Have you ever been in this situation? In an executive management meeting, the VP of sales and marketing, the VP of operations and the CFO each bring the latest sales numbers for the company. But all three versions are different, and not by minor amounts.
Unfortunately, this happens all too often, in companies of all sizes. Key metrics that measure the health of the business are inconsistently reported by different departments.
How could this happen?
To correct the problem of multiple answers to questions about corporate performance, we have to understand how the problem comes about. Two main factors create an environment in which distinct parts of the business can be working from different sets of numbers that, on the surface, should be the same.
First, many businesses have individual departments with their own systems used to report key performance metrics. For instance, the sales department uses a sales force automation system, operations uses a supply chain management system and finance manages the general ledger.
Each of these systems could be used to determine a version of sales figures. However, there is no guarantee that there is consistency in the information stored in each of these systems.
The problem is compounded by the second factor, which is that the definitions used to generate key performance metrics vary among departments. Terms such as “sales,” “profitability” and even “customer” are used throughout businesses without the realization that they have different meanings depending on who is using them.
When an attempt is made to clarify the meanings of various terms, you hear things such as, “We don’t include direct accounts since we can’t influence those sales,” and “Small businesses and nonprofits are counted in the consumer segment, not commercial.”
What can we do about it?
There are two parts to solving this problem. The first is technical; the second involves improved communication and understanding. The technical part is to create a centralized reporting repository that consolidates and reconciles information from all of the systems used by the business. The central repository (often called an enterprise data warehouse) acts as the single source for reporting, so that everyone accesses the same set of metrics, eliminating the confusion of gathering information from multiple sources.
The second part of the solution is a critical element of creating the data warehouse. Early in any data warehousing initiative, business analysts uncover terms that are used in multiple systems or by multiple departments but have different definitions. It is the business analysts’ job to work with the different parts of the business to come to agreement on the definitions that apply to various terms.
Sometimes, however, having disparate groups agree on the meanings of some terms isn’t possible. In these cases, it is important that all parties recognize that different definitions are appropriate, and make sure that everyone understands exactly what each of the definitions means.
The business analysts must then negotiate subtle changes to the names for the unique definitions so that they can be distinguished within the data warehouse and in the reports sourced from the data warehouse. Once the source of confusion is identified, most businesspeople appreciate the need to clarify the terms used in measuring business performance.
Companies must have one version of the truth and be able to manage using a consistent set of performance metrics. Through a combination of technology and improved communication, it’s possible to ensure that everyone has the same answers for the metrics that are used to run the business.
BRYAN MCCLAIN ([email protected]) is the business intelligence practice manager at Innovative Consulting Inc., an IT services company focused on delivering business intelligence solutions. Reach him at (610) 725-2101.
