Lessons Learned What not to do while implementing

Lessons Learned What not to do while implementing Clarity: Incorporating “Resource Allocation” processes while preparing for “activity-based” planning Jeffrey Bloom, PLC Secretary Xinify Senior Solutions Architect jeff. bloom@xinify. com 7/10/2008 Clarity PLC Summer Web. Conference This slide copyright Jeffrey A. Bloom 2008 1

The “Chicken and Egg” Problem How to introduce “activity-based” forecasting, budgeting, actual costs & management where none have existed before? 7/10/2008 Clarity PLC Summer Web. Conference This slide copyright Jeffrey A. Bloom 2008 2

Before “Activity-based”… -> organizational resource allocation Budget allocations typically based on past expenditures, Adjusted for “gross” estimates of changing resource demand 7/10/2008 Clarity PLC Summer Web. Conference This slide copyright Jeffrey A. Bloom 2008 3

What are the Deficiencies of the typical “Resource Allocation” forecasting process? ¡ Resource Allocations difficult to create, justify and approve as part of a uniform Governance Process l l l ¡ Resource Allocation creation, maintenance, evaluation & approval processes are typically immature and poorly documented l l l 7/10/2008 Forecasting demand for resources without a clear, auditable relationship to planned activities is typically based on inadequately supported assumptions Rationale and/or Justification for adjustments to past operating budgets upon which current forecasts are based may not be well developed and/or documented Simplistic forecasting models are used in the absence of adequate detailed data (e. g. , % of gross revenue projections, proportion of planned initiatives, etc. ) Difficult to defend Leveraging past experience is a challenge Provides little foundation for understanding of underlying assumptions, changes and plan versus actual variances Clarity PLC Summer Web. Conference This slide copyright Jeffrey A. Bloom 2008 4

How is “Activity-based” planning better? ¡ Activity-based Plans: l ¡ Resource Allocations are l l ¡ an OUTPUT of the planning process rather than an INPUT Finance Process enhanced l l 7/10/2008 provide an auditable forecast of costs & timing of expenditures to deliver PRODUCTS operating units must submit defensible forecasts Forecasts pass management review before becoming approved BUDGETs Clarity PLC Summer Web. Conference Expenditures of resources have specific dates and rates This slide copyright Jeffrey A. Bloom 2008 5

What is the Problem? The “Chicken & Egg” Conundrum ¡ The Organization is NOT READY l l l ¡ Not experienced in developing activity-based plans No adequate historical data to develop plans Not enough time What DOES NOT work l Creating a “Resource Allocation” and “Approval” process look-alike in Clarity ¡ ¡ 7/10/2008 Using Clarity Studio to create separate “budget objects”, portlets & reports Not integrated with Clarity objects, processes & reports Clarity PLC Summer Web. Conference This slide copyright Jeffrey A. Bloom 2008 6

Some Examples Four Clarity “projects” with information on one Actual Project ¡ Denormalized data structure l l ¡ Difficult to create and maintain custom portlets & reports l l 7/10/2008 Data synchronization problems since multiple objects are used to represent the state of one object All portlets and reports must replicate the logic required by the storage of one object’s state information in multiple objects Typically execute slowly May impact overall system performance Clarity PLC Summer Web. Conference Budget Account Project Amount Allocated Budget Approval Project Portion Approved Budget Released Project Portion to Spend Actual “scheduled” Project Portion Spent This slide copyright Jeffrey A. Bloom 2008 7

Some Examples “Co-projects” to carry budget information ¡ Denormalized data structure l l ¡ Amount to Spend Capitalized Budget Project Expensed Budget Project Difficult to create and maintain custom portlets & reports l l 7/10/2008 Data synchronization problems since multiple objects are used to represent the state of one object All portlets and reports must replicate the logic required by the storage of one object’s state information in multiple objects Scheduled Project Typically execute slowly May impact overall system performance Clarity PLC Summer Web. Conference This slide copyright Jeffrey A. Bloom 2008 8

What’s the Right Way? Standard “Out of the Box” Clarity ¡ Use “baseline” Organizational Budgets until ready for “activity-based” planning l Replicate the existing departmental resource budgets as projects and “service” tasks ¡ l Use the same resource estimates found in the “Resource Allocation” budget process to start ¡ ¡ Replace with “Scheduled” activity-based tasks as the organization’s planning capabilities are matured Utilize Clarity’s “Out of the Box” Financial Management System for all reporting l INITIALLY ¡ l “Resource Allocation” reports equivalent to the old process are output from Clarity THE BIG WIN ¡ 7/10/2008 One task for the whole period with all resources As individual planning efforts are undertaken, the benefits of “activity-based” planning – time-phased costs based on ACTIVITIES and PRODUCTS - are immediately incorporated Clarity PLC Summer Web. Conference This slide copyright Jeffrey A. Bloom 2008 9