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The Last Mile

Why is it still so hard to engage line managers in budgeting?

The metrics for Best Buy’s call centers illustrate the approach. Finance employees conducted extensive interviews with the managers and business analysts who oversee the customer-service operation. Finance managers determined that it wasn’t enough to merely measure the costs of running a call center. They decided that Best Buy should track the factors that affect those costs. These are numbers that are already familiar to call-center managers, things like the time that operators spend on the phone with customers or whether calls come from users of the company’s Website or customers who shop in its stores. The measures give an early indication of the costs the call centers will incur and are more useful for managers hoping to achieve their budgeted targets.

Managers and analysts enter the data directly into the company’s budgeting system, where it can be converted into financial measures that are used in the budget. “This is really activity-based costing,” says vice president of finance Gordon, “with an eye toward predictive ability.”

Ledger Domain

In theory, budgeting-and-planning (B&P) software is a good way to draw managers more deeply into the process. Often browser or portal-based, the programs enable users to analyze current and historical corporate data and create business models based on different scenarios. Once clunky and difficult to navigate, the applications (from vendors like Microsoft, Hyperion, Cognos, SAS, and others) have gotten more powerful and easier to use in recent years.

That’s a winning combination, but apparently not one that has won many converts outside of company finance departments. While many companies have purchased licenses allowing nonfinance managers to use B&P software, our survey found that those licenses are largely going unused. In fact, according to the survey, 40 percent of nonfinance users never logged in to their employers’ B&P systems during the past year.

Part of that reluctance may come from a fear of technology. It may also stem, in part, from the gap between what finance needs and what operations wants. Like the budgeting process itself, most B&P systems mirror the CFO’s view of the company: an Excel-like grid with general-ledger items running down one side. “It’s accountants who buy these tools, so it’s not surprising that the software resembles the spreadsheets they like,” says Serven. In fact, in recent years vendors have worked to make their programs look and feel more like Excel (a potentially worrisome trend, given that many managers aren’t adept at Excel; see “Wanted: A Better Front End” at the end of this article).

EMCOR has neatly prevented that problem by adopting B&P software (BudgetPak from XLerant) that lets operations executives enter costs and revenues in terms that make sense to them: by project. Instead of the spreadsheet grid, the program asks a user a series of questions (akin to how TurboTax and other consumer-oriented financial programs work). The application then takes those numbers and rearranges them into the general-ledger codes that finance needs.

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