Peter Krass is a former senior editor at Inc., Planet IT, and InformationWeek, and president of Petros Consulting.
Silicon Valley Comes to Times Square
MTVN’s Project FORE team has taken much of its inspiration from Cisco Systems’s move to a virtual close—reducing the time it needs to close the monthly books from 14 days to just four hours. According to Rick Timmins, Cisco’s vice president of worldwide sales finance, this achievement depended on six building blocks:
Senior Management Commitment. At Cisco, it started with the CFO (at the time, Larry Carter) focusing on improving the process. It then gained the support of other top executives during the effort’s six-year run.
Process Reengineering. “There’s no point in automating bad processes,” says Timmins. “You have to reengineer your processes to take out all the inefficiencies. Then you begin to automate some of those activities.”
Focus and Review. The old saw “You manage what you measure” gets a twist at Cisco, where they like to say, “You can’t improve what you can’t measure.” So the company developed metrics around quality, cost, cycle time, and client satisfaction. Then it examined each of those functional areas from a finance perspective. From there, Timmins says, “you measure and improve, measure and improve.”
Link with IT. Cisco finance partnered early on with the company’s IT department and funded the systems—all the development, all the applications—that greatly enhanced speed of deployment.
Use of Internet Applications. Back in 1997, Cisco was among the earliest to adopt Web-enabled software. Good news for imitators: today there are lots of good off-the-shelf products available, reducing the burden on internal development.
Network Systems Architecture. Cisco’s worldwide network makes finance data available anywhere. “Whether you’re in Beijing or Paris or Sydney, everyone has access to this information,” says Timmins. Standardization also helps. For example, Cisco uses just one ERP system worldwide, which it says is a key differentiator.
Hillenbrand: New Life, and a New IT Strategy
Redesign processes first, automate second: it’s hardly a new message. But while MTV Networks and many other companies are still working to get it right, Hillenbrand Industries Inc. seems to have figured it out.
Publicly traded Hillenbrand is a $2.2 billion holding company for three businesses that represent an odd sort of vertical integration: funeral insurance; hospital and health-care products; and caskets, cremation products, and other funeral-home products.
In the past two years, Hillenbrand has changed just about everything that could be changed, short of moving into new businesses. First came a flood of new management: two-thirds of Hillenbrand’s top executives are either new to the company or in new positions, according to CFO Scott Sorensen, himself newly hired in 2001. “We found ourselves significantly retooling the management team to a degree I’ve never seen before all at one time,” he says.
Next came the new team’s new vision for Hillenbrand. It involves remaining in the three core businesses, but giving each one a specific mission and role and, with the Sarbanes-Oxley Act of 2002 firmly in mind, dramatically improving financial processes. To address the latter, Sorensen has instituted new weekly meetings with the CFOs of the three operating companies, a big change from the quarterly meetings of the old regime. Driving the discussion at these meetings is a new financial scorecard that Sorensen’s team developed, which stresses metrics including revenue and cash flow while downplaying earnings per share. He’s also put in place a new risk-management process called the Risk Radar. One result: Hillenbrand recently issued guidance for the current year that lowered the revenue by $25 million. While that’s not the cheeriest of news, “the fact that we’re trying to be more sensitive to revenue growth when we don’t see it is based on some of our new forecasting tools,” says Sorensen.
The final component is IT. Like MTV, Hillenbrand has been hampered by multiple systems (nine for accounts payable, for example) and is working to drive consolidation around a single ERP system. Unlike MTV, however, Hillenbrand is placing a major bet on outsourcing as a solution. It signed a seven-year, $187 million deal with IBM Global Services in which IBM will take over virtually all of Hillenbrand’s IT hardware, not to mention nearly 40 of the company’s 200 IT staff.
Sorensen estimates that by next year, when the IT overhaul is complete, the company will have spent as much as $140 million. “It’s far from trivial,” he says. But it could provide the kind of insurance that makes sure Hillenbrand doesn’t have to use any of its own products. —P.K.