I Know We Have the Data, So Why Can’t I Get the Information?

We repeatedly hear CEOs express frustration when they can’t quickly get the information they need to make important decisions or when their firm struggles to consistently meet financial reporting deadlines.  In many cases, despite recurring failures and repeated requests to their Finance, Marketing or IT departments, the problems persist.

These challenges are typically rooted in the existence of disparate, unconnected databases and files, or databases that are formatted so differently from one another as to preclude an easy export-and-consolidation.  Moreover, data requests may face yet another challenge: information that should be in databases, is not.  Instead, this data resides independently in an employee’s Excel spreadsheet that, perhaps, has a unique and valuable analysis no one else can see.

The First Thing to Realize About This Challenge is …

 … this situation didn’t evolve overnight. Nor, can the solution.

This Complexity Seems Inevitable - but is it?

Most firms, as they mature, incrementally build their information systems while geometrically increasing the amount of data they contain.  The recognition of the need for a new system, let’s say a CRM, rarely triggers a re-visit and consolidation of the corporate data model.  Instead, a new system, in its rush for implementation, becomes parochial, departmental and unintegrated, collecting un-shared, inconsistently-formatted data.

Such ad-hoc initiatives across the corporation create a patchwork of siloed systems, data bases and Excel-based solutions that addressed problems as they arose, with little or no consideration of their implications on the firm’s larger information data architecture and processes.  The continuing evolution of new data sets, without first considering structure, consistency, compatibility and maintenance, precludes the possibility of both effective data analyses and efficient processes.

Embedded Inefficiencies

We recognize six causes of such information accessibility and process problems:

1. Disconnects:  Data, essential to producing the information needed, exist in disconnected, un-integrated systems.
2. Multiple Residences: The same data exists in multiple systems with little ability to discern which is more accurate or current.
3. Incompatible formats: The data exists, but in different formats so when, and if, it is compiled it will not aggregate correctly.
4. Indiscriminate data collection: In this circumstance, there is a near fanatic commitment to the collection of data, by well-meaning, quality-trained employees.  Except, that the data resides in multiple independent repositories and there is little to no common recognition of which data is most important.
5. WDCT (We Don’t Collect That) Data:  Too often young companies are concerned with only a few key pieces of data: Who is the customer? What did they buy? Where do we send the invoice?  Beyond that, any other data, if at all considered, is simply deemed non-essential and therefore not collected – until, of course, that moment in time when it is needed, sometimes years down the road.
6. Inaccessibility of Operational Data: This is the information collected and measured outside the firm’s ERP. Yet, this information may be critical to Management’s evaluation of the business.  Such information might include production yields and quality metrics.

The longer a firm has been in business, the higher the likelihood of data dysfunction and information access problems. 

Quickly devised solutions to such problems may relieve executive pressure from the IT folks, but may comprise a series of weak patches.  Afterwards, as long as the boat isn’t sinking, a more concrete solution is rarely considered.  There is no time – and no budget.

Not recognizing that such patches are indicative of a larger problem that will only worsen, is as irresponsible as not repairing a leaky roof just because the rain stopped.  The leak will likely re-appear the next time it rains and eventually cause serious damage.

 Assessing your Corporate Data Structure

 So, what is the best way to avoid or repair these information accessibility issues without bringing business to a screeching halt?        

Step 1: Define the data that needs to be integrated and consistent. This data typically resides in the following groupings:        

• Customer Master Data
• Supplier Master Data
• The Item Master (all the data sets related to Items sold or produced)
• Product Structure Master (sometimes called the Bill of Materials or BOM)
• Chart of Accounts
• Employee Master data

Step 2: Identify your currently dysfunctional processes

Most important business information is generated and used in three primary process flows: 

     - Order-to-Cash

    - Procure-to-Pay

    - Financial Reporting

How do you know which to attack first? Here are some clues;

• Your ability to produce Sarbanes-Oxley compliant reporting requires an extraction of data from a number of Excel and off-line systems. Even if your firm is not required to be SOX-Compliance, it will have an audit component based on typical financial controls - which evaluates the same 3 process flows.
• Important transactional processes, like Logistics or Requisition Management, are managed in Excel spreadsheets.
• Closing the books is impossible without difficult and convoluted manual manipulations.
• There is difficulty in managing the three process flows listed above.
• Management is not pleased because they can’t consistently get the timely information they need to make critical decisions and meet financial reporting deadlines.

Step 3: Change - Implementing a Master Data Imperative

A Master Data Imperative defines the primacy of the information needed for executives to make strategic decisions and meet their financial reporting requirements.  

Master Data is governed by two concepts: Master Data Management and Data Quality Management.  If done properly, they are based on several foundational principles. 

1. Data definitions and formats will not diverge as new systems or software modules get added
2. Data is shared between systems and only maintained in one place. This concept is known as “the single source of the truth”.  Master data sets can’t be controlled unless they are only maintained in one place, then propagated to all systems requiring the data set.
3. The data needed for generating the information needed for making decisions and financial reporting is collected and available when needed.

How does a company know it’s time to bite the bullet and begin to rebuild its information and data management paradigm?

You’ll know when …

1. Financial reporting requires significant manual data manipulations and collection of data from multiple data bases and spreadsheets
2. Reporting deadlines are consistently missed.
3. The Monthly Close process is slow (and painful)
4. Executives keep asking for reports and analysis they can’t get or are stale and out of date by the time they get them
5. The firm has numerous stand-alone systems that don’t bilaterally share the same data. (Note: If a critical report is based on an excel spreadsheet, there’s likely a problem with data format consistency.)
6. The firm has several major costly, unintegrated systems installation programs going on simultaneously, each with its own data repository and the requests for investment for more stand-alone, departmental systems keep showing up in next year’s IT budget.

 A Final Advisory:

If the symptoms above ring true, ask your IT department to commission an independent, 3rd party assessment of your firm’s information systems data integrity and financial reporting process.  Most assuredly there will be dysfunctions – major and minor.  But, like periodically standing still long enough to schedule a check of your personal health, whether the news is bad or good, the sooner you know it, the better.  Then you can do something about it.

*****

Rick Koski is the President of Lighthouse, a management consulting firm responsible for the planning and hands-on execution of strategic initiatives in operations, technology and corporate development.  Rick can be reached at [email protected] or 408.884.3690.