Excerpt from www.NDMA.COM, © 2024 N. Dean Meyer and Associates Inc.
NDMA Products and Services: Internal Economy Assessment
analysis of the effectiveness of your budgeting, rates, demand and portfolio management, invoicing/chargebacks/show-backs, allocations, metrics
Objectives
Most organizations have invested in many of the pieces of a comprehensive financial-management and resource-governance system.
These tools (software) and processes, if they're working properly, should address many resource-related issues that are common to shared-services providers and enterprise executives. It's reasonable to expect the resource-governance system to help executives do the following:
Identify cost savings by ensuring that all costs are linked to expected deliverables.
Defend rates (published annually) and allocations (if any) with a transparent, accurate cost model.
Benchmark costs fairly, answering the question, "Can I buy this product or service, at this level of quality, for less elsewhere?" Benchmarks of unit costs are far more accurate than high-level "towers" data or industry spending statistics.
Determine budgets based on the needs of the business and strategic investment opportunities (not unfounded algorithms like last year's spending or high-level statistics such as percentage of revenues).
Gain adequate funding for investments in infrastructure, innovation, and necessary sustenance activities.
Implement any necessary budget cuts by reducing or eliminating deliverables (demand management), countering the unreasonable and ineffective "do more with less" edict.
Manage customers' expectations within available resources.
Communicate to customers the value delivered for a given level of funding.
Empower clients to decide what they buy from shared-services providers (which ensures alignment) within the limits of their finite spending power -- with or without detailed chargebacks.
Make it easy for clients to order commodity products/services and streamline their delivery.
Produce accurate invoices based on consumption.
Produce management performance metrics that induce frugality, customer focus, entrepreneurship, innovation, and teamwork -- not simply spending what they said they'd spend (traditional budget variances).
Change the dialog with business executives from defending IT costs to investing in IT services.
Develop a culture within your organization of teamwork, customer focus, and entrepreneurship; and grow the next generation of business leaders.
To gain these benefits, financial and resource-governance tools and processes must be designed within a strategic vision of how things should work. They must be comprehensive. They must be integrated. Of course, well designed and documented processes are every bit as important as the tools.
However, you may be concerned that:
- Key components might be missing; as a result, other dependent components might not work well.
- Existing components may not have benefitted from the vision of how the entire system should work, and hence may be poorly designed and implemented; for example, it's not uncommon to find that organizations have implemented tools without the right surrounding business processes.
- There may be a lack of common understanding of the objectives of the resource-governance system, and hence an unwillingness to invest in needed next steps.
- Your leadership team may not have agreed on a resource-governance strategy, and hence next steps may be poorly chosen or unknown.
- Upcoming investments may not deliver the expected benefits.
The objectives of this study are to:
- Assess the effectiveness of current tools and processes, against a framework of all the benefits these systems should be delivering.
- Inventory which pieces of a comprehensive resource-governance system you already have, and identify gaps against a comprehensive architecture of tools and processes.
- Suggest a strategy for evolution, including a definition of the recommended next step.
Scope
The scope of tools and processes includes the following:
- Product/service catalog, and units of charge (price per what).
- Cost model which assigns costs to catalog items.
- Budget format and process.
- Resource-governance processes, including investment portfolio management (priority setting).
- Invoicing processes.
- Dashboards and metrics.
You will decide the scope of your organization to be considered.
Deliverables
This quick study will deliver a written report and an on-site presentation (with interactive discussion) of its findings. The presentation may be made to your leadership team as well as your finance and resource-governance core team.
The content of both the report and the presentation will include the following:
- Satisfaction: feedback on satisfaction and concerns on the part of both your organization and its customers.
- Vision: how internal financial-management and resource-governance processes should work -- the concept of internal market economics.
- Architecture: a comprehensive framework of tools and processes, and how they're integrated.
- Inventory: an assessment of which tools and processes are in place.
- Gaps: an assessment of which tools and processes are inadequate for the intended purpose or missing altogether.
Note: Assessments will be at a high level (functionality of the components), not a detailed analysis of the construction of each component (which, for the sake of time and money, is deferred to any subsequent projects that invest in improving a given component). For example, tools will be evaluated based on their high-level functions and integrations, not a detailed assessment of data structures, features, or performance.
- Strategy: recommendations for a sequence of initiatives to improve your financial-management and resource-governance tools and processes based on urgency and technical interdependencies among the components, with a specific recommendation for the next step.
Attendees at the presentation will receive copies of the report, and of the book, Internal Market Economics: practical resource-governance processes based on principles we all believe in, on which the analysis is based.
Following the presentation to your leadership team, we will work with the core team to evaluate the reactions of the leadership team and identify tangible follow-up action items.
Benefits
This study should help define, justify, and design improvements to your tools and processes so that they better satisfy the needs of both your leadership team and your customers, in the near term and the long term.
Specifically, it's intended to deliver the following benefits:
- Help you harvest the benefits of investments to date in financial-management and resource-governance tools and processes.
- Help you build consensus on a long-term vision and architecture that will guide the design of near-term initiatives, to ultimately attain all the benefits of an effective system of financial management and resource governance.
- Help you focus near-term investments within that broader vision and architecture so that they better integrate with existing and future components, and more effectively deliver expected benefits.
Process
The assessment involves the following steps:
- Planning: You will assign a core team to manage this project. We will meet with your core team by telephone to plan the details, including the schedule, interviewees, and leadership-team participants. Two 1-hour telephone meetings are planned.
- Preparation: You will schedule interviews with your customers and your leaders, and schedule the final presentation.
- Data gathering: In an on-site visit, we will interview your customers and your leaders to assess satisfaction with existing processes. We will also work with your core team to gather detailed data on existing tools and processes.
- Analysis: We will assemble and analyze the data, and prepare the report and the presentation.
- Presentation: In a two-day on-site visit, we will present findings to your leadership team (day one) and work with your core team (day two) to evaluate leadership reactions and determine next steps.
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