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Modern Financial Systems and Business Performance Management

Democratizing the Blame

Published: April 12, 2007

A colorful BPM system can help an organization to much more quickly realize how ignorant and wrong it can be in setting its forecasts, budgets, goals and targets. However, the Rule of C allows the organization to excuse why things are not as they thought.

What organization does not try to set accurate and realistic forecasts, budgets, goals and targets (uncommonly abbreviated FoBuGoTa)? In order to do this, many use some serious financial applications toppled with some even more serious business performance management (BPM) applications. With all this, an organization should be able not only to set its FoBuGoTa, but also follow it all up in a professional manner in the form of BPM with an added touch of colorful dashboards.

And this is all fine, now that the tools are all there. What remains is to figure out an underlying efficient process for making the FoBuGoTa accurate. For one thing, most financial applications are good in supporting the bottom-up approach by consolidating FoBuGoTa on different levels and axes. This allows the active participation of everyone involved, which is great in order to make everyone responsible for his or her activities – and accountable when things go by the board. In the old days, most organizations instead had a top-down approach whereby they simply said that they wanted to increase revenues by X percent across the board. It was easy, but people complained about getting unrealistic goals and not enough money for doing it.

With a gleaming, modern, consolidating financial system, everyone can set his or her own FoBuGoTa and then everything can be consolidated. However, after having done this procedure, the top management still usually says that it is not enough and they tell everyone that what is really wanted is to increase revenues by X percent. It is just like in the good ol’ days, except that everything has been complicated. At least, these complications have been democratized.

In the end, there are a multitude of different figures showing what next year’s FoBuGoTa looks like for different axes, hierarchical levels, business units, etc. A satellite is needed to take a picture of it if one wants it all in one single view. That is a really spread-out spreadsheet. There are even rumors that Hollywood wants to make a movie called “Godzilla Against The Incredible FoBuGoTa.”

At least it is nice to have BPM on top of the FoBuGoTa in order to put some colors to it all. Given the complexity of most FoBuGoTa, the resulting dashboard can look like a surrealistic painting made by a color-blind lunatic. Looking at it for more than three seconds may cause the viewer to suffer an adverse reaction.

In fact, financial systems combined with business performance management and dashboards would be brilliant in helping organizations to better predict the future and therefore optimize next year’s FoBuGoTa – if they could only be confident that this year’s FoBuGoTa is realistic and accurate. Many organizations use all their applications and vendors to a maximum, paying them a maximum (something that also has to be added to the Bu part, i.e., the budget, in the FoBuGoTa). Then, they hope that the capability to figure out the future market and its capricious behavior shall also be included in all these systems. In case it is not, as is generally the case, anyone and everyone can be blamed now that there are so many to blame with the bottom-up approach. At least a colorful BPM system will help in a much quicker fashion to realize how ignorant and wrong an organization can be in estimating its FoBuGoTa. And that is always something. The usual response to these surprising and often shocking results is habitually that the BPM system must be incomplete and not really taking into account the complexity of the particular business combined with the complexity of the marketplace. This tactic can be called the Rule of C, i.e., the rule of complexities.

The Rule of C is what allows an organization to excuse why things are not as it thought. An organization’s analysts can use this when explaining why their extremely expensive analytical applications, built around an even more extremely expensive and expansive data warehouse, do not tell the future accurately. And if they are correct in their forecasts, it must be luck. With the Rule of C, what else could it be?

The Rule of C, by the way, is what lets the FoBuGoTa beat not only Godzilla, but also any critics. If these critics just cannot understand how complex today’s financial systems are – and still without the capability to automatically provide exact answers to questions about the future – they shall have to deal with the Rule of C as an answer.

Oh yes, the Rule of C is the answer if systems that crunch and present mission-critical figures still cannot help an organization become better in its business. Another answer might be to improve the general competence about the basic business activities before launching expensive, complex and high-profile projects within the fields of data warehousing, business intelligence, business performance management and whatever. But that is not very colorful. And it shall certainly not beat Godzilla.

And so, with a complex process for our FoBuGoTa, combined with some serious financial applications, business performance management and dashboards, one can always hope that sound underlying processes and competence can be slightly and lightly ignored. If not, we shall all be fodder for Godzilla, in whatever form he may turn out to be.

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