Communicating to the troops

For years, proper procedures and control reports have been provided by computer system vendors to insure the accuracy of input data and to balance inventory and deliveries on a daily basis. This data feeds into the general ledger and canned reports or report generators are available to provide clear pictures of what your business has done.

Robert R. Levins

This is all well and good for owners and managers who want to see how their efforts have paid off and it serves the requirements of their bankers and accountants. However, these reports almost never have an effect on decisions employees make in the ordinary course of doing their jobs. It is these decisions, made many times daily, that will produce the results on the next set of reports.

As an owner or executive, you set the strategic goals of the company. Strategy, to be effective, must be converted by managers into operational tactics. For those tactics to succeed, they must be communicated to the troops.

Imagine an army in which officers ordered tactical operations without understanding the strategy of the general staff; where those orders where never understood, or followed by the men on the ground. You may have heard (or lived) the term “the fog of war” – the chaotic conditions of battle where the best intentions meet the reality on the ground and there is insufficient communication to understand and respond to what’s really going on. All too often, we work in a similar fog.

If you are to convert your strategy into results, you need to address two missing elements: information and communication.

Managers need to know what is going on day-to-day.

Everyone needs to understand and accept responsibility for carrying out the company’s tactics.

I was once told that in an operational environment such as ours achieving ongoing financial success and realizing strategic goals requires 1 percent vision and 99 percent alignment. Corporate strategies, in financial terms, are laid out in annual budgets, by month, normally down to a manageable level of detail.

Unfortunately, middle management often does not have access to month-to-date (MTD) numbers as they trend. We have all heard the statement; “In order to manage, you must be able to measure.” While fiscal reports abound, operational reporting, especially MTD, is almost non-existent. MTD margins, volumes, delivery statistics, tank turns and customer profitability are hard to come up with.

Increasingly, marketers are realizing that they must take a more aggressive stand when it comes to communicating and raising awareness of current MTD trends and budget variances with their employees. Accurate information, deployed on a daily basis, maintains the desired and consistent awareness, giving staff the ability to make informed and effective course changes during the month. The purpose of this exercise is to arrive predictably at month end.

A marketer I know has been using the balanced scorecard concept of performance measurement for many years, for just this reason, and has seen remarkable results.

In the beginning, he met with all of his management staff and collectively, in a democratic process (so he says), made decisions on what metrics or key performance indicators would properly measure their performance. Many of the measurements were non-financial and were believed to have significant influence on performance. Budgets were then established and a system was created for the daily collection of the MTD numbers.

Once this was accomplished, these numbers and their variances from plan where published daily. Everyone, top-down, was now on the same page, literally. He then did one thing that other marketers thought was quite creative. He attached the managers’ bonuses, as part of their overall compensation plan, to the goals. In summary, he provided the following to get the desired results:

• Presented the vision (strategy)
• Translated it into performance measurements (tactics)
• Provided an automated communication tool
• Achieved staff buy-in for the vision and the measurements
• Clearly defined responsibilities
• Clearly assigned accountability

Within the propane industry, a distributed approach of operational accounting is commonly used, in addition to centralized processing, using various forms of communications. Frequently, electronic files or spreadsheets are transmitted up to corporate to monitor performance. At the corporate level, those files are merged into more spreadsheets at considerable cost with frequent delays and constant risk of error.

There is a better way – business intelligence (BI).

A BI application’s primary objective is to collect all data electronically from all sources necessary and to put the story together quickly, accurately and totally unattended. This would include not just the primary accounting system, but also onboard applications, payroll, dispatch and the like.

When a BI system is first installed, the data in all the reports is balanced to the data in the original systems so that all users are confident in its accuracy. As the data from the various systems is collected, it is presented in reports and graphs designed to let everyone see how they are progressing toward their goals.

When a problem situation is exposed, these reports and graphs let users “drill-down” into the data, going all the way down to individual transactions, if necessary, to uncover the cause of the problem. The objective is to find any potential problems, make a course correction and move on.

The deployment method can be via desktop PC for analysis, an e-mailed document, on a company intranet or simply delivered right to your PDA.

With increased awareness of and agreement to company goals and with improved communication of results, management can make quick and effective adjustments during the month. Everyone can remain focused on the ultimate goal that is always assumed but sometimes lost during the activities of the day – to make money!

Bob Levins is president of Technology Assistance Group, which specializes in business intelligence applications and business process analysis for the downstream propane and petroleum markets. He can be reached at
robertrlevins@aol.com
or 215-519-8751.