Innovative Management Reporting: The Microsoft COREFinance Initiative
Published: June 2008
Comprehensive management reporting initiative takes aim at business processes, reporting tools, and data governance.
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Chief Intelligence Officers and Chief Technology Officers, external to Microsoft
Microsoft, like many large companies, is structured around independently run core business divisions. It operates under division-specific processes and relies on internal financial reporting tools that have evolved over time to serve specific purposes. As a result, data emerges from each division–or even groups within a division–reflecting inconsistent metrics and conflicting taxonomy. Even the timing of reports can vary. Thus, analysts are expected to intervene to ensure proper internal reconciliation of financial data from across the corporation so that managers can appropriately track cross-group performance.
There is a significant cost for this fragmented approach to internal financial reporting. Analysts reportedly spend as much as 75 percent of their time compiling and reconciling data and then preparing manual reports for management. What's more, the company supports dozens of specialty applications used in reporting, estimated to cost more than $30 million annually. Although hidden costs are harder to calculate, their presence is assumed as well. For example, corporate decision-making must necessarily suffer when business data isn't available, relevant or clear.
Following an internal study that uncovered these and other internal reporting issues, Microsoft management decided it was time for the company to change its internal corporate finance management reporting structure. The COREFinance initiative is the company's program designed to change business processes, financial reporting tools, and data governance policies.
The aim: provide accurate and timely information, thereby enabling better business decision making. To achieve this, the COREFinance objectives have been defined as:
- Integrate - standard reporting across the company
- Reliable - single, master data source and taxonomy
- Powerful - world-class tools and simple workflow
This article describes the reporting problem that inspired the creation of the COREFinance initiative, the desired results, program details, and the processes and tools that are being rolled out within Microsoft to address the problem.
The Reporting Problem
Microsoft Chief Financial Officer (CFO) Chris Liddell was on the job for just over one year when he concluded that company analysts and field sales representatives were spending an excessive amount of time compiling data and preparing financial reports –with some devoting as much as 75 percent of their workday to such tasks. This fact, among other valuable insights, was uncovered through an internal study known as the Hackett Report, conducted by a third-party analyst in November 2006.
The report made evident the organization's primary pain points: inconsistent definitions, hierarchies, metrics, and key performance indicators (KPIs) were in use by more than 350 decentralized finance tools and systems. Compounding this lack of system and tool integration was the fact that there were no mechanisms allowing analysts to obtain detailed information from the data itself. More than three-fourths of the reports were generated in an "offline environment," suggesting manual creation and distribution. The Finance Solution Delivery analysis also concluded that as much as $30 million was spent annually on "shadow" software applications for preparing these customized reports.
Perhaps the most apparent symptom illustrating this condition was Microsoft's inability to correlate revenue to sales efforts. In the mid-1990s, the company implemented a proprietary revenue-tracking tool, MS Sales, to track income from all vectors of the Microsoft sales channel. Meanwhile, Microsoft field sales representatives use the Customer Resource Management (CRM) system (Siebel) to report customer contact data. While both tools produce valuable data, they are disconnected from each other and cannot be correlated. Consequently, the sales effort at one end of the channel cannot link to a sale made at another point in the channel.
The primary conclusion drawn from the Hackett Report was that business intelligence was suffering due to the company's fragmented internal financial reporting structure. Obviously, this was an unacceptable state of affairs; the time for change had arrived.
COREFinance - The Vision
Let's be clear: Microsoft is in full compliance with the standards and laws that govern external reporting. It's in the area of internal financial analysis and reporting where things get messy. For example, correlating sales data to employee productivity becomes a complex process that requires digging through reports from several different supporting organizations. With no standard rules governing daily financial analyses, the potential for dueling hierarchies and data transformations from this unclear area was high.
The Hackett Report and internal analysis showed the problem was widespread and integral to the operating rhythm of the company. In fact, it was painfully evident that the entire internal Microsoft Finance structure–business processes, tools, analysis methods, and reporting policies–needed to change.
Microsoft assembled a team of managers and stakeholders from across the organization and tasked them with the responsibility to "fix reporting." Under similar circumstances, most companies might opt simply to fix the existing toolset. Microsoft, however, chose a different solution, opting to remake its entire internal financial management reporting structure in the belief that the availability of better data leads to the ability to make better business decisions.
This decision spawned the seeds of what is now called the COREFinance initiative, the aim of which was to create an environment that provides strategic information at the top, as well as a knowledgebase for making tactical and operational decisions. The COREFinance team determined that there were three primary objectives for the program: integrated, reliable, and powerful.
The term "integrated" refers to the notion of instituting standardized reporting across the company. Because this is a business process challenge, it must be addressed prior to the introduction of technology-based reporting processes.
98% of reports are distributed manually
78% of reports are created in "offline environments"
75% of analyst time is spent compiling data for standard reports
>70% reports auto-generated & "pushed"
40% reduction in number of reports
<40% analysts' time spent on collecting data for reporting
>60% analysts' time spent on analysis & presentation
The COREFinance initiative uses the term "reliable" to describe the mission of establishing a single, master data source and taxonomy for the entire company, and ensuring that all data metrics are consistent over time. (Internally, Microsoft stakeholders group reliability issues under the Information Architecture program.)
Multiple data sources
Inconsistent definitions and hierarchies
No common reporting processes
Data errors due to manual transacting &reporting
Establish single, master data source
Ensure 100% compliance in taxonomy with disciplined change control
End-to-end reporting process & calendar
Use standard system-generated reports
The COREFinance initiative aims to remake Microsoft Finance into a world-class organization through the internal deployment of Microsoft Business Intelligence (BI) software. IT Infrastructure is the internal program tasked with making the COREFinance initiative "powerful" to its stakeholders.
Over 350 silo finance tools
Approx $30 million in annual spending on "shadow applications"
Systems lack integration & common security
Systems/processes are too specific to main campus
Reporting tools do not support analysis/drill down
Eliminate duplicate/silo tool investment & shadow applications
Ensure 70% automated role-based security
Use geography & time zones for report delivery
Employ reporting tools, templates, & training support
Leverage Microsoft BI technologies
Use standard system-generated reports
The Program Defined
Microsoft's independent culture encourages individuals to pursue full ownership. Although this tone is integral to the company's long-term success, it can cause problems when the corporation tries to change processes for the common good. Managers often encounter individual resistance to doing things in a standard way.
Independent-minded individuals often believe the quickest way to implement change is to build upon the manual processes that are already in place as opposed to adopting new, corporate-directed methods. As a result, projects are developed to address a specific issue, with little effort applied to reviewing the data element definitions or transactional processes to ensure they match standards across the company.
In trying to standardize reporting across the company, the COREFinance team knew they must strike a balance between the company's culture of independence and the business need for a common, integrated, finance structure. Taking a cue from former Chief Operating Officer (COO) Robert Herbold and his guiding principle, "Discipline at the core, flexibility at the edge," the COREFinance team adopted an overall program philosophy that would allow for balance between the independent culture and the business need. "Core" principles are emphasized, while "flexible" functionality is allowed. This philosophy became the cultural guide for the design and development of the COREFinance program.
A Layered Architecture
The strategic and tactical elements of the COREFinance initiative were logically grouped into three functional areas. Known as "layers" of the initiative, they each represent different processes and stakeholders. The following sections provide detailed information about these layers.
Layer #1 - The User Interface
The User Interface (UI) layer is perhaps the most visible to the end users and will have a considerable effect on the overall adoption of the business processes and tools defined by the COREFinance initiative. It is designed to address two work streams associated with the project: 1) Metrics and Alignment; and 2) Reports, Scorecards, and Dashboards.
Metrics and Alignment
An important target of the COREFinance initiative is identifying key performance drivers and then mapping them directly to the company's business strategy. This means that certain core reporting elements must remain constant and consistent between the various reports that reach across the company.
Microsoft denotes these reporting elements as "metrics," or measurable data. They produce the standard components that create the company's information. For the COREFinance initiative, metrics have been categorized as follows:
- High Value Core (HVC): Data that is monitored routinely by the Senior Leadership Team and/or data that is integral to other data. High Value Core elements are present in multiple Executive level (Tier 1) reporting packages.
- Core: Data that supports conversations across Microsoft. The data is present in a Tier 1 reporting package and highly visible.
- Non-Core: Data that is used to manage business segments or Sales, Marketing & Services Group (SMSG) organizations and does not require agreement among the Business Divisions or SMSG organizations. Non-Core elements do not support cross-organizational conversations and are generally not present in a Tier 1 reporting package.
Every reporting element or metric is assigned to one of these three categories and ultimately standardized in taxonomy.
Reports, Scorecards, and Dashboards
The COREFinance program calls for development of a visual interface based on these new data metrics and alignment strategy. The interface will provide access to multiple levels of data, allowing executives and employees to quickly review high-level information and drill down into the details when desired. The standard reports created through this effort will apply not only to individual business divisions, but also to the organization as a whole. In turn, the new systems will be used not only by the company's internal finance resources, but also by Microsoft business partners.
As planned, the visual interface will enable business leaders to view a scorecard for their organization's defined Key Performance Indicators (KPIs), drill into a standard report that provides the detail, and make educated decisions based on the information presented. Individuals too will look to these reports to provide analytical insight for both anomalies and standard results. In the end, executives and analysts alike will have a standard internal reporting system in terms of the tools used to prepare and generate reports.
Because users will no longer be required to devote excessive time to preparing reports, they will now have time to analyze data and provide valuable business insights. The consistency will improve communications and reduce reconciliation, minimizing wasteful overhead associated with customization at the "Core" level.
Layer #2 - Information Architecture
This layer of the COREFinance framework is responsible for two predominant goals. First, the end-to-end reporting process must be clearly defined and mapped to applicable business cycles. This will help management meet both internal and external requirements in a more efficient manner through automated report generation and distribution. Second, hierarchies and metrics must be standardized and mutually agreed upon by the organization. This will eliminate common discrepancies and minimize the need to explain the data.
Governance will be critical to the success of the COREFinance program and ensure that data quality can be scaled and maintained over time. To ensure long-term success, a set of Governance Principles, roles and empowerment guidelines have been developed. These principles will enable managers and executives throughout the company to make decisions based on the nature of the data, its impact to other financial elements and its usage across Microsoft.
Data Governance exists to drive business value. All decisions will be based on business needs of individual groups while at the same time keeping a broad "shareholder" perspective in mind. Data Governance will be owned by the business, supported by IT, and instituted across the enterprise. The Data Governance model is dependent on standardized controlled processes.
The COREFinance team has established a two-tiered Data Governance model to oversee Microsoft's standard reporting. The scope for governance includes all processes, definitions, calculations, hierarchies, and data domains that affect standard financial reporting elements.
- Tier 1 / Core - Focused on managing the financial standards across the company
- Tier 2 / Flexible - Focused on managing the financial standards across the Business Division/SMSG organization
Layer #3 - IT Infrastructure
Changes to Microsoft business processes and data metrics must affect the company's IT infrastructure. In addition to consolidating information management and eliminating duplicate/silo tool investment and shadow applications, the IT infrastructure will be redeveloped to ensure that information, controls, systems, and processes are standardized across the organization.
There are two important values that will guide the design of the IT infrastructure:
- Numbers must have integrity - Implementing standardized information management controls is critical to the success of the initiative; without them there will be no trust in the data, and thus, no widespread adoption.
- Data must be accessible - Users must be able to access the data they need, when they need it. Enabling this access can eliminate shadow applications entirely.
Creation of a single, master data source and comprehensive taxonomy means that any, and all, information is potentially available to anyone within the company. To protect sensitive data, the information management work stream needs a role-based security platform. This kind of hierarchy can provide consistent user access to information as needed, while also providing a multi-tier reporting framework that is reliable, more secure, and agile.
Implementation of the COREFinance initiative requires building a technical solution roadmap that will meet the needs of the company and infuse "technology energy" into the Microsoft management reporting system. This technology toolset must also adhere to the initiative's principle philosophy: "Discipline at the core, flexibility at the edge."
Of course, Microsoft technology will be featured in the COREFinance technology toolset, including elements from each of these programs:
- Microsoft Excel®: This is the primary mechanism for rendering standard reports and data collection workflow, and serves as the entry point for established reporting through MS Reports. Excel Services will be utilized for publishing and managing Excel reports as well.
- Microsoft SQL Server™
- Analysis Services: Deployed as the source for most reporting and analytical tools.
- Reporting Services: Leveraged for static view reports that do not require filter or pivot functionality. This includes views such as a daily flash, or complimentary reports tied to a specific KPI on a scorecard.
- Microsoft Office PerformancePoint® Server (PPS)
- Monitoring: Business scorecards and associated dashboard will be deployed with PPS Monitoring.
- Analytics & ProClarity: These components will be attached to standard reporting data sets to provide data visualization and deep analytics.
- Visual Studio® Tools for Office: Leveraged to extend the base functionality of Excel for a standard reporting solution.
- Windows® SharePoint® Services: Utilized as the access point for reporting and the consolidation point for business workflow and processes.
Enterprise Data Warehouse
The foundation of business intelligence is data, and for Microsoft Finance that means the Enterprise Data Warehouse (EDW). The primary components of the EDW for Finance are MS Sales (Revenue), MARS (Opex), and MS People, with a new manual component that will house non-Microsoft source data, such as computer/server shipments, NSAT, or other survey data. The EDW components will share common links such as geography, account, and product, which will enable more comprehensive data integration. The EDW is the first place data is acquired from transactional source systems such as Service Advertising Protocol (SAP), and is where the first stage of integration occurs.
Figure 1.1 | Microsoft Finance Business Intelligence
A set of data services is being established to organize and manage the data in the EDW. These components perform the many back-office functions for hierarchy and taxonomy management, as well as KPI and metric creation and management. Additionally, workflow items (such as data entry forms and approval processes) are configured through these data services to enable capturing targets, thresholds, and non-system data for scorecards and reports. Deployed technologies include Enterprise Data Management (Stratature), PerformancePoint Server-Planning, as well as custom SQL.
End-User Tools & Performance Management Applications
There are a variety of technologies that can create and render reports and scorecards. For example, a collection of internal business intelligence services will serve as a hosting mechanism for many of the reporting components described earlier. By providing both a regional and central infrastructure for these components, solutions will be designed and implemented based on both local needs, as well as central economies of scale.
The central reporting team will manage all of the report creation components for the near- and mid-term periods. The long-term plan will be to extend this–and potentially some of the business rule management–beyond the central team to the business groups.
A complimentary set of report services will be provided to organize and manage the reports and scorecards. The report catalog exists today and is utilized in many places already. Additionally, a new scorecard KPI catalog is in creation. This will allow scorecard and report authors to reference a centrally managed listing of common, as well as group-specific KPIs, ensuring consistency of use. In the upcoming year, a new role and content-based security model will be created and deployed as well.
SharePoint will be the primary entry point for business users. A set of connected portals will be created based on business organizational alignment and with common components. These portals will provide consolidations of reports, scorecards, workflow, calendars, and other group-specific content.
Reporting has been a challenge for Microsoft for many years, but thanks to the COREFinance program, this is changing. The COREFinance initiative aims to solve the biggest issues related to reporting, such as:
- Lack of common integrated, technology infrastructure
- No common agreed definitions at the organizational level
- Ineffective and undisciplined approach to managing hierarchies
- Excessive freedom and flexibility to change without adequate governance
The COREFinance program is still in its infancy, but its team has worked diligently to put the necessary foundation in place with these successes:
- Obtained high-level Executive buy-in and explicit support
- Secured the necessary investments in both human and capital resources to reach objectives
- Developed a solid foundational approach that details tangible milestones
- Aligned project resources across multiple groups working towards common goals
- Focused on the importance of solving underlying problems rather than covering them with glamorous technology
The roadmap milestones for the COREFinance initiative currently run through the fiscal year of 2009 (FY09). However, team members expect certain aspects to become a permanent "way of life" for financial reporting as various elements of the program are rolled out across the company.
The COREFinance program is one of the largest and most ambitious initiatives Microsoft Finance has ever undertaken. Although the processes and infrastructure will take time to develop, the result will be a corporate financial culture of integrated, reliable, and powerful reporting.
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