Worst management reporting mistake ever

Recently we’ve experienced consequences on management reporting not yet seen. Here is the story.

Management reporting is highly sensitive to many problems in gathering data, converting them to information and knowledge. Problems are

source: http://www.sxc.hu/profile/nkzs

 mostly  laying in business intelligence tools environment and wrong conceptual approaches toward knowledge processing. Many of this problems exist in many companies. They are „natural“ and part of companies.

But, one recent mistake made by management in one particular company outranked all current “natural” problems mostly due to lack of knowledge and insufficient analyze of consequences of their decision.

Decision was to process and gather all financial data through ERP system and to deliver information to Management Information System in bulk. Further, other part of decision was to process all non financial data in separate systems like data warehouse, business intelligence solutions and deliver information to Management Information System separately through other information flow. Intention was to process financial and non-financial data independently and then to gather them for Reporting purposes in Management Information Systems and then to publish performance indicators toward all relevant participants like Bord, Supervisory, Audit and similar.

It is simple, two separate projects will process and prepare key performance indicators separately. All seams perfectly clear.

Here is what makes difference.

Financial system like ERP together with certain Business Intelligence modules provide very good Cash Flow report, detailed and precise Cost and revenue report. ERP system can not act like Management Information System because it is production system, transaction system, designed for gathering and processing data, not for reporting. For example, ERP system can hardly or never have data like sales channels, customer segmentation, product profitability and similar reports which are essential for management reports. It is simply not build for that and by clear separation of project (ERP is referent for all financial data) could mean lack of data sharing with other data if projects are not closely integrated.

Actually, there can not be two projects but only one, otherwise there will be no guarantee data will be propagated in proper manner for management reporting. There can not be two independent projects, financial and non – financial data processing  and reporting. Data flows will not be adequate to supply complex management reporting which never consist from only financial or non financial data.

Biggest mistake is to treat systems and projects separately because they have to be treated as one but with different views. Such wrong assumption lead to biggest mistake ever, to create two different projects that are not interacting as one. This means to kill company knowledge and wisdom generation.

Consequences of decision could be that reports would never allow drill down and derivation of current financial statements and financial ratios into financial and business logic details. For example, in this case would be impossible to calculate Profit and Loss statement derivatives like Profit and Loss per organizational units, per functional units, per services or products and similar.

Cause and effect could be lost and that would mean management reporting blindness.