As the old saying goes, a tool is only as good as the people who use it. The companies most successful at using business performance management (BPM) tools not only leverage the technology and align people and processes with strategic goals, but also extend BPM beyond finance into operational areas. The winners of the Business Finance 2006 Vision Awards sponsored by SAS Institute Inc. -- Princess Cruises, Wyeth Canada and Poway Unified School District, Calif. -- demonstrated the ability to make the most of their BPM tools broadly across their organizational structures.
Although the three winners face different performance challenges, some common themes tie them together. "The winners have linked their performance processes to high-level strategy or goals and demonstrate sophisticated use of technology to make the processes work better," says John Pancoast, Vision Awards judge and senior partner at Robert H. Schaffer & Associates in Stamford, Conn. "All three winners were looking for a better-controlled financial reporting process -- and got it."
Here's how each of the winners infused their respective cultures with a performance-based mindset.
Over $5 billion
Winner: Princess Cruises
Princess Cruises, a Los Angeles-based unit of Carnival Corp., stands out for its implementation of a world-class management system, according to Vision Awards judge Don Parker, vice president and CFO at Cary, N.C.-based SAS. "Their performance management system demonstrates excellent linkage of reporting measures to key operating objectives," says Parker. "They are leaders in deploying technology to support efficient and effective reporting, evidenced by their high user satisfaction. Operational metrics, such as customer satisfaction and travel-agency relationships, are measured and linked to financial outcomes."
It wasn't always that way. As this decade unfolded, the cruise business was struggling with rising threats of terrorism, a sluggish U.S. economy and the deployment of bigger, newer vessels -- all of which were forcing the industry to improve its cost structure. Adding to those pressures was the company's complex organizational structure, which encompasses hotel operations, restaurants and entertainment services such as casinos, as well as the operation and maintenance of a fleet of ships and management of the people who operate them.
"Attempting to use spreadsheets, hundreds of them in fact, to meet those challenges was an uphill battle; we spent most of our time aggregating, validating and reviewing information instead of analyzing it," says Greg Bozigian, director of financial planning at Princess Cruises and Cunard Line. "There were over 150 personnel contributing to the annual plan, making it difficult in ensuring the accuracy of global assumptions and drivers. We were looking for a secure, automated, Web-based, unified system we could use across all areas of our business, with a planning tool for real-time aggregation and consolidation. It had to be easy to use, update and maintain. Among our goals were better management of the overall planning process; increased visibility of our data, which in turn could drive accountability; and tighter control over costs, revenues and profitability."
With those goals in mind, Bozigian and his colleagues, including Clint Allen, manager of financial planning for Princess Cruises and Cunard Line, implemented a BPM solution from Cognos in 2002 and went live with it in 2003. "It's a real-time application that updates all elements of the planning model when the user updates their planning information," says Bozigian. "It's owned by finance rather than by IT, requires minimal training since it's Web-based, and it ensures data sources are accurate and complete."
Princess personnel use the BPM solution for financial planning, including budgeting and forecasting, for all cruise revenues and expenses; management of tour planning for the Alaska land segment of vacations offered by Princess; staffing needs; and inventory management, control and planning for the ships' boutique shops. "It's been a unifying tool for us. We're all using one system and the same information -- critical factors when you're dealing with a complex business like ours," says Bozigian. "Whenever one change is made, all of our departments know about it, we're all on the same page. We're doing more work with less people now than we were using five years ago, something we couldn't do without a tool like the one from Cognos."
When a request comes in from a senior manager, an operations manager or corporate finance, Bozigian's department has accurate data at the ready, so filling those requests isn't a time-consuming chore. "We can review our budgeting and planning in real time whenever we wish and make any changes we want during a meeting with those managers, adjusting projections right on the spot," Bozigian explains.
These days, the finance department can devote more time to analyzing data than to collecting it. Future plans for the business performance management software include ramping up its business intelligence (BI) capabilities. "When we first bought the BPM solution, improving the efficiency, accuracy and visibility of our planning process was our number-one priority; now, however, we're looking to develop the BI side of the BPM tool to gain a deeper drill-down capability," Bozigian says. "In addition, being able to apply one set of drivers to all of our business assumptions helps us identify our data source for creating our budgeting and forecasting, which helps meet our SOX requirements."
$501 million to $5 billion
Winner: Wyeth Canada
John McMahan, Vision Awards judge and finance advisory practice leader with The Hackett Group in Atlanta, was impressed with how well Wyeth Canada, a pharmaceuticals manufacturer based in Markham, Ontario, has worked complexity out of its financial system. "Wyeth Canada operates its performance management using one platform, so it doesn't have multiple versions of the truth. And it uses one ERP tool, something you don't see too often," says McMahan. "They're able to report three days after the close and have created a comprehensive balance between financial and nonfinancial metrics -- including measures tracking marketing expenditures." Kip Churchill, vice president, finance, accepted Wyeth Canada's award.
Using BPM for marketing is part of the tool's evolution. Its use had already expanded beyond finance to other business functions, such as operations and the supply chain. That progression has been a boon for Wyeth Canada, whose marketing department is a vital contributor to the bottom line.
As part of its larger BPM solution, the company exponentially improved its analytic capabilities about six years ago when it switched from Excel to a centralized OLAP database that used a front-end desktop tool to collect financial information. From there, the company's finance department built a complete, centralized model for its forecasting and planning needs, which streamlined and improved accuracy and granularity. With that BPM foundation in place, the organization's finance department turned its attention to the marketing department.
"In our business, a fair amount of operational expense is marketing-driven, including promotional materials for our supply-chain partners," explains Cathy Kwan, manager, commercial finance. "We wanted to track our promotional projects better, including things such as our marketing publications, print advertising, continuing education programs and learning materials, in order to get a clearer picture of how those dollars were spent and a better understanding of how our promotional planning was being handled."
Accordingly, Kwan championed the implementation of a BPM-based marketing tracking system, run by the BPM software they had purchased in 2002 from Clarity Systems. The comprehensive system took nearly three years for Kwan and her finance colleagues to build.
"In the past, we had issues with visibility regarding how those promotional plans were aligned with the company's overall plans, and there were continuity issues in terms of forecasting and planning, since promotional projects were managed using spreadsheets," Kwan says
Once the marketing group could access the central BPM system, Kwan and her colleagues were able to link their product managers' performance to the company's strategic plans for marketing, whereas in the past there had been no direct connection. "Before, we couldn't see what was happening from a tactical perspective," Kwan says. "Now we've got greater visibility into marketing's overall performance. And the product managers can utilize better, faster data to see how they're doing."
Part of Kwan's success came from involving marketing managers and other personnel in the creation of the tracking system. After managers were linked to the centralized forecasting system, they came to accept a more uniform, standardized way of setting targets and working toward achieving them. Forecasts are updated monthly, so finance-department analysts can now spend more of their time analyzing the data instead of collecting it.
Under $500 million
Winner: Poway Unified School District, Calif.
If there's a pot of gold at the end of the BPM rainbow, it's the opportunity to apply its principles at the individual level. Within a business setting, that means linking employee performance with strategic goals. Applying it in an academic setting presents even greater challenges: It means measuring how well strategic goals are contributing to student achievement. For Poway Unified School District in Poway, Calif., it's a dream well on the way to becoming a reality.
The school district is expanding the use of BPM tools in a unique program to support student learning, according to Vision Awards judge John Morrow, CPA and vice president of The New Finance at the American Institute of Certified Public Accounts (AICPA) in New York City. "They're extracting what they need to value their education efforts," Morrow says. "They're 100 percent online, they use a single ERP system and [it takes them] four days from closing to reporting."
When Randie Allen, Poway's CFO, joined the school district four years ago, she realized she had her work cut out for her. "The previous CFO, who had built a lot of procedures and processes during his tenure, was retiring, and he ended up taking that organizational knowledge with him," says Allen. "We needed a means of storing that kind of knowledge in a centralized location. Budgets, financial systems, reporting were all scattered among the school district's 34 schools and 30 departments. I was meeting with over 60 principals and departmental leaders, each of whom had their own set of knowledge and reporting preferences and were basically operating in silos."
After shopping for BPM software, Allen chose an application from SAS in the summer of 2005. It took only a few months to implement the system and to prepare employees to use it, according to Allen. "Still, it required changing the way people viewed information systems and how they did their jobs, which can be threatening and challenging," Allen says. "Among the benefits has been an end to arguments over where budgeting dollars should go. For example, recently within our transportation department, we needed to add four more positions. The need for those positions was justified and visible for anyone who accessed our BPM system."
Poway's operational performance has improved in several ways. "Now we're able to forecast cash flows from the state of California easily by looking at past trends," Allen says. "Instead of just seeing the numbers, BPM gets us on board with our strategic plans so we can see where our energies will have the greatest positive impact. It helps us in finance because we can see how what we're doing links to the overall strategies."
The school district's principals also have more accessible, timely information available to them for decision-making and for creating plans and budgets. "In addition, we can use BPM's analytic capabilities to spot any areas of concern or budget overruns and drill down to see where the problem is. We don't need to wait for a report to recognize it's there. It's also given each budget manager greater control and accountability over the area they're responsible for."
The ultimate goal for BPM at Poway, however, goes beyond financial metrics and operational performance improvement. "In the past, there were always competing factors in the development of the budget, but now we're measuring our budget effectiveness in relation to student learning," says Allen. "We're looking at each school and saying, 'this school was given these resources and here's the outcome' -- tying those outcomes to each teacher and student. We can say this student was given this instructional program and then see how effective that program has been in relation to how that student performs, based on test scores and other inputs. Measuring effectiveness is more difficult than measuring efficiency, but we've already put this foundation in place, and we've just touched the surface of its power."
Gaining sufficient information for measuring program effectiveness at the student level will take time, at least another year or so, Allen believes. But with the help of BPM to monitor the correlation between student success and various learning programs, she believes the pieces are in place to go forward with a student-level performance plan that other school districts can only envy.