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Business Performance Management Point of View

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Enterprise Performance Management
Pressure To Perform
25 May 2005
Copyright © Accenture 2005. All Rights Reserved. Accenture, its logo, and High Performance Delivered are trademarks of Accenture.
Agenda

Accenture Overview

Our Point of View on Enterprise Performance Management

Implementation framework

How to get started
© Accenture 2005. All Rights Reserved.
2
Accenture Overview
Introduction to Accenture
• Global management and technology consulting organisation, with
revenues of $13.7bn in FY2004
• More than 100,000 people working in 48 countries
• Operates as a global organisation servicing clients in five industry
based groups, Financial Services, Communications and Hi-tech,
Products, Resources and Government
• Globally serves 87 of the Fortune Global 100 and more than two-thirds
of the Fortune Global 500
© Accenture 2005. All Rights Reserved.
3
Accenture Overview
Accenture credentials – Our position in Financial
Services and our specialist “Service Lines”
Comms &
High Tech
Financial
Services
Govt
Customer Relation ship Management
Finance & Performance Management
Human Performance
Solutions Engineering
Solutions Operations
Strategy & Business Architecture
Supply Chain Management
Technology Research & Innovation
© Accenture 2005. All Rights Reserved.
4
Products
Resources
Agenda

Accenture Overview

Our Point of View on Enterprise Performance Management

Implementation framework

How to get started
© Accenture 2005. All Rights Reserved.
5
EPM Point of View
Enterprise Performance Management (EPM) is critical
to manage near- and long-term performance
High-performance businesses use EPM to:
© Accenture 2005. All Rights Reserved.

Identify and predict value drivers that will optimize
position in the value chain

Link strategy with planning, budgeting, forecasting
and performance reporting capabilities

Capture information that can generate insight and
turn that insight into action

Set better strategic goals and make more informed
decisions

Identify issues / threats faster, and react to them
more quickly
6
EPM Point of View
Fact: Many organisations are not satisfied with
their current EPM capability
Common Gaps
Satisfaction Rate (%)
0
25
50
75
100











Alignment between company strategy and planning process
(40%)
Focus on key business drivers (24%)
Amount of time required to create the annual plan (47%)
Speed and accuracy of the forecasting processes (48%)
Ability to produce business models and test impact of changes
(31%)
Speed and accuracy of the monthly financial reporting (63%)
Reporting of non-financial measures (28%)
Business users view and analyze performance reports at will
(25%)
Integrated IT systems to collect and manage the information
(41%)
Visibility into current results (29%)
Understanding of future performance trends (30%)
Source: October 2002 survey of 245 companies conducted by CFO Research Services
© Accenture 2005. All Rights Reserved.
7
EPM Point of View
Accounting earnings based financial management has
become less relevant as the majority of value is in the
future…
Current Value versus Future Value
Russell 3000 (May 2003, $ trillions)
$13.1
$7.6
100%
58%
• Future Value is a significant
component of total Enterprise
Value for most organisations
• Future Value is the expected
incremental value beyond the
value delivered by current
operations
$4.9
42%
$0.6
4.2%
1
Enterprise Value
First Year
Remaining Years Future Value3
2
Current Value
© Accenture 2005. All Rights Reserved.
8
EPM Point of View
…Neither does the Balance Sheet adequately track the
assets that are driving value.
Market to Book Value Over Time
S&P 500 – (1980 – 2002)
100
90
~20%
Market Value (%)
80
~45%
70
60
~85%
50
40
~75%
Unexplained
Value
~80%
30
~55%
20
10
~15%
~25%
Accounting
Book Value
0
1980
1980
PeakPeak
(3/2000)
(3/2000)
1990
Post-Crash
Post
Crash
(8/2002)
(8/2002)
Sources:
Lev, Baruch. “Intangibles: Management, Measurement, and Reporting,” Brookings Institution Press, 2001
Lev, Baruch. “Remarks on the Measurement, Valuation, and Reporting of Intangible Assets”. Economic Policy Review (Federal Reserve Bank of New York), September 2003
Accenture Analysis
© Accenture 2005. All Rights Reserved.
9
EPM Point of View
However few organisations extend EPM beyond
traditional financial measurement
Intangible
Tangible
Monetary
Physical
Relational
Organizational
Human
 Cash
 Investments
 Receivables /
Debtors
 Payables /
Creditors
 Property
 Plant
 Equipment
 Inventory
Value
• Customer
Contracts
• Formal
Alliances, JVs,
Supply
Agreements
• Systems
• Formalized
Processes
• Codified
Knowledge
• Patents
• Brands
• Management
Contracts
• Documented
Accessible Skills
Inventories
• Credit Ratings
• Borrowing
Capacity
• Receivables
Certainty
• Accruals
Convertibility
• Plant
Flexibility
• Plant
Modernity
• Access
Rights
• Balance
Sheet
Strength
• Customer
Loyalty
• Quality of
Contracts
• Strength of
Stakeholders’
Support
• Networks
• Regulatory
Imposts
• Structure
Appropriate
• Informal
Processes
• Organization
Reputation
• Brand
Meaning
• Productivity of
R&D
• Top Mgmt Quality/
Experience
• Ability to Execute
Strategy
• Leadership
Capabilities
• Problem Solving
Ability
• Employee Loyalty
Traditional scope of financial/accounting measurement
© Accenture 2005. All Rights Reserved.
10
Agenda

Accenture Overview

Our Point of View on Enterprise Performance Management

Implementation framework

How to get started
© Accenture 2005. All Rights Reserved.
11
EPM Implementation
We work with our clients to implement a holistic
framework for Enterprise Performance Management
Target Setting &
Business Plan
Strategic Plan
Determine Key
Measures of
Success
Portfolio Value
Assessment
Determine Key
Business
Drivers
Monitor
Refine
Corporate Vision
& Strategic
Objectives
Enablers
Incentives and
Rewards
Set Targets for
Key Measures of
Accountability
Policies &
Procedures
Integrated
IT Arch
Common Data
Structures
Cascade Targets to
Lower Level Metrics/
Organization
Controls
Operate
Develop Plans
to Achieve
Targets
© Accenture 2005. All Rights Reserved.
Allocate
Resources to
Achieve Plans
12
Review,
Challenge &
Finalize Plans &
Forecasts
Develop Action Plans,
Re-allocate
Resources and
Update Forecast
Review Performance
with Executive
Management
Monitor Key
Measures of
Business
Performance
Close and
Consolidate Books
and Report Actuals
EPM Implementation
Typical EPM issues – target setting
Target Setting &
Business Plan
Strategic Plan
Determine Key
Measures of
Success
Portfolio Value
Assessment
Determine Key
Business
Drivers
Monitor
Refine
Corporate Vision
& Strategic
Objectives
Enablers
Incentives and
Rewards
Set Targets for
Key Measures of
Accountability
Common Data
Structures
Cascade Targets to
Lower Level Metrics/
Organization
Policies &
• Target
setting
Procedures
wrapped into the
Integrated budgeting process –
IT Arch slow and resource
intensive
Controls
Operate
Develop Plans
to Achieve
Targets
© Accenture 2005. All Rights Reserved.
Allocate
Resources to
Achieve Plans
13
Review,
Challenge &
Finalize Plans &
Forecasts
Develop Action Plans,
Re-allocate
Resources and
Update Forecast
Review Performance
with Executive
Management
Monitor Key
Measures of
Business
Performance
Close and
Consolidate Books
and Report Actuals
EPM Implementation
Typical EPM issues – enablers
Target Setting &
Business Plan
Portfolio Value
Assessment
• Inefficient use of
Monitor
resource &
poor
control from overRefine
Determine Key
Determine Key
Corporate Vision reliance on
Measures of
Business
spreadsheets
& Strategic
Success
Drivers
Action Plans,
Objectives • Lack ofDevelop
common
Re-allocate
business Resources
language
and
leads to Update Forecast
Enablers
misinterpretation of
numbers
Incentives and
Policies &
Strategic Plan
Rewards
Procedures
Set Targets for
Key Measures of
Accountability
Integrated
IT Arch
Common Data
Structures
Cascade Targets to
Lower Level Metrics/
Organization
Controls
Operate
Develop Plans
to Achieve
Targets
© Accenture 2005. All Rights Reserved.
Allocate
Resources to
Achieve Plans
14
Review,
Challenge &
Finalize Plans &
Forecasts
Review Performance
with Executive
Management
Monitor Key
Measures of
Business
Performance
Close and
Consolidate Books
and Report Actuals
EPM Implementation
Typical EPM issues – linkage to strategy
Target Setting &
Business Plan
Strategic Plan
Determine Key
Measures of
Success
Portfolio Value
Assessment
Determine Key
Business
Drivers
Monitor
Refine
Corporate Vision
& Strategic
Objectives
Enablers
Incentives and
Rewards
Set Targets for
Key Measures of
Accountability
Policies &
Procedures
Integrated
IT Arch
Common Data
Structures
Cascade Targets to
Lower Level Metrics/
Organization
Controls
© Accenture 2005. All Rights Reserved.
Allocate
Resources to
Achieve Plans
15
Review Performance
with Executive
Management
• Lack of broad
understanding of key
Monitor Key
value drivers
Measures of
• Current report content
Business
does not align withPerformance
strategy
Operate
Develop Plans
to Achieve
Targets
Develop Action Plans,
Re-allocate
Resources and
Update Forecast
Review,
Challenge &
Finalize Plans &
Forecasts
Close and
Consolidate Books
and Report Actuals
EPM Implementation
EXAMPLE : Determining key business drivers using a
value tree for the organisation
BUSINESS DRIVERS
Illustrative example for Life Insurance
Value Tree
Total APE
Profit
Margin
New
Business
+
APE by
Product
X
Average
Product
Profit
Margin
Distribution
Distribution
Margin
Directly
Controllable
Costs
-
Economic
Profit
+
+
Variances
Commission
Existing
Business
© Accenture 2005. All Rights Reserved.
Commission
Variance
Other
Capital
Charge
Persistency
16
• Distributor
Profitability
• Cost of
Servicing
• Salesforce
Remuneration
Allocated
Overhead
+
-
Business
Drivers
• Product
Design
• Quality of
Servicing
• Brand
• Salesforce
Calibre
EPM Implementation
EXAMPLE: Using business drivers to develop structured
reporting requirements
Illustrative example for Life Insurance
Priority Drivers
Key Measures
Information Requirements
• Mapping of KPIs to
prioritised business
drivers, with
identification of
additional new KPIs
where required
© Accenture 2005. All Rights Reserved.
Exec
Product Design
Salesforce calibre
Cost of servicing
Regulatory Compliance
Existing Business
Operating Costs
Sensitivity Model rating
Channel Mgt
• Prioritisation
of drivers by
their
Economic
Value
sensitivity
Business Drivers
Brand
% of Consultants
with Basic /
Advanced Skills
Training
Commission
Sales performance
Salesforce
Calibre
Actual APE vs
Target by
Consultant
Profitability
Business outcomes
H
H
H
L
Managing Director
W
M
M
M
Q
Q
A
Q
Q
Q
Sales Director
W
M
M
M
Q
Q
A
Q
Q
Q
Finance Director
W
M
M
M
Intermediary - National Sales Manager
W
M
M
M
Q
Q
A
Q
Q
Q
Direct - National Sales Manager
W
M
M
Q
Q
A
Q
Q
National Telesales Manager
W
M
M
Q
Q
A
Q
Q
• Linking accountability for business drivers and
their outcomes to individual business roles
enables a matrix of information requirements
to be developed
• Matrix includes classification of information
priority and required reporting frequency
17
Agenda

Accenture Overview

Our Point of View on Enterprise Performance Management

Implementation framework

How to get started
© Accenture 2005. All Rights Reserved.
18
Getting started
Leading practice is to break EPM into a number of
discrete stages
REVIEW
CONCEPTUAL DESIGN
Business Case
Development
Implementation Plan
Detailed
Design &
Plan
Detailed
Design &
Plan
Detailed
Design &
Plan
Software
Evaluation
High Level
Architecture Design
Stakeholder
Engagement
© Accenture 2005. All Rights Reserved.
Conceptual Design
of Solution
High Level Plan &
Business Case
Assess current state to identify gaps
/ Perform Diagnostic
Organisational
alignment
DETAILED
DESIGN
Justification of
investment
19
Detailed
Design &
Plan
Detailed
Design &
Plan
Implementation
blueprint
IMPLEMENT
Implement
Implement
Implement
Implement
Implement
Realisation of
benefits
Getting started
Our EPM Diagnostic enables issues to be confirmed /
identified in a structured approach over 4 – 8 weeks
Enterprise Performance
Management (EPM) Framework
View Full Screen
Instructions: (1) Click on "View Full Screen"
(2) Navigate to Survey by selecting area
View Normal
(2) Target Setting &
Business Plan
Go to Status
Go to
Instructions
(1) Strategic Plan
Determine Key
Measures of
Success
Portfolio Value
Assessment
Determine Key
Value Drivers
(4) Monitor
Refine Corporate
Vision &
Strategic
Objectives
Enablers
(6) Incentives and
Rewards
Set Targets for
Key Measures of
Accountability
Review Performance
with Executive
Management
(5) Data Structures
& Controls
(7) Leadership &
Capability
(3) Operate
Develop Plans to
Achieve Targets
© Accenture 2005. All Rights Reserved.
Develop Action Plans,
Re-allocate Resources
and Update Forecast
(5) Standardized
Processes
(5) Integrated
IT Architecture
Cascade Targets to
Lower Level Metrics/
Organization
Go to
Results
Allocate
Resources (all
categories) to
Achieve Plans
Monitor Key Measures
of Business
Performance
Review,
Challenge &
Finalize Plans &
Forecasts
Copyright © 2004 Accenture. Patent Pending. All Rights Reserved.
20
Getting started
The Diagnostic is pre-populated with leading practice for
each of the main building blocks of the EPM framework
EXAMPLE: Strategy Formulation & Planning
Key Inputs
 Opportunity
and risk
assessment
 Investor
expectations
 Key
competitor
and external
information
Refine Corporate
Vision & Strategic
Objectives
• Clearly defined
• Communicated
to all levels of
the organization
• Consistently
understood
Determine Key
Value Drivers
• Identified
• Prioritized
• Wellunderstood
• Clearly linked
to strategy
 Current
business
performance
 Current
strategic plan
Determine Key
Measures of
Success
• Critical few key
metrics
• Aligned with
shareholder
value creation
• Clearly defined
common
definitions
• Aligned with
measures
reported up and
used to manage
down
Key Outputs
 Agreed
upon business
assumptions
 Well-understood
business strategy &
objectives
 Revised
and prioritized
value drivers and
cause and effect maps
 Identified
 Updated
scorecards
with revised key
measures for each
business unit
 Defined
© Accenture 2005. All Rights Reserved.
strategic
initiatives
key measures
Copyright © 2004 Accenture. Patent Pending. All Rights Reserved.
21
Getting started
We capture an assessment from key stakeholders to
determine the value of addressing each gap
(1)Strategic
Plan
(2) Target
Setting
(3) Operate
Strategy Formulation & Planning Survey Complete
Return to
Navigation
Return to
Status
Return to
Instructions
(5) IT
Architecture
(4) Monitor
(6) Incentives
(7) Leadership
(8) Results
Current State Key
Save Results
Now
1
2
3
4
5
Go to
Results
Common practice in place and operationalized
Wide-recognition of current practice short coming, nothing underway to address
Leading practice agreed but no plan in place
Leading practice agreed and work is underway to achieve
Leading practice has been adopted and operationalized with success
STRATEGY FORMULATION & PLANNING
ID Common Practice
Current
Leading Practice
State
Current and future value drivers identified, prioritized, and clearly
2 1
linked to strategy
Value
1.1
Drivers partially identified but generally not prioritized; linkage to
strategy & future value not well understood
1.2
Focus on current value drivers with assumed cause and effect
linkages that are not always mapped or quantitatively tested
3
Cause and effect linkages well-understood and quantitatively tested
for both current and future value drivers
10
1.3
Strategic plan stands alone, and changes to strategy do not
automatically result in changes to targets and budgets
4
Strategic plan linked to targeting and resource allocation, enabling the
organization to more effectively adapt to changing conditions
5
1.4
Strategic planning is a long-term forecasting exercise and is not
always shareholder value-driven
3
Strategic planning is firmly grounded in shareholder value with an
external value focus on current/future value shift and share
35
1.5
Many P&L-focused performance measures; neither well-defined nor
consistent across the organization
1
Consistent, clearly-defined key result measures of successful execution
of strategy with direct linkage to TRS
15
1.6
Intangible asset performance neither explicitly measured nor actively
managed
1
Intangible assets accepted as key drivers of future value and managed
actively
15
Other Comments
© Accenture 2005. All Rights Reserved.
20
100
Copyright © 2004 Accenture. Patent Pending. All Rights Reserved.
22
Getting started
The business case for EPM should consider value
through three perspectives
Perspective
Definition
Effectiveness
• Ability to make better
decisions based on value
throughout organisation
• Sales force incentives aligned with
maximising value across channel /
product mix
• Ability to detect issues for
management attention on
timely basis
• More accurate business plans and
forecasts build credibility with
stakeholders
• Ability to provide
information with optimal
balance across cycle time,
effort and quality
• Cycle times for internal and external
reporting reduced
• Ability to manage within
financial and operational
risk parameters
• Compliance with external regulations
Efficiency
Risk
Mitigation
© Accenture 2005. All Rights Reserved.
Example Benefits
• FTE savings through reduction of
manual effort
• Enhanced internal controls through
automation and clearer audit trails
23
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