Sunday, November 08, 2009

Perspective, Outside of the Box

Several months ago I contributed a perspective on reporting with So What, Now What¸ At that time I made a call to action oriented reporting, where the users of management reports are motivated to taking some type of positive action. Since then I have extolled the virtues of different types of reporting to unearth the true dynamics of the organization. For most organizations this is an aspiration far beyond their comprehension.

For many organizations their reality finds itself in a certain ‘comfort zone’. This zone is steeped in traditional reporting where the reasons have been lost in the annals of time. As I left one such company, a biomedical device manufacturer in North Carolina, headed for the Credit Research Foundation (CRF) conference in Pittsburg, I had 7 hours of windshield time to ponder this dilemma.

Miramiller (not their real name) has been producing molded biomedical devices for almost twenty years. The last eight years of business was under the ownership of a European parent company. My engagement with the organization was an assessment of their current asset management policies. During the engagement the company migrated to a new financial management system, which was driven by the need for consolidated reporting across all of the business lines. As I watched this project unfold, one startling thing screamed to be acknowledged. Miramiller was building their new $2M system to be like their old system. The reporting of the existing system was ‘ported’ into the new system. Then through all of this the organization spent thousands on software training. This was synonymous with buying a new car, but investing thousands to make it drive like your old truck. With that said, why even move to a new system? The motivation was ‘better reporting’. For the firm, better reporting was the same old reports from a new system. This exercise in futility was essentially a $2M economic stimulus package to the software company!

How can organizations be so blind as to seek a new competitive advantage, but at the same time fall into old business practices? The seed to this behavior is a fear of change – a deltaphobia of sorts. Organizations get so imbued in process which is steeped in history that no one has the confidence in trying something new. It is for this reason; organizations replace or retool old systems and continue to dice and slice old reports. All under the auspices of change, when in fact they have remained stagnant and the world is changing.

The CRF conference was much of the same of what I have been hearing for the past year, the application of old solutions on today’s problems. How can someone reasonably believe that the exercising of ordinary solutions will move organizations through extraordinary times – they can’t it is a false sense of security. The reality is that current times are extraordinary and require a different approach for success.

Although I have professed a new prospective for quite some time I have yet to find many organizations espousing that mantra. It wasn’t until I attended a lecture series put on by a regional CFO group that I had the pleasure of listening to a comrade of change. The key speaker, David Saxon, explained the nature of the changing world order. His mantra of new management reporting was emphasized in every aspect of his lecture. During his lecture he destroyed the concept of budgeting and forecasting. Realistically he demonstrated that any type of organizational plan beyond 90-days is like throwing pennies in a wishing well.

David closed his presentation with a case study, an examination of a large bulk recycling company. This company, ABC, watched as its gross margins dwindled between 60-90% from 2007 to summer of 2009. With margins hemorrhaging away, the corporate leaders realized that the same old methods would not work. Acting expeditiously the organization migrated to new technology and completely changed their types of reporting. The new reports, now produced within hours rather than weeks, examined new metrics that the company never examined before. With this act of executive responsibility ABC not only survived but is now positioned for strategic growth.

Saxon in his book, Best Practices in Planning and Performance Management, extols the need for organizations to drive their reporting and performance analysis based on business focused metrics and not on historical general ledger classifications. It is only through this fresh start that I feel; organizations have a chance of surviving these extraordinary times.
Perspective, a new look at current circumstances, requires open-mindedness and knowledge. Organizations will be better equipped for tomorrow’s challenges by redirecting training dollars to education activities where staff and leaders a-like can dialogue about a new perspective for their organization’s survival and growth.

1 comment:

james said...

Very nice.......I'm sure it will help many people.....
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