CFO Question: So how many reports should I have in my organization?
Posted by Thomas Antunez on Tue, Dec 08, 2009
Let's use the 80/20 rule today.
In the hundreds of meetings I have had with CFO's, VP's of Finance, Financial Planning Manager's, etc there is one question that seems to strike fear into their respective hearts: how many reports should we have? I suppose the reason for this is twofold. First, given the simplicity of the question, Executives worry that the number they provide will be either too large or too small. Secondly, Executives worry that they will be ridiculed if they provide an answer of "I don't know". So, I'll give you the Economist's answers: it depends...but we can provide a good range for most situations. Clearly the differences between organizations drive varied reporting needs, however, if we narrow the question a bit, without diluting the end goal, we can provide some fairly good rules of thumb.
In the end, enterprise performance management is about managing the business, and it is not about reporting. If we isolate the true management of the business, using the CFO's perspective as our proxy for report volume, I believe we can provide much better guidance. In my experience, a typical CFO, and his or her direct reports, can effectively manage 80% of the business operation with the use of 10 to 20 reports. Within these 10 to 20 reports, using EPM technology, a finance professional can analyze various cost centers, roll ups, etc with extreme precision and accuracy. Relying on more than 10 to 20 reports suggests an overuse of technology and a misunderstanding of the core business.
The remaining 20% of the business can be analyzed and managed using ad hoc reporting tools and databases. Now, be sure to pay attention to these "outlier" reports because they will lay the foundation for new ways in which to analyze the numbers. Analysts are extremely crafty and resourceful, often mining millions of rows of data to secure a new insight into the business. Quite iterative, this process will yield new reports that take into account market changes, competitive movement, etc AND will also reveal holes in your current data, which is to say some of the data required to manage the changing nature of your business does not exist because it is not currently recorded...which can lead to changes in the underlying ERP system.
So, use the 80/20 rule with respect to reporting. Don't' let anyone lead you to believe that you must build thousands of reports simply because the technology can do so a bit more quickly. It's smart business and will save you a great deal of pain and effort in the long run.