This slide copyright Jeffrey A. Bloom Lessons Learned What not to do while implementing Clarity: Incorporating “Resource Allocation” processes while preparing for “activity-based” planning Jeffrey Bloom, PLC Secretary Xinify Senior Solutions Architect 7/10/2008 Clarity PLC Summer WebConference

This slide copyright Jeffrey A. Bloom 2008 The “Chicken and Egg” Problem How to introduce “activity-based” forecasting, budgeting, actual costs & management where none have existed before? 27/10/2008 Clarity PLC Summer WebConference

This slide copyright Jeffrey A. Bloom 2008 Before “Activity-based”… -> organizational resource allocation 37/10/2008 Clarity PLC Summer WebConference Budget allocations typically based on past expenditures, Adjusted for “gross” estimates of changing resource demand

This slide copyright Jeffrey A. Bloom 2008 What are the Deficiencies of the typical “Resource Allocation” forecasting process?  Resource Allocations difficult to create, justify and approve as part of a uniform Governance Process Forecasting demand for resources without a clear, auditable relationship to planned activities is typically based on inadequately supported assumptions Rationale and/or Justification for adjustments to past operating budgets upon which current forecasts are based may not be well developed and/or documented Simplistic forecasting models are used in the absence of adequate detailed data (e.g., % of gross revenue projections, proportion of planned initiatives, etc.)  Resource Allocation creation, maintenance, evaluation & approval processes are typically immature and poorly documented Difficult to defend Leveraging past experience is a challenge Provides little foundation for understanding of underlying assumptions, changes and plan versus actual variances 47/10/2008 Clarity PLC Summer WebConference

This slide copyright Jeffrey A. Bloom 2008 How is “Activity-based” planning better?  Activity-based Plans: provide an auditable forecast of costs & timing of expenditures to deliver PRODUCTS  Resource Allocations are an OUTPUT of the planning process rather than an INPUT  Finance Process enhanced operating units must submit defensible forecasts Forecasts pass management review before becoming approved BUDGETs 57/10/2008 Clarity PLC Summer WebConference Expenditures of resources have specific dates and rates

This slide copyright Jeffrey A. Bloom 2008 What is the Problem? The “Chicken & Egg” Conundrum  The Organization is NOT READY Not experienced in developing activity-based plans No adequate historical data to develop plans Not enough time  What DOES NOT work Creating a “Resource Allocation” and “Approval” process look-alike in Clarity  Using Clarity Studio to create separate “budget objects”, portlets & reports  Not integrated with Clarity objects, processes & reports 67/10/2008 Clarity PLC Summer WebConference

This slide copyright Jeffrey A. Bloom 2008 Some Examples Four Clarity “projects” with information on one Actual Project Budget Account Project Amount Allocated Budget Approval Project Portion Approved Budget Released Project Portion to Spend Actual “scheduled” Project Portion Spent  Denormalized data structure Data synchronization problems since multiple objects are used to represent the state of one object All portlets and reports must replicate the logic required by the storage of one object’s state information in multiple objects  Difficult to create and maintain custom portlets & reports Typically execute slowly May impact overall system performance 77/10/2008 Clarity PLC Summer WebConference

This slide copyright Jeffrey A. Bloom 2008 Some Examples “Co-projects” to carry budget information Scheduled Project Amount to Spend Capitalized Budget Project Expensed Budget Project  Denormalized data structure Data synchronization problems since multiple objects are used to represent the state of one object All portlets and reports must replicate the logic required by the storage of one object’s state information in multiple objects  Difficult to create and maintain custom portlets & reports Typically execute slowly May impact overall system performance 87/10/2008 Clarity PLC Summer WebConference

This slide copyright Jeffrey A. Bloom 2008 What’s the Right Way? Standard “Out of the Box” Clarity  Use “baseline” Organizational Budgets until ready for “activity-based” planning Replicate the existing departmental resource budgets as projects and “service” tasks  One task for the whole period with all resources Use the same resource estimates found in the “Resource Allocation” budget process to start  Replace with “Scheduled” activity-based tasks as the organization’s planning capabilities are matured  Utilize Clarity’s “Out of the Box” Financial Management System for all reporting INITIALLY  “Resource Allocation” reports equivalent to the old process are output from Clarity THE BIG WIN  As individual planning efforts are undertaken, the benefits of “activity-based” planning – time-phased costs based on ACTIVITIES and PRODUCTS - are immediately incorporated 97/10/2008 Clarity PLC Summer WebConference