Situation Analysis:

After installing a sophisticated firm-wide Enterprise Resource Planning [ERP] technology with an integrated Finance capability, ClientCo’s CFO failed to see the promised breakthrough in operating performance gains. An internal Six Sigma team contacted The Lab to identify non-technology improvements and rapidly improve performance.

Improvements Identified:

The Lab began with an eight week Phase I analysis of ClientCo’s entire North American Finance group organization and operating processes. The Lab’s standardized improvement templates helped pinpoint more than 275 activity level improvements. Most [80%] required no technology change [Class I Improvements]. Roughly 25% of these could be implemented in 1-2 months. The remaining Class I improvements were all completed within six months from start of implementation. Examples:

1. Financial Close Rework - Needless complexity in allocations consumed 30-50% of Finance staff capacity with corrections, clarifications and on-the-fly re-training of data submitters. The new ERP technology increased an already bloated chart of accounts by an additional 40%. Account names and purposes were inconsistent and poorly documented across business groups, locations, and facilities.
2. Management/Financial Reporting - The vast majority of costly staff time [85%] was devoted to the lowest value activities: Gathering and scrubbing data [65%], generating and distributing reports [20%]. Only 15% of capacity was devoted to the tasks most requested by business units – financial analysis. The proliferation of ad hoc and “one off” reports was a major root cause.
3. Budgeting and Planning [for Operations] - The cycle time for finalization and formal approval of operating budgets extended slightly over half of the fiscal year at ClientCo. Even after this arduous process, at least 20% of budgets were significantly off plan with minimal quantitative insight or justification regarding the causes. Contributing factors: Over 80% of underlying financial assumptions were documented as incorrect at the start; only 20% of the budget incorporated unit cost and productivity data; 4-5 budget meeting iterations were considered “normal” for finalization.

Overall Results:

The self-finding implementation effort reduced the low value tasks by over 60%. Within six months, all project costs were recouped. At month 12, payback exceeded 2.5X. Improvements were more than 80% applicable to European operations.