IBM Cognos 8 Planning: Engineer a clear-cut strategy for achieving best-in-class results using IBM Cognos 8 Planning with this book and eBook

Problems with traditional planning processes are commonplace. The process can be time consuming, involving countless hours of activities that add little value. Changes in the business environment are seldom reflected in the plan. The integrity of data is questionable. The process of collecting and consolidating plans creates a lag that makes information obsolete by the time it reaches the decision maker. For non-financial managers, the task of preparing the budget seems to be more of an invasion of their time rather than a rather a meaningful, productive exercise. They feel overwhelmed by the demands for financial projections that have little connection to the realities of their business. Many of these problems are evident in companies that have inadequate planning systems.

While today's business literature has placed considerable focus on sophisticated enterprise-wide planning systems, most companies still plan using spreadsheets, sending planning templates back and forth, and spending an inordinate amount of time collecting and consolidating plans. A survey by CFO Research Services asked finance executives about their efforts to transform their planning, budgeting, and forecasting processes. Of those who responded, 73% rely primarily on spreadsheets and manual processes. Only 16% use analytical applications, and only 11% extract the necessary numerical information from their accounting modules. Spreadsheet-based planning is littered with problems and is often a chaotic, frustrating, and ineffective process, causing managers to submit unrealistic budgets and senior executives to fudge the numbers at the top. This drives a wedge between senior executives and lower-level managers, and alienates people who are accountable for the plan but feel a certain distrust of the numbers by which they are now measured. Other problems are familiar.

Developing a model in a spreadsheet appeals to many users because of its flexibility. You can develop a model without the need for a preliminary blueprint or prototype, because the spreadsheet imposes no rules or structure for designing or laying out your model. While this is all well and good for a simple model, you will soon realize that a spreadsheet-based planning process can quickly degenerate into "spreadsheet hell". A simple insertion of a row or column can be a daunting task when numerous worksheets are involved. Macros that execute routines must be recoded, retested, and redeployed to account for the change. The fact is that the spreadsheet, while a powerful personal tool, lacks the structure that is so vital in enforcing the discipline necessary to support and maintain any process on an enterprise scale.

Even the most carefully-crafted spreadsheet carries the risk of formula errors. In a spreadsheet, formulas are embedded in cells and then copied across many rows, columns, worksheets, and workbooks. This method may not seem initially onerous, but when you have to make a change in formula to multiple spreadsheets, it is easy to make a mistake, especially when there is no central place where calculations reside. Errors come in many forms, from a simple typographical mistake to completely overlooking a critical component. Because the calculations are scattered and mixed with data, finding a formula error is like searching for a needle in a haystack.

All too often, spreadsheets are developed by individuals in finance and so are designed to be user-friendly to the designer. To a non-financial person, it could be the opposite. A spreadsheet that contains complex formulas that refer to multiple cells across several worksheets can be intimidating. When users do not understand how their numbers are arrived at, the planning process loses its integrity.

When spreadsheets are distributed across the organization, the task of collecting and consolidating them can be extremely time-consuming. No wonder that in some companies the task of consolidating is a full-time job. Not only must the plan be submitted on time, it must be the correct version, and it must roll-up the latest organizational hierarchy.

Corporate Performance Management (CPM) is a term that describes the practices, processes, technologies, and metrics that are used to measure and manage a company's performance. There are a host of similar terms in business literature, such as Business Performance Management (BPM), Enterprise Performance Management (EPM), and Financial Performance Management (FPM). Notwithstanding the differences in terminologies, the concept is the same: companies need a way to manage performance within a complete and comprehensive framework. CPM provides answers to three fundamental questions: "How are we doing?", "Why?", and "What should we be doing?" Leading organizations are succeeding through an integrated CPM approach that encompasses planning, scorecarding, and business intelligence. This approach enables companies to define strategic goals and then measure and manage performance against these goals. Such organizations establish performance expectations through planning, monitor performance by using scorecards, and understand what drives performance by reporting and analyzing information.

The following figure shows the various steps in the CPM approach:

IBM Cognos Planning helps to improve financial and operational planning by giving companies the ability to transform a high-level strategy into discrete plans. It encompasses the entire company yet it enables the finance department to own and manage the process. It supports dynamic planning and provides the cornerstone for enterprise-scale performance management. Some of the benefits are: