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Narrative Performance Reporting: The Story Behind Finance’s Numbers

insightsoftware -
January 22, 2021

insightsoftware is a global provider of reporting, analytics, and performance management solutions, empowering organizations to unlock business data and transform the way finance and data teams operate.

Narrative Performance Reporting Numbers Header

Finance professionals often tell us they are conflicted when it comes to writing performance reports. As business advisors, we like to think we know what is going on around us. But when it comes to writing variance commentaries our instincts tell us that those who “own” plans, budgets and forecasts should be documenting their own reasons for adverse or favorable outcomes.

The approach taken within individual organizations will depend upon the size and culture of the company as well as the tenure and past experiences of individual budget holders. But no matter what the backdrop, the finance professionals I meet tend to agree that budget holders remain wary of harsh judgement if they contribute to performance reports in the way we hope they would. Consequently – at one end of the scale – they sometimes window-dress their words and end up writing what they think the Board or Finance want to hear, in some cases, purely from a sense of self-preservation. At the other end of the scale, they will often have competing operational priorities that either keep them from what they perceive as a time-consuming chore or prevent them from hitting Finance submission deadlines altogether. On the whole, they are far happier to let the Finance team write their performance reports for them. At least then, if executives react to the commentary in a less than positive way, they can say, “Those aren’t my words. I didn’t mean that!”

Of course, budget holders will never tell you this is the case. They will say that they work closely with their colleagues in Finance and that playing mind-games is dysfunctional. However, we do need to bear in mind that playing the game can be totally understandable human behavior. This is especially true where Finance may have gained a reputation for organizational snooping or, more worryingly, may not have allowed budget holders to truly own their top-down plans or fully commit to bottom-up forecasts. Trust is a two-way street.

Best Practice

In response to this somewhat perplexing situation, Finance managers tend to take the high ground and talk about best practice. They portray themselves as guardian angels and point out that the business leaders for whom the reports are written want:

  1. Performance reports to be business-owned and actionable.
    Executives need the real story behind the numbers to make better decisions and the real story only bubbles up from the bottom of the business when individual managers own their explanations.
  2. The material they are reading to be produced in a highly participative and collaborative environment.
    Executives want to read about performance based on alignment, commitment and accountability. Involving more people in an integrated way drives consensus and improves report quality.
  3. High frequency and shorter reporting cycles that focus on current, imminent and future outcomes.
    The value of information diminishes over time and the way we do business is constantly changing. Cutting cycle times produces faster feedback from those in the know, improving accuracy and business response time.

Finance managers already know these best practices will deliver business value. The result of their application can be seen within other process-oriented financial disciplines such as group consolidation, tax and treasury management and the above-mentioned planning, budgeting and forecasting activities. So, the real question is:

How can Finance get the management buy-in that the business needs when it comes to writing internal financial performance reports?

Building Management Buy-In

One answer could be recommending that business users access the same software platform their Finance colleagues use when they want to write their own departmental business reports. They could literally use the same platform as Finance – leveraging on-site IT infrastructure – or they could use their own separate departmental applications on the cloud.

All lines of business and business support units create narrative-based documents on a regular basis to meet their own functional needs. These routine internal reports are written quarterly, monthly, weekly and, in some cases, daily across all industry and market sectors including the public sector. They cover a wide variety of non-financial disciplines, e.g., sales, marketing, business development, merchandising, procurement, production, logistics, inventory control, customer services, R&D, capital projects, facilities management, IT and systems, human resources, legal and company secretarial, and many, many more. A list of individual departmental (and inter-departmental) documents would be endless and ever-changing but, irrespective of the line of business and type of report, they do share common characteristics and suffer from common production problems. This commonality can be used to promote and develop inter-departmental collaboration and trust. At the very least sharing good ideas should help break down any unwanted departmental stereotyping.

So, let’s look at some common characteristics of existing document production processes. We need to understand the day-to-day reality all departmental teams share before we can understand why organizations can benefit from a common narrative reporting platform. We also need to understand why business users from different departments might bond with a common solution before we can help management buy into financial performance reporting.

Common Document Production Problems

These days those involved in regular document production cycles access a wide variety of corporate systems, applications and data sources and can therefore produce relevant, structured, numerical information fairly quickly. But incorporating the data into their internal narrative reports takes them back to the Dark Ages. For the most part they find themselves importing, copying, pasting and even re-keying data into Microsoft Excel, Word and PowerPoint. At that point, each document becomes a skunkworks project with department members falling over themselves as they try to interact with the data and with each other. This disconnected manual production process reflects organized chaos and relies upon patient, professional attitudes and long hours of work to succeed. It is labor-intensive and error-prone for contributors and time-consuming and inefficient for reviewers. There is an over-reliance on email. And the most proactive people often find themselves working at the pace of the slowest team member. Multiple validation checks take place throughout the production cycle but there are still several forensic reviews needed at the end.

Day-To-Day Challenges

The following day-to-day challenges are encountered by most departments when preparing regular narrative reports:

  • There is little document uniformity when information is collated. Different geographies, business units or service departments may use different document structures, font sizes and formats and then change them whenever they need to spin a message a different way.
  • Compressed deadlines mean it may not be possible to compile all contributions in the time available. Even if timely compilation was possible, multi-layer or matrix-based review would take forever. Late nights increase the potential for human error and staff dissatisfaction.
  • Data validation issues occur when data sources are not synchronized and system cut-off errors are introduced between reports over time.
  • Production bottlenecks – or even a broken process – may remain hidden for years, especially in large organizations. Even in smaller organizations, there is little process transparency.
  • A summary total in one part of a report may not tie out with the breakdown of the same number in another part of the report or a different report.
  • Even if the numbers do tie out, problems tracking low-level changes can lead to irritating discussions about who is using the most up-to-date language. “Why does the text still say greater when the number has decreased?” “Don’t worry– I corrected that this morning.” “Well, it’s still wrong in my copy of the report. Version control nightmares such as these are all too common and can lead to a lack of confidence in both the process and the output.
  • Every instance of a number must be changed when it changes at source no matter where the number occurs in the narrative. The same KPI may be repeated dozens of times in one document, increasing the impact of human error.
  • Highly-paid people end up performing low-value clerical tasks to preserve personal reputations.
  • The same fire-drill has to be repeated each reporting period. Such a process is simply not sustainable as businesses grow and change.

Finance departments have successfully met these day-to-day document production challenges by implementing a collaborative reporting solution like Certent from insightsoftware. You will see how implementing reporting best practices with Certent can deliver business value at operational, tactical and strategic levels both within Finance and across the organization.

Finance managers tend to talk about narrative reporting best practice. We understood why business leaders want their performance reports to be business-owned and actionable; why they want them produced in a highly participative and collaborative environment; and why they want high frequency and shorter reporting cycles that focus on current, imminent and future outcomes. Finance managers already know that these best practices will deliver business value as they have seen the result of their use within other process-oriented financial disciplines. So, the real question is:

How can Finance get the management buy-in that the business needs when it comes to writing internal financial performance reports?

One answer could be recommending that business users access the same software platform their Finance colleagues use when they write their own departmental business reports.

All team-based narrative reporting processes share common characteristics and suffer from common document production problems. This commonality can be used to promote and develop inter-departmental collaboration and trust. We therefore examined existing document production processes as well as the day-to-day reality all departmental teams face when writing performance reports. This helped us understand not only why organizations might benefit from a common narrative reporting platform but also why business users from different departments might bond with it. By priming ourselves with this knowledge, sharing reporting best practice and influencing the way common document production problems are solved, Finance can deliver business value – not just within Finance – but across the whole organization.

So, let’s now look at how some Finance departments have already delivered business value within their own business domain. The underlying best practice can then be presented to management as a blueprint for success within other departments.

Delivering Business Value

Many Finance departments have successfully met the day-to-day document production challenges we discussed last time by implementing Certent Disclosure Management. They have delivered business value at many different levels. In the following value matrix, we can see how Certent Disclosure Management product features enable best practice and how the associated product benefits deliver business value. To explain each business value further – in terms of the related best practice – we have already noted that business leaders want:

  1. Performance documents to be business-owned and actionable.

  • Operational value: Microsoft Word, Excel and PowerPoint, low-level audit trails and change tracking, sidebar review commentary and file attachment functionality is already familiar to most users. On-boarding is straightforward as little training is required. Instant familiarity with the user interface not only ensures that content is business-owned and actionable but also reduces the cost, risk and pain of the document production process.
  • Tactical value: Certent Disclosure Management “reference variables” update data points within text automatically and business rules help departmental users validate their data. Once these types of controls are in place – and the content is updated and validated automatically – it becomes actionable. This helps users produce accurate information quickly.
  • Strategic value: Lines of business can deploy their own Certent Disclosure Management applications on the cloud. The software is provided and maintained by Certent as a service. It is business-owned. Training is targeted and implementation is fast. Departmental usage is self-paced and software adoption grows organically based on merit. Individual applications can also be deployed within a hybrid cloud environment or 100% on-site, e.g. as part of a wider corporate initiative using existing IT infrastructure. Process checklists, content glossaries and online instructions can be used to provide corporate guidance on everything from business objectives, timetables and deadlines to specific document completion requirements. Custom group reporting allows the same information to be presented in a different way depending on the audience, e.g. by product, service, project, geography, business unit, etc. Departmental users can write recommendations and action plans that align with corporate strategies and commit them to company goals, e.g. related to resource allocation, profit optimization, etc.
  1. The material they are reading to be produced in a highly participative and collaborative environment.

  • Operational value: Certent Disclosure Management  user management, workflow controls and translatable user interfaces ensure that departmental team members don’t tread on each other’s toes but access their parts of the document at the right time in the process. There could be hundreds of users from the same department collaborating on the same document all over the world.
  • Tactical value: Version control helps document administrators manage change at a high level. Cascaded reporting ensures that master documents bring uniformity to subordinate reporting processes. Amendments can still be pushed down. Departmental users can collaborate on content to produce far more relevant information.
  • Strategic value: As a secure, multi-user application, Certent Disclosure Management     provides a single hub for departmental narrative reporting. Shared objects can be included in a variety of documents so that departmental users can comment on common content from their own unique perspectives. They may be writing local business or functional reports but their local or functional content could be incorporated into group reports automatically. The application can release untapped document production synergies.
  1. High frequency and shorter reporting cycles that focus on current, imminent and future outcomes

  • Operational value: Document administrators can see the big picture at a glance from their activity dashboards. They can spot bottlenecks, enforce formatting standards and generally expedite the reporting process. Departmental users can work at the speed of the fastest team member, not the slowest. Everyone can see which part of the document is checked in or checked out. Increased transparency reduces cycle times and therefore the cost associated with the process.
  • Tactical value: Certent Disclosure Management   report data can be integrated with other reporting platforms and solutions (using XML), thereby transmitting upstream efficiency gains downstream. For example, internal marketing and corporate communication teams (as well as external design houses) can bulk import validated Certent Disclosure Management data into their desktop publishing tools. Adobe InDesign documents (IDD) can be updated regularly as each external reporting cycle closes out. Thereafter –  once the reporting cycle is complete – Certent Disclosure Management documents (and IDD) can be rolled forward to jump-start the next cycle. Such automation can save hours of tedious clerical work.
  • Strategic value: The solution delivers central data connectivity and query management through multi-flavor built-in OLAP and relational query builders, OLE DB, ODBC, Excel source files, etc. The solution also leverages native connections to financial consolidation tools such as Hyperion Financial Management (HFM). This rationalizes the way users interact with common data. One query could be used in many reports. Different output formats can be chosen for different audiences but they will still see the same consistent view no matter what the media. This promotes alignment and commitment to corporate goals.

 

Finance has always played a key role in improving common, company-wide business processes. And now narrative reporting is no exception. Certent Disclosure Management can help Finance facilitate the automation and streamlining of internal document production cycles across the whole organization. The platform will help Finance break down dysfunctional “game-playing” within a department and unnecessary stereotyping and demarcation lines between departments. It can be deployed on-site or on the cloud. Other service functions can also use it to help front-line business units and operating regions buy into the key management reporting requirements within their professional domains, e.g. HR, IT, FM, PM, etc.

Once line-of-business users see how easy it is to use Certent Disclosure Management in their own narrative reporting environments, they will feel a lot more comfortable writing their own performance reports and commentaries for Finance. They might even say, “Help me break open and investigate the numbers so that I can write my own commentary.” In the meantime, cutting their teeth on their own documents should help departmental users understand the different levels of business value that can be derived from narrative reporting best practice. Institutionalizing best practice in this manner should help Finance promote – or rebuild – inter-departmental trust for the greater good.