Time to Clean the Shed!

Having worked with many organizations both nationally and internationally in the area of financial and asset management, one thing seems to tie so many organizations together – their hesitation to change.  Several years ago I addressed organizational change more from a systemic perspective.  However, systemic behavior is a culmination of behavior of each of its parts.

Although I have seen the same behavior through my decades of work with organizations, I somehow passed off the behavior as being native only to private organizations.  However a recent article broke this myth and demonstrated that all organizations fall into the same trap.  The article Long Live Spreadsheets by Kathleen Hoffelder examined the outcomes of a recent Price Waterhouse Coopers study on the ‘tool of choice’ in corporate tax departments.  

The joint study conducted by Price Waterhouse coopers and the Manufacturers Alliance for Productivity and Innovation surveyed 100 tax professionals in the area of their tools for managing and reporting on data.  Of the respondents, 60% said that they continue to rely on spreadsheets as a provisional tool in their tax departments.  Although 60% is a high number, what makes the response more interesting is that spreadsheets were used amid the use of more complex tax-technology tools.  The report goes on to demonstrate how many companies are using spreadsheets as significant data storage and reporting tools.   The study reported that nearly 70% of respondents from mid cap to large cap firms continue to use spreadsheets to perform ongoing legal-entity reconciliations.

Based on personal experience, I have found that private organizations rely on spreadsheets at least as much as public companies.  Although the technology exists to use specialized tools for reporting and the like, organizations continue with the gymnastics of ‘massaging’ data in spreadsheets.  I have personally experienced organizations that have and continue to swim in the sea of spreadsheets.  Not surprisingly to the point of keying and re-keying data when the facility of electronic data transfers exists!  The room for error in this environment is tremendous, in my opinion.

The article revealed that spreadsheets have become the ‘life support’ systems of many tax departments, and I would add accounting/finance departments.  Michael Burak, U.S. and Global Industrial Products Tax leader at PwC indicates “The use of spreadsheets is a reason why tax departments spend a significant amount of time gathering data instead of just analyzing data”.  Statements like these lead one to question if the problem is with the user or with the technology.  , the user doesn’t want to give up the old tools of their job, management likes the reports the ‘old way’ or the technology is simply not available. 

My experience suggests that the issue is two-fold and thereby begs a two pronged solution.   The primary basis is the user and management.  Management must look toward the information of reporting rather than the esthetics of reporting.  Insisting on higher demands on the analytics rather than the esthetics will drive line departments to add more value than ‘fluff’.  User departments must more fully explore the tools of their current methods and technology, provide analytics and secondarily to provide feedback to technology companies to produce the tools they need.  Todd Bixby, tax technology leader at PwC contends ‘Companies would be better served by streamlining the entire process with better data integration’.   My take away, organizations should look toward a more holistic approach to data, reporting and analytics.

Several years ago I wrote an article ‘So what, Now what’, looking at the need for reports to motivate decision makers to act.  It is in the quality, timeliness and intelligence of the report that drives decision making not the ‘esthetics.  Organizations are spending an inordinate amount of money on producing reports using highly labor intensive tools.  When instead they could repurpose that cost of keying and rekeying data to analytics – adding intelligence to the reporting!

Doing (the Right) Thing (Right)

With the plethora of changes in the US system (Affordable Care, Blizzard of regulatory changes) it is becoming increasingly difficult for organizations to navigate their way through the myriad of changes. If the pressure for compliance is not enough, the economic pressures of competitors and the demands of stakeholders have pushed many organizations beyond the boiling point. Regardless of the industry, organizations currently face increasingly strict operating environments.

It was the November 2013 article by Josh Hyatt Raising the Standard of Compliance that afforded me the glimpse of what large multi-national public companies are facing. Up to this point, I felt the rain of compliance requirements in medium sized single industry organizations. Trying to get my head around the, what appears to be, the dichotomy between business success and compliance. My initial perspective, like that of others was, ‘another thing that must be done’.

The Hyatt article reviewed data of 150 senior executives of organizations whose revenue was at least $100 million per year. The data revealed that 81% of respondents that the task of monitoring tax and employment related changes had become much more time consuming. Supported by deductive reasoning, 92% of these executives indicated that their budgetary cost of compliance will increase over the coming year.

For many, personally and corporately, the response to the compliance demands of external agencies are met with ‘we will simply pay the penalty’. Hovering under the guise of ‘wait and see’, for many is par for the course. However, when it rains it pours! The wait and see model may work for a time, but when the agency percolates to the top of some list for investigation, and the investigation yields fruit – it become a call to the wild for a feeding frenzy!

The roulette wheel of ‘wait and see’ is not a long term strategy for any organization. In the same vein, organizations are being pulled by many fires and the compliance fire may only be smoke at the current moment. Juggling one more external demand causes executives to ponder ‘ doing things right vs. doing the right thing’. Through the ebbs and flows of current economics has brought me to the very question many times.

Doing things right vs. doing the right thing may, be to the literary aficionado the power of the placement of an adjective; in business circles has led to tremendous debate. There appears to be no end to the commentary on this powerful phrase when an internet search returns an immediate 431,000 hits in little over 2 seconds. At the highest level, Peter Drucker says “Management is doing things right; leadership is doing the right things.”

Unpacking the statement, I guess, suggests that ‘the right things’ are tied to those things that bring ‘good’- however we choose to define good. While ‘thing right’ relates more to the how individual steps are made toward the fulfillment of the ‘right thing’. This notion is supported by John Tabita in Doing Things Right vs. Doing the Right Things, where he contends that this phrase is the difference between leadership and management.

Tabit builds on the notion that ‘doing the right thing’ relies on strategic thinking that is meant to build vision. While ‘doing things right’ is more of a tactical pursuit. Although Tabit continues the strategic vs tactical debate he never clearly makes the point that strategy and tactical response must be tightly coupled.

Probably the best article on addressing ‘doing the right thing vs doing things right’ was by David Anderson, Why “doing things right” should lead “doing the right thing”. Anderson begins with the neuro-psychological basis of ‘trust’. Trust in predictability and quality are the keys to enabling deferred commitment. When there is no trust and no underlying capability to make real options valuable, there is a tendency to compensate with early commitment and over-burdening of a system. When users cannot expect a consistent or quality deliverable, they question on the validity of the output to meet their needs. Regulatory systems provide the mechanism to instantiate ‘trust’ in the deliverable.

Although many organizations see regulatory issues as the ‘ball and chains’ they do create trust with the end user which will create the end result of user commitment. This is the first step in building a solid organization. Management must use the ‘doing the right thing’ to make the organization successful – Drucker and leadership.

"Doing things right" must lead "doing the right thing" to enable a virtuous cycle of continuous improvement. Management must stop trying to solve one challenge at a time but rather take a more holistic view toward achieving the best achievable cost advantage.

No One Size Fits All

With the economy climbing from the abyss onto dry land it appears that the new mantra, at least it sounds new, is more with less and greater efficiency.  While that phrase has pervasive in 2007-2009 as a means of survival it is now about profitability.  Now with most every article I pick up or webinar I attend, there is a new widget to make my business better, more efficient and much more profitable.

With the sea of constant commercial stimulation for better both in the operations and in the back office, how is one to discern which new snake oil will add value. I could easily see how this constant attack against one’s enterprise could send leaders into a shutdown mode. Recently I attended a webinar on streamlining the accounts payable process.  With the big leaders on the panel I was sure that I would be able to come away with some magic remedy that would cut cost and increase AP efficiency.  What I did come away with was, through the licensing of some cloud based technology my AP operation would be better.  It still puzzles me how this is possible without someone doing a more in depth analysis of what we do in AP and how best to achieve better results through removal of redundant work.  Sorry panel – more technology is not what I need!

Recently in a prominent financial magazine, I happened upon an article that espouse the merits of adopting a ‘best practice’ approach to AP and AR management.  Wading through paragraph after paragraph of ‘best practices’ I came to the realization that my AP and AR departments are probably the post children for best practices.  Which I know is not the case! 

Regardless of where one’s organization is on the continuum of ‘best practices’ there is always room to achieve gains in revamping processes.  So often managers get so bogged down with the day to day activities of keeping their department going that either they are too exhausted to seek means of gaining efficiency or there is no benefit to gaining efficiency.

Without a strong visionary leader, finance departments can settle into the doldrums of doing the same thing the same way as they have always done it.  To break out of this vicious cycle, there has to be several elements: the need to change, the desire to change and knowing how to change.   For many stayed mangers they are batting 0 for 3. It is for this reason that senior management must hold finance to the same metrics as all other production departments. There are many improvements that finance can undertake to derive greater efficiency; not all of which are tied to purchasing something.

The most difficult step in developing an operation rooted in efficiency and innovation is to change the culture.  The cultural shift must encourage and promote innovation.  Mistakes should be embrace for the value they teach and successes shared by all.  Moving from a petrified environment to one of innovation, may require new talent if innovation isn’t part of the current genome.  Should new talent be procured, then there is the settling in phase and eventually the resistance to change. 

To effect real change, leaders must build the environment that encourages change.  People must feel they are part of something bigger than themselves and it must align with their goals and objectives for career growth.  This is where they leadership team must have a strategic vision for the organization, and then sell it to the teams.  People need to see their place in the vision.  Once established, acceptable performance must be based on a relevant contribution to the organizational goals.  Through my career, this has been called ‘skin in the game’.  Contrary to Kohn’s organizational compensation models explained in Management by Rewards, employees need to be challenged both in efficiency and productivity. 

Recently I participated in a roundtable dialogue of efficiencies gain in a primary care practice.  For several on the panel, old techniques were the fare of their operation.  Most practices called their patients to remind them of the appointments, scheduled patients according to their requests and some maintained either a standby list or allowed walk-ins.  The most progressive practice did all of these, with a twist. Firstly, patients were called several days earlier with an auto dialer that required the listener to hit a key to confirm the appointment.  Failing which, the patient would be contacted personally in the even a rescheduling of the appointment was required.  Secondly, the practice realizing they had a certain level of ‘no-shows’ they maintained a standby list.  In addition, they had a triage nurse that would assess the severity of the situation. Finally, having skin in the game – motivating providers! Provider compensation was built up based on several criteria: patient visits per day, sufficient documentation for billing and most importantly, peer review.  These changes working in unison positioned the practice head and shoulders over other similar practices.

The question remains, how does one get there?  It isn’t through some new software or technology.  It is through innovation.  How does one seed innovation?  When examining a function or department, say like AP.  One must ask, what three or five things MUST be accomplished otherwise this area is considered to be non-functioning. From there, one builds a new paradigm to complete the task or build a department. 

Without beginning with a must have list, one cannot affect great change.  In a recent blog Seth Godin, Skeumorphs = Failure,  explains that so many designs are made to look like something else.  The theory is it flattens the learning curve, as users are more familiar with the antecedent.  This may be the case when designing, but true innovation must start from a clean slate because – no one size fits all!