Senior business and IT managers in large organisations struggle with a lack of visibility into profits – and this is having a negative effect on financial performance, morale and business success.

This is one of the findings of a new study from Oracle, and conducted by Dynamic Markets among managers across Europe, US, Middle East and South Africa.
The research, entitled “Performance Management: An Incomplete Picture”, also highlights the significant issues with the data-gathering processes that is central in creating a dangerous ‘four-month’ data lag.
The research highlights what it calls “profit myopia”: 82% of businesses admit to not having complete visibility into profits by line of business. In addition, 46% believe this creates potentially erroneous business decisions, 40% feel this can impair financial performance and 38% believe it results in flawed business planning that will hamper business success.
Spreadhsheets are still a big part of financial planning – what the study calls “spreadsheet spaghetti”: managers typically spend over a third (36%) of their week number crunching in spreadsheets. In fact, 82% of those involved in scenario planning use spreadsheets to manipulate and investigate data during this task.
Vintage data is identified as another problem: handling data this way means it becomes outdated quickly: on average, data used to make decisions is more than four months old, worse still is that 28% of managers do not even know the age of the data they use.
This, in turn, leads to outdated planning: scenario planning fares little better, with data being typically six months old, with almost a third (30%) again not knowing the age of critical data; it is no surprise that 95% of respondents involved in this process encounter problems.
The study concludes that poor agility creates consequences: It can take nearly a year-and-a-half to identify and amend a failing business process or initiative and 83% of companies admit to suffering consequences because of this. One third (33%) see plans become obsolete, 55% incur unnecessary costs and 43% witness a negative impact on employee morale.
Part of the problem is a silo mentality: 87% of businesses managers criticize their inter-departmental data sharing and communication, with 71% describing the links between strategic goals, operational plans and budgets as “fragmented”.
John O’Rourke, vice-president: EPM product marketing at Oracle, says: “Management is clearly struggling to cope with the vast volumes of data being generated by their businesses, which is manifesting itself in a serious lack of visibility into profitability across the entire company. Without enterprise business planning systems to give organisations an end-to-end planning process that links strategic, financial, and operational planning to profitability and cost management, they are going to continue to struggle with fragmentation and have no option but to continue ‘making decisions in the dark’.
“According to the research, most businesses appear to have a fragmented approach to performance management often underpinned by spreadsheets. This piecemeal approach to planning rather than opting for a holistic view can lead to dangerous inaccuracies, human error, and serious time lags. To combat this, leading edge companies are implementing common enterprise performance management systems that take the time and complexity out of ensuring all relevant information is delivered in a timely fashion, supporting more agile planning and decision-making,” says O’Rourke.
Professor Andy Neely, deputy director of AIM Research, adds: "Organisations today face significant challenges in extracting accurate information on profit and performance. As the volume of available data increases, so does the complexity of organisation structures. The shift to shared services, accompanied by the tendency to outsource and partner, makes it more difficult than ever before to allocate costs and apportion overheads. As this research shows, the consequence for executives is a partial picture of performance.”