cartesis reporting blue print

Creating a Framework for BPM Success –

Management Reporting Blueprint

Date: Monday, May 7th 2007Mark Oberlander, Practice DirectorPaul Bayne, Lead Consultant

http://www.cartesis.com/en/

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© 2007 Parson Consulting All rights reserved

d

• Parson Consulting and Client Overview

• Project Overview

• Current State Assessment

• Gap Analysis

• Solution Design

• Road Map

Agenda

Parson Consulting and

Client Overview


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About Parson

• Parson Consulting is a Financial Management consultancy

Dedicated to the office of the CFO… and broader Finance function

Located in 14 offices throughout North America

Owned by Management Consulting Group PLC

• Our people have deep experience in Finance and Accounting

The majority of our professionals have spent their careers in F&A

CPAs, CFAs, MBAs…

Former CFOs, Controllers, Auditors and Finance Executives

Recruited from “Best in Class” companies and consultancy

• We utilize our experience, methodologies and tools to create lasting value

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Helping the CFO to achieve the priority objectivesThe expertise that we bring to the table

Financial optimisationFinancial

optimisation

Financial and management

reporting and controlling

Financial and management

reporting and controlling

Governance, Risk

Management and Regulatory

Governance, Risk

Management and Regulatory

Corporate TransactionsCorporate

Transactions

Accountingprocesses

and systemsoptimisation

Accountingprocesses

and systemsoptimisation

Strategy planning, monitoring and

performance improvement

Strategy planning, monitoring and

performance improvement

Pragmatic ways

of working

New technology

trends

Proven

results

An independent

viewpoint

Collaborative approach

World class

Best Practices

Insight into future goals

Sustainable

Change

An international

perspective

Deep practical

experience

Support in

transformation

Innovative

ideas

CFO

Valuecreation

Optimizing governanceand control

Providing the right services for the right

costs

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Client Overview

• Mid-sized financial institution with over $17 billion in assets Commercial and consumer bank Auto lending Insurance

• Grew from $1 billion to $17 billion in assets over 10 years

• Approximately 2800 employees

• 138 branches, stand-alone offices and in-branch service centers

• Very little technology investment during the past 10 years

• Near-complete management and board turnover in the previous 12 months

• Extensive use of off-line databases, applications, and spreadsheets to manage and present data

• Finance organization has been recently engaged in a restatement

Project Overview


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Project Overview – Why were we engaged?

• The finance organization was unable to provide relevant, timely and actionable information to management

• Information “silos” existed throughout the organization, hampering the ability of management to gain a holistic view of the organization, products, customers, or business lines

• Business lines spent excessive amounts of time collecting and manipulating data, instead of analyzing and using it

• Data integrity issues complicated the relationship between finance and the business units

• High levels of frustration with the current reporting structure existed throughout all levels of the organization, from the Board of Directors down

• A data warehouse project and an ALM project commenced just prior to Parson’s engagement

Section I Project Overview

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Create a Reporting Blueprint to baseline current financial and management reporting methodologies

Identify information gaps

Identify applicable best practices

Develop a master implementation plan for improved financial reporting

Enable the Finance organization to spend more time on value-added analysis and less time on report production and transaction processing activities

Project ObjectivesSection I Project Overview

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Project Approach

Current State Assessment

Future StateDefinition

Solution DesignBuild

ImplementationPlan

Master Implementation

Plan

Reporting Blueprint

Systems Architecture

Redesigned Reporting Organization

Redesigned Reporting Processes

Future StateRequirements

Redesigned Close Process

Best Practices / Gap Analysis

People

Process

Technology

Integrated Workplan with New Software

Action Plan to Close New Software Gaps

Gap Analysis to New Software Reporting Vision

Roadmap for Future New Software

Modules

People

Process

Technology

Interviews / Workshops

Mgmt InformationMgmt Information

Report Inventory / Analysis

Best Practices

Weeks 1 - 3 Weeks 7 - 8Weeks 4 - 6Weeks 2 - 5

Report Inventory

Redundancy Analysis

Section I Project Overview

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Reporting Blueprint – Expressed as Four Initiatives

Section II Current State Assessment

Rationalize Standardize

Optimize

Organizational alignment - link organization to business objectives (KPI model)

Organizational efficiency – rationalized span of control and functions (CORE model)

Utilize PMO structure to mitigate project risks and cost overruns

Develop key reports currently not produced due to data dimension gaps

Rationalize current report inventory and standardize reporting across business lines

Eliminate ‘shadow’ reporting Utilize responsibility reporting (variance at cost center

level & KPI’s) Refine Board Package and align to Reporting Blueprint

Refine closing and external reporting processes Transform and enhance budgeting/forecasting as key

processes and institutionalize responsibility management (cost center level budgeting and reporting)

Utilize activity-based drivers to manage costs

Close data dimension gaps Standardize and modernize key enablers (chart of

account structure and single GL) Integrate data and interface key technologies

according to best practices systems architecture Automate reporting to enhance reporting integrity while

improving efficiency and effectiveness Enable drill-down capability Enable self-service / ad-hoc reporting

Reporting OptimizationOrganizational Design

Operational Excellence Technology Optimization

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SECTION I Current State Assessment

ERP System / GLe-Com.Apps

Extensions

Foundational Layer – Transaction & Other Feeder Systems

Financial/Budgets

Operations & Cost

Products CustomersCompetitors& External

Revenue

Data Warehouse, Integration & Management Layer

Reporting / Query and Analysis

MultidimensionalAnalysis

Scorecard / Dashboard

User Interaction Layer

Other Transaction Systems

Technology Optimization Initiative


Report Inventory Analytics


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Definitions

Section II Current State Assessment Report Inventory Analytics

• Shadow Reporting – Reporting within the lines of business that is redundant in nature to baseline financial report production (eg, line of business produces a P&L, profitability and/or KPI report)

Standard Reporting – Reports that are generated on a consistent basis in terms of frequency (cannot be assumed as 100% relevant reporting)

Production Reporting – Total reporting effort…..includes baseline financial reporting and all other non-shadow reporting

Ad-Hoc Reporting – Reporting produced on an infrequent basis on a time-sensitive demand basis – heavy reliance on self-service

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Reporting Effort

Reporting Inventory – Organizational Perspective


Production93%

Analysis7%

Key Insights

• More than 160 FTEs performing report production tasks within the Bank; nearly 60 of which can be classified as “shadow” to the core financial reporting group

• Over 1,800 reports are being produced in a non-standard format across the Bank

• Majority of reporting effort is “production-oriented” (versus analytical) due to lack of integrated data; tremendous amount of effort on data mining

150 FTE’s

11 FTE’s

Line of Business Shadow Production Total FTEsAccounting 8 40.5 48.5 Auto/Consumer/Consumer Risk 4 4 8.0 Commercial 17.5 18 35.5 Consumer 2 2 4.0 Consumer Risk - Credit Administration 4 6 10.0 Mortgage 12 12 24.0 Reporting Department 0 4 4.0 Retail Banking 10 11 21.0 Treasury 3 3 6.0 Technology - 7 7.0

Grand Total 60.5 107.5 168.0

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Standard99%

Ad-Hoc1%

Ad-Hoc Reporting Automated Reporting

Key Insights

• Greater than half of all reports are manually-produced

• Significant amount expended in developing/delivering standard reporting and there has been little time/effort to perform ad-hoc analysis

Manual53%

Automated47% 880 Reports

1006 Reports

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The project team classified management reports into 5 categories, based on the sample reports and inventory

% of Total

Key Insights

• Historical statistical reporting represent the vast majority of reporting and is the most manually intensive process as most of the data is operational in nature and resides in many disparate locations

• Forward-looking reporting represents the smallest percentage of reports

• Multi-dimensional reporting represents a small percentage of reporting because it is delivered through manual ad-hoc analyses



Statistical Forward-Looking Organizational Reporting

Multi-dimensional Profitability Board/Regulatory

Financial & non-financial data that relates to key revenue and cost drivers

Financial and statistical information used to plan for the growth of the enterprise and report on the progress of that growth

Financial results (P&L, revenue, expenses) used by organization on a periodic basis

Non GL-based views of profitability and its components across customer, customer segment, product, and channel that reconciles to organizational reporting

Reporting that is required by both the Board of Directors and external regulators

1,459 Reports 15 Reports 87 Reports 118 Reports 207 Reports 1,886

77% 1% 5% 6% 11% 100%

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Observations

• Multiple data sources with multiple data definitions

• Manual data collection and storage

Future State Objective

• Single source of data with standard data definitions

• More efficient queries to avoid repetition and multiple data dumps

Observations

• Almost 60% of reports use Excel for integrating data, reconciling and formatting for distribution


• Utilize reporting tools that have automatic alerts and graphical capabilities so as to eliminate manual work and identify areas of further analysis

Observations

• More than 85% of reports are emailed

• Emailed reports provide limited or no drill-down capability resulting in frequent request for ad-hoc reports


• Self-service tool (portal) with drill-down capabilities with appropriate data security

Reporting Inventory – Statistical Reporting


Excel / Access

GL / Information Warehouse

Others

Operations Applications

EmailExcel

Management / Board of Directors

Other Stakeholders

Finance

Data Sources

Transformation/Calculation Delivery Audience

Line of Business

Gap Analysis


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Observation Theme Impact on Ability to Deliver Blueprint

Limited use of external benchmarks and key performance indicators (KPI’s) to measure execution of strategy at all levels of the Bank

KPI’s

Bank Strategy is currently being refined Integrated KPI and Scorecard framework

has not been implemented Reports are internally focused and use

lagging metrics

Significant number of stand-alone databases used/maintained to support ad-hoc and standard reporting requirements

Data Integration

Significant amount of shadow reporting is hindering value-added work

Risk of ineffective/erroneous reporting Data Integrity issues necessitate time-

consuming data massaging & reconciliation Difficult to implement organizational

restructuring (eg, shifting relationships between regions, branches, and business segments….represented in multiple applications and data stores

Extended closing, reporting, and planning cycles stem in part from data access issues

Current State Findings -- Management Reporting


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Significant amount of reports are created in order to close the books and build the financial reporting package. In the current close process, these reports must also be run multiple times over the course of the close

Financial Reporting Process

GL Optimization

Lack of dimensionality in GL chart of account structure

Significant number of reclassing entries Multiple GL instances Lack of drill-down capability

Significant levels of reclassification journal entries and ‘decoding’ to unravel GL account balances to be meaningful to decision support or reporting

GL Optimization


Multiple GL instances Lack of drill-down capability

Significant level of manual effort to produce financial reporting

Reporting Delivery


Multiple GL instances Lack of drill-down capability Inability to incorporate data from multiple

subsystems due to system limitations and incompatible data definitions


Current State Findings-- Financial Reporting

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Financial Close Process is currently taking 15 days to close subsidiary books; 25 days to close consolidated; 50 days to report externally; and 75 days to report to the Board

Financial Close Process

Encumbered closing efficiency due to process design

Lack of defined and published close process for the entire Company

Financial Close Process

Encumbered closing efficiency due to process design

Lack of Financial Close Process definition, documentation and communication

Lack of Financial Close Process “single point of contact”

Lack of standardized and enforced materiality levels set for journal entries

Financial Close Process Encumbered closing efficiency due to

process design

Lack of automated allocation and elimination journal entries

GL Optimization

Multiple GL instances Lack utilization of GL consolidation

features and recurring/allocation journal entry capabilities


Current State Findings-- Financial Close Process

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No Formal Target Setting Process Budget Process

Lack of budget process definition, documentation and communication

Lack of industry best practices in budgeting

Lack of use of common assumptions and drivers to build budget

Budget Process


Lack of industry best practices in budgeting

No formal / standardized forecasting process is employed across the bank

Forecast

Process

Lack of forecast process definition, documentation and communication

Lack of industry best practices in forecasting

No formal / standardized budgeting process is utilized across the bank

Budget

Process


Lack of industry best practices in forecasting


Current State Findings-- Budgeting & Forecasting

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The bank currently utilizes ten instances of the GL.

GL Optimization

Inability to utilize the GL’s full functionality in managing allocations and inter-company transactions

Inability to timely close subsidiary and consolidated books of the Bank impedes ability to produce timely internal and external reporting

GL accounting code structure only utilizes two dimensions (natural account and cost center)

GL Optimization

Inability to produce dynamic financial reporting

Multi-dimensional reporting is compromised by not utilizing chart of account segmentation structure

Inability to efficiently reconcile GL reporting to non-GL analytical tools

The Bank does not maintain a standard and defined cost center structure across all lines of business (where applicable)

GL Optimization

Inconsistent data definitions Hinders ability to leverage allocations Inability to deliver effective ABC costing

solution to drive multi-dimensional profitability

Current State Findings-- Technology / Data


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No data governance policy including roles and responsibilities of data governance group, data owners, data trustee, and data producers with overall reference to reporting and application use

Data Governance

Change Management

Lack of enterprise-wide process documentation

Organizational accountability challenged by lack of true cost center architecture

GL Optimization

Lack of cost center standardization Lack Single GL Lack drill-down capability

Standardized, company-wide financial and reporting policies and procedures are not published, reviewed, or updated regularly

Process Documentation Lack of enterprise-wide process

documentation

The finance organization does not utilize a Center of Reporting Excellence framework that could leverage the Finance organization’s data management capabilities and increase its span of control

Organization Design Lack of a well-defined reporting

organization design and implementation


Current State Findings-- Organization

Solution Design


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The Desired End-State for Reporting

Desired end-state for reporting

50%

30%

20%

20%

50%

30%75%

2%

23%

Current Statemodel

Optimizationmodel

Insightmodel

OR

Insight

TransactionProcessing

Reporting & Control

SECTION III Solution Design

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Current Structure

Legal Entity

Segment

Business Units

Geography

Cost Center

Product Classification

Account number

Future Structure

The chart of account structure is the backbone to dimensionality in reporting

Account number

Cost Center

Legal Entity


Parson Point of View – GL Must Deliver Dimensionality

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Accounting Optimization

Ease of ImplementationHard Easy

Val

ue

Ass

essm

ent

Hig

hL

ow

GL Optimization Single GL Std, fully-dimensional COA Rapid Consolidation / Close Automated reporting platform Simplify external reporting

Organization OptimizationReporting OptimizationKEY:


Gaps by Priority Weighting (Resulting from Best Practices Workshop)

Streamline Close Process I/C Eliminations / Allocations JE thresholds Minimize manual entries Defined close process EW Use of Estimates vs Actuals Reconciliation practices

Reporting Blueprint Realize efficiency model Integrated data model Reporting cycles defined Standardize reporting x LOB Variance reporting

Board Package Prototype / Build Sustain Link to KPI model

Data Architecture Optimization

Planning Optimization

Integration of Data PMO model Realize drill-down Data governance model Data dictionary tools

Budget / Forecast Optimization

Align to strategic blueprint Target setting Assumption / driver model What-if modeling (ABC) Defined budget process Defined forecast process

KPI / Scorecard Optimization

KPI / Scorecards Prototype / Build Link to Strategic Blueprint Reporting model / delivery Driver-based Alignment at all levels

Reporting Organization Scope definition CoRE implementation Self-service reporting Data governance model Value-added analytics Cornerstone Reporting Data definition standardization Alignment to LOB - Analytics

Quick Hits Closing quick hits Reporting quick hits Efficiency quick hits

Policies / Procedures Closing Budgeting Forecasting External Reporting Maintenance model

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InitiativeBusiness

ValueImpact on Bank

ResourcesTiming

(months)

Quick Hits: Process & Reporting Blueprint < 3

Board Package Development < 3

Process Transformation: Financial Close / Reporting / Other

3 – 6

Reporting Organization Implementation 3 – 6

Reporting Blueprint Implementation 6 – 9

KPI / Scorecard Implementation 3 – 6

PMO Implementation 3 – 6

GL Optimization 6 – 9

Budget / Forecasting Process Model & build of 2008 Plan 3 – 6

Policies and Procedures – Core Financial Processes

< 3


Opportunities

Very High High Medium Low Very Low

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Solution Considerations

Most effective means to align strategy among different business units and corporate is to utilize an integrated KPI framework

Utilizing a PMO is the most effective means to implement critical applications, databases and end-user tools

Active change management model should be utilized to monitor and effect change

Recommendation

A. Develop and implement a KPI / scorecard business performance management framework to align business unit, department and support center strategy to corporate strategy

B. Implement a Center of Reporting Excellence (CORE) support team within the Finance Organization to oversee baseline financial reporting, data governance and future reporting requirements

C. Implement a Project Management Office (PMO) structure to manage, measure and report on key projects

D. Implement a formal Change Management program to actively manage and monitor project execution

Organizational Design Initiative

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Integrated KPI / Scorecard Framework

Develop and implement a KPI / scorecard business performance management framework to align business unit, department and support center strategy to corporate strategy

Impact on Bank Resources Business Value Derived Timeframe (months) 3 – 6

Approach / Actions Benefits

Design, prototype, build, implement, sustain phases

Pilot single business unit

Top-down approach (strategy definition)

Coincide with budget development

Align with Board Package build-out

Eventual phase-in to Executive Information System solution (Fidelity)

Effective alignment of business units, departments and support centers to corporate strategy

Achieve organizational responsibility model

Integrated business performance management platform

Proactive decision support model

Promotes exception-based management

Convert to metric-focused organization

Very High High Medium Low Very Low

Organizational Design Initiative (Recommendation Detail)

A

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Solution Considerations

Realization of the reporting blueprint is not entirely dependent on technology solutions (eg, data warehouse, Bancware, GL optimization) – the first critical steps are rationalization and standardization

Board Package refinement will evolve as other solutions are realized (eg, KPIs are developed across the Bank, etcetera)

Cornerstone reporting is an effective catalyst to align management team to a consistent performance management framework across the enterprise

Recommendation

A. Design, develop and implement key reports that are not currently produced due to data dimensionality and data integration issues

B. Rationalize current reporting inventory and standardize reporting across all business lines (including elimination of ‘shadow’ reporting)

C. Refine Board Package to best practices structure and alignment to corporate strategy and KPI framework

D. Design, develop and implement “Cornerstone Report Package”

Reporting Optimization Initiative

Road Map


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Most Critical Step: Linkage of Reporting Blueprint to Strategy & Organization

SECTION IV Road map

Strategic

Blueprint

Organizational

Blueprint

Technology

Blueprint

Reporting

Blueprint

Business blueprint would serve as a guide to operationalize the Business Strategy over the maturity of the realization of operating milestones

Organization Design based on Strategy & Responsibility Structure

Selected application tools

Technical platform Data integration plan Analytical tools Reporting engines

Reports designed around: delivery models; standard definitions

Standardized reporting blueprint across business lines

Integrated framework between Board and Company Reporting

Prior to fully executing Reporting Blueprint, Bank should conclude its Strategy and Organizational alignment and effectively link the three Blueprints

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SECTION IV Road Map

Reporting Blueprint = Delivery Framework for Effective/Efficient Reporting

• Pct of target institutionsbidding

• No. of bids in range• Agreements negotiated

within milestone• Average interest rates• Total interest expense

vs. target

Negotiate morefavorable creditterms

MetricsStrategy Actions

Eliminate high risktrauma services

• Identify institutions &solicit bids/offers

• Negotiate agreements• Implement policies

• At least X targetinstitutions bidding

• At least Y bids in range• Lower average interest

rates• Less restrictions/

covenants

Expected Results

• % renegotiationscompleted by xx date

• No. of referral centersby xx date

• Asset base vs target• Headcount vs target• ER costs versus target• Premiums vs target

• Renegotiate with plans• Set up referral

relationships with othercenters

• Sell/retire specializedequipment

• Eliminate headcount

• Fewer traumaadmissions

• Reduced capital base/and depreciation

• Lower head count• Lower ER costs• Lower insurance

premiums

Executive Scorecard

Future Value(NPVFCF)

Shareholder Value

Stock PricePremium/Discount

(P/E)

Current Value

EVC

R&DExpenses

Admin

Delivery

Cost of ProductsSold

Selling, Deliveryand Admin

ConsolidatedRevenue

Volume

Price

Capital Charge

Cost of Capital

Average Assets

Equity

Debt

Other

Working Cap

PP&E

Selling Expenses

FutureSales/Purchases of

Assets

Discount Rate

Future Cash Flow(FCF)

Portfolio MarketValue (R&D

Pipeline)

Pre-Phase III

Pre-Phase IIIb, IV

Earnings

(per share)

Commercial RAOVariance

Commercialization Cycle Time

R&D RAO Variance

Understand Therapeutic Markets and RPR Customer Needs

Discover New Chemical Entities

Develop New Products

Manage Regulatory Environment

Develop and Retain Key Resources

Manage Financial & Physical Assets

Deliver Products

Manufacture Products

Customer FocusGap

Relative Market Sharefrom Key Products Market to and Educate RPR Customers

Sell Therapeutic Products

Fill Rate for KeyCustomers

Retention Rate

Innovation

TherapeuticFocus

Globalization

Financial Performance

Customer Focus

Teamwork

Future Operation

Portfolio Mix

How can weincrease

shareholdervalue?

CUSTOMER/MARKET•Quality

- Patient/Family satisfaction ratings- NCQA ratings- Community awareness/perception

•Share- Share by procedure (local market)- Physician admission share (pct of patients

admitted)•Other

- Customer retention – physicians, patients

FINANCIAL•Revenue

- Growth vs. plan- Growth vs. avg for local market peers- Price vs. peer group vs. reimbursement rates

•Cost- ER insurance premiums vs. target- Interest expense vs target

•Margin- Overall operating margin- Margin vs. plan by major service

LEARNING/GROWTH•Morale

- Physician, staff retention rates- Employee satisfaction

•Skill Building- CME compliance rates/scores- Training hours/employee vs target

•Other- Number of applications for open positions- Average time to fill open positions

INTERNAL/OPERATIONAL•Productivity

- Revenues per bed- Revenues per head count

•Labor- Wage rates by position vs. local market- Headcount vs. plan by skill/position

•Other- On-time project completion rate- Average days outstanding for reimbursement

KPI Metrics

Definition

Actual FTE laborersEOY budget target

Source Data

Actual FTE: Weekly payroll(total hours/40 hr week )

Target: January BOD final

Notes

• 18 mos. history• Compare to # checks• Drill down by dept

Metric

Headcount vstarget

Reporting/Viewing Rules

CIO Head of R&D CFO

HR/AdminLegal

DivisionPresident

CEO

VP Marketing VP SalesOperations

VP ManagedCare

Brand Teams

Head ofSupply Chain

VP Sales

48 hrs max

Specific Definitions

concurrent

24 hrs max

Medicaid

CentralIntegrated Repository

3rd Party

PBS

CARS/ISAccountMaster(merge)

ATM(operational)

XponentPlanTrak

CustInfo

IMS

MI/PMTool

Account Analysis,Performance Reports

Account Plans, Contracts

MMO Mktg Sales Distr Svc

SFA

M C Target List

(Query Tool)

Nucleus

PE Mart(PAD East)

Promo Eff / Targeting analysis

Tool

Promotion EffectivenessReports

DCIS

CopromoData

ZS (Target

list)

SASTool

Ad hoc Analysis / ROIReports

Target vs. PlanRx impact vs. Plan

Reports

SampleAllocation

Tool

Sample Demand PlanningReports

SampleGuardian

Operational Systems

Decision Support ArchitectureExternal

Sources

OrganizationalDSS InformationConsumers

DataRefinery

DataRefinery

3rd PartyClaimsData

Accountscrub

Peoplesoft

RBCAllocationInterface

ORGScript Check

PortalPortal

Technical Architecture

ApplicationsData Warehouse

Delivery Media

GL Chart of

Account Structure

xx-xxx-xxx-xxxx-xx-xx

GL Chart of

Account Structure

xx-xxx-xxx-xxxx-xx-xx

EIS

Content Mgmt/Portal

Self Serve

Lessons Learned


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Lessons Learned

• Evaluate status of current technology and process initiatives early Implementation timelines Dependencies

• Establish consensus early with ALL stakeholders regarding the project’s scope and deliverables Different groups had different expectations Expected timelines for the receipt of the first reports varied widely

• Identify key processes and systems, the data elements residing in those systems, and conflicts between the data in the systems Include resolution of the conflicts in the implementation plan Redesign processes if needed

• Implementation of the blueprint will require a PMO with visibility across other corporate projects that may impact the reporting process

Thank you

Mark Oberlander

Parson Consulting

[email protected]

732-357-6112

www.parsonconsulting.com

Paul Bayne

Parson Consulting

[email protected]

401-935-3377

www.parsonconsulting.com
