Comparing Performance to Plan with BI: It Should be Simple… (Part II)
In my last post I discussed getting your plan into your BI system. This allows for easy comparison to actuals so that you can monitor your performance vs. your plan. In that previous post I assumed that your plan and actuals were captured at similar business roll ups. For example, if you had a sales plan that was created by division, region, rep and customer you very likely have your actual sales captured by those same levels. This makes for easy comparison of sales to plan.
Now let’s consider the situation when the actual sales are captured one way, and the sales plan is created another. Is this just because the sales folks are off in the weeds and don’t understand the business roll ups used to track information? It could be, sometimes they do live in their own world 🙂 … but more likely it reflects how sales assigns responsibility across customers or products vs. the way customers are assigned a region, maybe from a financial point of view.
When we run into this problem the first thing to do is understand the rollups and what drives them. Let’s use an example where the plan is created by division, region, sales rep and customer. But the region in our plan is slightly off from the region captured in the actual sales information. Certain customers are in the western region in the actual sales information while those same customers are in the mid-west region when we look at the sales plan.
So what are our options?
1. Do nothing, this is just the way it is. This sounds easy (and it is!), but a couple of issues may come up. First this means we won’t be able to compare the sales to plan at the region level. Not good if we want to check on the performance of our Regional Mangers in the West and Midwest regions since the sales and plan roll up differently. Also if the basis for our sales plan is last year’s sales, we are going to have to spend time moving and readjusting the region roll ups so that we have the customers rolling up to the regions as we want them from a sales perspective. So the do nothing option is probably out.
2. Realign the regions so that both sales and finance (and anyone else that cares) agree on the regional definitions. This solution works great, but can be tough to get to. Getting a consensus on the definition can take time and energy from the business and may take a long time to happen. In the mean time we still can’t compare our plan to actuals. This solution will ultimately work best if we want sales to be aligned with the way other groups look at the business.
3. Capture the actual sales rolled up into different regional rollups. Any good BI system allows this to happen. In our example we would continue to capture sales rolled into the region roll ups we have today, but would add a region roll up specific to sales. To add this sales region roll up, all that is typically required is to define a relationship (per our example) that relates customers to sales region. This definition may exist in our ERP system, or it could exist outside the ERP system. A BI solution like Silvon’s Stratum can capture this new relationship and easily apply it on a go-forward and historic basis without the need to update history or change the current business processes beyond the maintenance of the customer to sales region.
4. Capture the sales plan by the region used in our actual sales, in addition to the sales region described in option 3. This allows the business to see how we are doing vs. the sales plan regionally. Having this common region may help us use the sales plan as part of our S&OP process. It’s important that adding this region to the plan (remember this is not the region that sales uses) does not make creating and maintaining the plan any more difficult for the sales group. Some BI solutions like our Stratum system provide for the ability to maintain plans at one level and then automatically distribute the plan across additional roll ups. This option does not help sales, but does help the rest of the organization use the sales plan to evaluate how sales are progressing vs. the plan and look to the sales plan to understand what to expect in the future.
So which option do we choose? Option 2 is the best choice since it brings the overall business into alignment so all groups are thinking and looking at information the same way. But if the time to come to consensus is going to be too long, then a combination of options 2, 3 and 4 is the way to go. Start the process and discussions for option 2. Then get the sales region-to-customer relationship defined so that it can be used for the sales plan and actual sales.
Adding the new region to your actual sales should be relatively easy. If you are using a planning system like the Stratum planning application, adding the traditional region to the plan should be pretty easy as well. Over time the region definition may come into alignment across the business. At that point then, we can remove the distinct sales region easily from both the sales and plan information, along with the business process required to maintain the sales regions to customer relationship.
Remember, we were using a region roll up as an example of how there could be different roll ups for actuals and a plan. This could have been a roll up on the product side of things or a different customer roll up as well. The region just happens to be an example I ran into recently.
If you are a Silvon customer and want to need to know more about how to plan and add rollups in Stratum or if you just have some questions about this topic, you can reach me at franksblog@silvon.com.