The result is a system that combines online analytical processing (OLAP) reporting, active analytics, financial reporting, and Web interactivity for customers and customer service employees. The system enables Fujifilm to analyze customer data contained in the rebate requests and use the results to gauge rebate promotions' performance, anticipate customers' buying patterns and reveal new marketing opportunities. Fujifilm's BPM software has greatly enhanced customer service managers' ability to make informed, effective decisions. And the company now mails out rebate checks within eight days of receiving customers' requests.
David Giannetto, director of Cohn Consulting's enterprise performance management practice, worked with McNulty on the initiative. He believes that BPM projects which fail usually do so because the end users of the system have a hard time seeing its value when project leaders describe the benefits -- instead of demonstrating them. That's why he and McNulty used a "show, don't tell" approach.
The customer rebate initiative has shown the rest of the organization how BPM systems can create value in the form of efficiency gains, enhanced customer satisfaction and faster access to critical information. The project's success has stimulated interest in BPM capabilities throughout the company.
"Business performance management is a difficult thing to get your arms around, especially if you don't have a passion for business processes, data and efficiency," McNulty notes. "But buy-in is much easier if you can show people actual benefits like cycle-time reduction, cost reduction and greater access to information."
Revenue Category: $500 million to $1 billion
Location: Springfield, Ill.
A chant of "no margin, no mission" echoes from the corporate finance offices of St. John's Hospital, a teaching medical center affiliated with the Southern Illinois University School of Medicine. The hospital boasts a trauma center, a cancer institute and a birth center among its many clinical and diagnostic facilities. Its mission is a simple one: to provide care to hospitalcustomers.
But a few years ago, the ability of St. John's to accomplish that mission was in jeopardy because of the organization's marginal financial performance. Although it did not lose money in any year, its financial performance was flat from 1996 to 2002. Its operating margin hovered below 2 percent due to declining reimbursement from insurers; lower business volume; rising pharmaceutical, labor, malpractice insurance and medical technology costs; and subpar investment portfolio performance, among other problems. Despite its lackluster performance, the hospital added full-time employees (FTEs) during that six-year span -- a phenomenon CFO Hugh Collins calls "FTE creep."
In late 2002, St. John's launched a project designed to improve productivity by leveraging business performance management capabilities. Software supporting the initiative included multiple instances of an ERP system, a chart-of-accounts tool, and several stand-alone finance and benchmarking applications.
"What we needed to do was to change the culture," Collins says. The project team's primary goals were to reduce FTE creep and to gain support among employees for the new performance management strategy.
"We implemented benchmarks for performance and measured ourselves locally, statewide and nationally in numerous areas," Collins reports. St. John's also supplemented its technology base, he says, "to support our goal of improving productivity and reducing labor costs." The initiative quickly paid off. The hospital increased its operating margin to more than 5 percent for the fiscal year that ended June 30, 2003. "Compared to other not-for-profit hospitals nationwide, we're at the top," says Collins. "We're at the best-practices level."
Collins emphasizes the importance of demonstrating the benefits of benchmarking and performance management initiatives to the people who make the improvements possible. St. John's leveraged its efficiency gains to boost employees' annual merit increases. The hospital also made compensation adjustments in order to remain competitive in the market for certain workers -- nurses and radiation technologists, for example -- who are in extremely short supply.
As a result of its success with the business performance management initiative, the hospital continues to be able to fulfill its mission. St. John's now plans to parlay its impressive balance sheet and operating results into funding for a $100 million capital improvement project.
Revenue Category: Less than $500 million
Location: Naperville, Ill.
Goossen's company won a Vision Award last year. As a judge this year, he liked what he saw in United Asset Coverage (UAC), a provider of telecommunications and data networking maintenance services. "I think they stood out for their dramatic improvements in both financial and nonfinancial results," he reports. "They also stood out for their focus on the most critical drivers of the business. They did not lose their business perspective with all the BPM information."
United Asset Coverage's perspective is decidedly long-term when it considers enterprise software investments. When the fast-growing $35 million company invested in a large ERP system from Oracle in 2002, it was thinking of future as well as present finance and accounting needs, says CFO Mario Christopher. The ERP suite also supports the BPM software UAC purchased last year.
Like many of the finance executives in the other Vision Award-winning businesses, Christopher emphasizes the human component of the people-process-technology troika. "Buying the [BPM] tool is nice, but I think a lot of companies fail to realize that you have to have the horses around that technology," he says. UAC used consultants in the employee training phase of the BPM implementation, but it monitored their contributions carefully to ensure that the software's end users did not become too reliant on outside help.
That strategy helped United Asset Coverage realize early benefits from the initiative. In the 12 months since the roll-out, the company has slashed its invoice production time from more than a week to just two days. Invoice inquiry calls, which accounted for 80 percent of all inbound contacts before the implementation, now constitute less than 5 percent, Christopher reports. Plus, call center productivity -- as measured by the percentage of service representatives' time spent talking with clients about core service offerings -- has soared.
The company's performance measures focus on earnings, revenue renewal, and the relationship between equipment maintenance expenditure (a variable expense) and contractual revenue (a fixed amount). This repair-to-revenue ratio is a key driver of margin, and UAC executives monitor it closely. The organization also keeps a watchful eye on factors that influence the ratio, such as customer satisfaction ratings, price competitiveness and employee satisfaction -- all of which are analyzed in the reports that the BPM system generates.
The quality of the reports that a business performance management software system generates is a primary indicator of the tool's effectiveness, and the usability of corporate performance information was an important factor in the Vision Awards judges' decisions. "The winners we chose all had very high scores from end users in terms of how well the information is presented and how timely it is," O'Rourke notes.
These four companies illustrate how business performance management's most successful practitioners are adapting technology to meet end users' needs -- and taking productivity to new heights.