Master Data Management: the Good, the Bad and the Ugly

When Master Data Management is brought up as an action item on the company to-do list, it is often met with a room full of heavy sighs and groans. Management teams understand that not having an MDM process has negative effects, (severe delays in daily processes, lack of confidence in master files and uncertainty in providing regulatory reporting) but nobody jumps at the chance to put one in place.

In an era where mergers and acquisitions are on the rise, organizations must put in the time to get MDM in check to minimize the impacts of unreliable master data.

The Good: You want reliable data? You got it.

Hands down, having an MDM process in place makes life easier. MDM encompasses the procedures and technology put in place to maintain and protect the integrity of critical data sets. A well-defined process helps facilitate the distribution of shared attribute data between source systems, providing one version of the truth. Quality control checks embedded in data management practices instill confidence in data used by the business for day-to-day operations. They ultimately minimize the confusion that comes with data inconsistencies.

Proactively managing master data also has a positive, direct impact on company reporting. Having access to reliable and timely data reduces hours spent researching data idiosyncrasies in order to provide accurate asset counts and regulatory information.

The Bad: Managing master data is not free or easy.

While there is no question the benefits of having MDM controls in place, investing in and developing a process is not free. In order to realize results, businesses must create a well-defined process for the entire lifecycle of the data sets being used. Additionally, they must budget for a dedicated team of resources to manage the flow of data. This team should be carefully selected as it is critical they are familiar with all data elements.

After solidifying processes and selecting an MDM team, master data files must be analyzed and cleansed. This exercise can be painful and time consuming depending on the state of the data, but is necessary to see positive results. Custom built reports can be created to quickly identify data discrepancies for cleanup.

It is important to note, even after all master files are scrubbed, data gaps will be an ongoing issue. Sometimes specific data points, such as legacy effective dates and pre-acquisition contact information, are not available or do not exist. Implement an MDM organization now to avoid creating unnecessary data gaps in the future.

The Ugly: Not managing master data is worse than the difficulties of managing it.

For organizations operating without a formalized way to manage company master data files, getting information is ugly. Think of unorganized vendor files causing payments sent to incorrect addresses and contradictions in product codes living in multiple systems. Without a clean foundation of master data and a process to manage updates, day-to-day business operations become sluggish. The lack of confidence in data often results in users working in offline, self-managed workbooks.

Too many organizations are struggling to conduct standard business processes due to lack of access to reliable master files. This issue is only magnified as acquisitions are made and customer bases grow.

Regardless of industry, all organizations are susceptible to the nightmare of disorganized master data. If businesses identify lack of critical data as a pain point now, it will only become more problematic in the future as data grows. Stop perpetuating the cycle of bad data and implement MDM comprised of a robust process, clean master data, and a team that knows what they’re doing.

6 Common Mistakes to Avoid When Hiring a Consulting Firm  

The basics of hiring a consulting firm remain constant: get multiple proposals and talk to previous customers of all the firms you’re considering. Yet, it’s amazing how often senior executives neglect these basic precautions.

Unfortunately, there are several common mistakes between the preliminary search and final hiring of a consulting firm. While no criteria is foolproof, you’re more likely to make a wise hiring decision by avoiding these common problems:

1. NOT hiring a consulting firm.

It’s the classic blunder. Many major projects may appear to be well within the realm of your team’s capability. But before you know it, they’ve morphed into monstrous initiatives that burn out your best employees and require you to hire a consultant to clean up the mess. It’s usually less expensive if you hire the right firm from the outset.

2. Waiting until you are desperate.

Waiting until things catastrophically fail can increase the cost of a remedy or worse, lead to irreparable damage. A minor customer service process issue can turn into a BIG issue if sales increase. As soon as you see signs of trouble, begin engaging with consulting firms to see how you can head off a major complication.

3. Muddled communication.

Open communication includes asking straightforward questions and clearly delineating what you want and expect from a consulting firm. Put verbal communication in writing.

4. Being enticed by low or high bids.

Be wary of bids that are outliers – substantially higher or lower than the competition. Make sure each bid accounts for the same services and can be compared realistically. Read the fine print.

Lower bids might mean part-time resources that are stretched thin between competing priorities. They may assume internal employees will be responsible for day-to-day activities with minimal oversight from the consulting firm.

Higher bids rarely reflect higher standards of service. It may be as simple as out-of-town travel expenses billed to a project, or a firm with a full workload only seeking work with high profit margins.

5. Choosing a consulting firm that never says “No.”

A consulting firm that says “Yes!” to everything is probably too good to be true. Either they are desperate for business or aren’t really listening to your needs. In a good consulting relationship, the firm will serve as a trusted advisor who may occasionally have a differing opinion.

6. Hiring a firm to fix a problem without assessing it.

Don’t hire consultants to fix a problem without asking them to first gauge the issue. This doesn’t necessitate binders full of analysis or months-long studies on the topic. However, it does require the consulting firm to take a broad view of your situation and provide straightforward answers about your current approach and their proposal.

On the flip side is the consultant who wants to sell more work than is actually needed. To avoid this, ensure the consulting firm provides you with a project plan with an exit strategy. Any deviations from the agreed upon timeline should be made upfront and well in advance.

It’s easy to be enticed by a low price,  propensity for a “yes” answer to everything, or always being told what you want to hear. Stop, take a minute and make sure the consulting firm will tell you what needs to be said and can solve your problem. There is not a one-size-fits-all solution to every issue. It’s important to assess all of the options and ensure the consultants you hire will deliver what they promise.

 

 

 

Advantages of a Cloud-Based Financial Reporting Tool

Using the cloud is an everyday occurrence in our personal lives. We demand the ability to store information where we can access it anytime, anywhere. Whether we’re posting photos of our family vacation on Facebook or accessing documents from Dropbox, most of us take full advantage of the cloud in our personal lives. The real question is: Why haven’t our business lives caught up?

At work, we accept we can’t get instantaneously updated information, have to be logged in to the network to gain access to reports, and must have IT’s help to get information from the system. It’s time for a change; we need to make our business data as efficient and accessible as our personal data.

The use of Excel in financial reporting is common, but leaves companies in the dark ages. Users spend more time dealing with data and worksheets than actually analyzing the data. While other companies use expensive and cumbersome bolt-on apps with their ERP system, cloud-based financial reporting tools are relatively inexpensive to implement and combat the disadvantages of hardwired financial reporting systems. Implementing cloud-based financial reporting tools can bring analog companies into the 21st century.

Cheaper Than a Data Center

The cloud is a cost effective solution for multiple reasons. It requires less infrastructure, reduces the burden on internal IT, and reduces the size of the company’s data center. Companies are able to use a smaller data center because, unlike the hardware of a traditional system, cloud storage does not take up physical space. Using a cloud-based system cuts IT’s cost as well. The burden of constant maintenance and upkeep of cloud based systems falls on the supplier, not internal IT. Cloud-based systems don’t require an in-house system expert, which frees up the IT department’s time and budget, allowing them to move into an administration and security role.

Faster Implementation

Cloud-based systems are more dynamic than traditional systems, allowing for increased productivity and a quicker implementation. Multiple resources can work simultaneously on the build. During the implementation, the project team can test the system as they build, and address problems before reaching user acceptance testing. Validating data and tackling major hurdles ahead of time results in a smoother user acceptance testing process. Addressing issues during the implementation allows the project to stay on track and decreases the risk for major system rework.

Finance and Accounting Take Ownership of the System

With cloud-based systems, the supplier maintains and updates the system instead of IT. Because the end-user can take ownership of the system, it creates a more autonomous relationship between accounting and IT. No technical or coding knowledge is required. IT handles the system security and user profile maintenance while accounting handles data updates.

Easy Transition from Excel

Many businesses have grown accustomed to Excel’s ease of use and flexibility. Making the switch to the cloud is easy because, similar to Excel, cloud-based systems are intuitive. All the features an end user needs are in one location, so users no longer have to dig through hierarchies only programmers who built the code understand.

Easily Scalable

Businesses can scale their company quickly using cloud-based systems. They have flexible interfaces, making it easy to scale the system as a company grows. The end user can add a legal entity or a new account without going through rigorous hoops and can see information updated instantaneously. This gives companies more time to analyze financial data and perform scenario analyses.

Cloud-based financial reporting systems decrease costs, speed up the implementation process, create an autonomous relationship between IT and accounting and are easy to learn.

How to Get Real Value out of the Budgeting Process

Pundits argue budgeting is a useless exercise and companies should curtail the efforts. In many organizations, budgeting becomes mere drudgery to appease the executive team. The budget process is long, and once complete, rarely reflects what management believes to be true. For example, a cost center budget is typically developed based upon historical costs with some small percentage increase or decrease. The process does not add value.

Convincing an entire executive team to eliminate budgeting is close to impossible. However, there is a way to get value out of the budgeting process.

Think about the last time you hired a service provider to do anything. There was likely a signed agreement containing expectations of both parties with an agreed upon set of fees in exchange for the work.

Why not use the budgeting process to allow each of the service providers in the organization (Finance, Human Resources, Engineering, Marketing, etc.) to “contract” for the work? For example, the Cost Accounting Department’s primary goal is to accurately capture product and inventory costs to enable make/buy, capacity and pricing decisions. The cost accountant’s customers include marketing and plant managers. The cost accounting team’s budget would be considered the price marketing and plant managers pay for the cost accounting services. This price (or cost) can be weighed against the value provided.

The budgeting process should allow each of the business functions to revisit what they do in terms of value provided to the organization. Functions can be stacked against each other in terms of the value provided and used as a means to reduce costs or build high-value capabilities.

Organizations have adopted the concept of service level charters as a means to drive value out of the budgeting process.

For example, a CFO has a global $6M budget for cost accounting whose value is considered high and a $7M global budget for accounts payable staff providing considerably less value. The immediate argument is accounts payable requires more effort. However, why would an organization spend more on activities that result in lower value? The CFO creates service level charters for Accounts Payable, Cost Accounting and the other finance functions. The service level charter outlines the scope of work, services provided and associated costs. The service level charters expose the inefficiencies with accounts payable and an effort to streamline processes allows the accounts payable budget to be cut in half.

The concept of a service level charter contains 5 key components:

1. Real Value

Each charter must have some connection with what is strategically important to the company. It is easy for the engineering department to identify the value of new product development. However, it is more of a challenge for the internal controls group to define their value statement. That being said, the Internal Controls Department keeps the executives out of jail. How is that for value?

2. Transparency

Department managers often shy away from sharing budgets with peers for fear of finger pointing. However, sharing the cost of the business functions should be transparent across the organization. A department manager who cannot justify his value should be challenged. There is nothing wrong with peer pressure to reduce costs and demonstrate value.

3. Service Expectations

In any contract, it is important to set service delivery expectations. It is easy for the cost accountants in the plants to get dragged off performing special assignments for the plant managers which have nothing to do with controlling and analyzing plant costs. Nonetheless, these special assignments are of value for the plant managers. The cost accountant’s delivery expectations for performing the special assignments need to be in the service level charter and budgeted accordingly.

4. Customer Expectations

As with every service agreement, there are expectations from the customer. In a service level charter between a technical support group and plant operations, plant operations would expect timely reporting of support issues. The old adage “I cannot help you if you don’t help me” applies here.

5. Measurement of what Matters

Defining performance metrics tied to the budgets is important. For example, a safety organization’s key measure is lost time incidents. During the budgeting process, some may believe there are too many safety supervisors. At the same time, the organization has zero lost time incidents displayed on the service level charter. The metric curtails any debate over costs.

Developing service level charters should be a simple process. Organizations may try to over-engineer the process.

Keep the service level charter simple:

1. Stick to One Page. The charter should be simple enough to put on one page in a 12+ font. Anything longer and the customer will not take the time to read.

2. Select Few Measures. Do not try to develop too many measures or select complicated measures. The easier to calculate the measures, the more likely everyone will understand.

3. Keep it High Level. This not about creating bureaucracy and trying define the specifics of every business function.

4. Stay Flexible. Organizations need to stay fluid and understand business changes may mean straying a bit off course to address the unexpected.

Implementing service level charters in an organization might be disruptive, but in a good way. Service level charters can drive a change in the culture of a complacent organization stuck in the process of budgeting for the sake of budgeting. Budgeting is not fun. But it can be if it is competitive and value focused. Trenegy has developed a service level charter format used by leading organizations. For an example, please is at: info [at] trenegy.com

Just a Flesh Wound! How Not to Cut Costs

Monty Python and the Holy Grail is one of funniest movies I’ve ever seen. One of my favorite scenes is the Black Knight skit. For those of you who haven’t seen the movie, you can watch the five-minute scene here (although I recommend you watch the whole movie!) In the scene, King Arthur tries to cross a bridge, but the Black Knight refuses to let him pass. They enter into a sword fight and King Arthur cuts off the Black Knight’s limbs one by one. The Black Knight responds:

  • After his left arm: “’Tis but a scratch.”
  • After his right arm: “Just a flesh wound.”
  • After his first leg: “I’m invincible!”
  • After the second leg (and King Arthur crossing the bridge): “Oh, oh, I see, running away then. You yellow b***! Come back here and take what’s coming to you. I’ll bite your legs off!”

I’ve always thought of cost cutting to be like a surgical procedure where a doctor wants to remove the diseased tissue, but ensure that the patient stays alive and gets better.  However, lately it seems that cost cutting in energy companies looks more like the Black Knight in Monty Python and the Holy Grail, with companies madly continuing the fight although they’re missing their arms and legs.

Although I admire the gumption of the Black Knight, this is no way to go about executing cost cutting measures in your business. Here’s why:

Somebody else is deciding what to cut.

In the movie, King Arthur does the cutting and the Black Knight has no say. When executing cost cutting measures, it is best if management decides what to cut. Letting analysts, board members and other external parties make these decisions won’t work because they don’t have the insight into your long-term strategy and/or the full understanding of your current position.

There is no path to being as healthy as before the cuts.

For the Black Knight, there’s no way to fully recover after losing his arms and legs. Likewise, overzealous and under planned cost cutting can leave your organization critically wounded.  Instead, use a deep understanding of your current state and long term strategy to eliminate costs today that don’t impair your future. Try to make these cuts scalable so they can be reversed when the up cycle returns. Use a scalpel, not a sword.

Regardless of how hard you fight, the competition still gets the advantage if you make the wrong cuts.

In the end, even as courageously as the limbless Black Knight fights, King Arthur crosses the bridge. When making cuts, understand what elements of your business are critical to the bottom line and competitive position, and begin cutting elsewhere.  Otherwise you may be opening a door for your competition to pass you.

Trenegy helps companies successfully plan and execute cost structure improvement projects. Our three step methodology clearly confirms what needs to be cut, maps out how the trimming can be done in a scalable way–which allows for future growth, and ensures that you stay ahead of your competition. To achieve your desired goals, we work with you to:

  • Survey: Clarify your strategy, the levers that drive your bottom line, and your current processes, organizations and systems.
  • Target: Draw a clear vision of what your organization, processes and systems need to be to achieve your strategy while lowering costs.
  • Roadmap: Prepare a detailed step-by-step plan to achieve your cost reductions rapidly (while maintaining a healthy organization) that provides quick wins.

When times are tough, like they are in the energy sector, cost restructuring is a requirement. But bravery alone will not get you through this down cycle. To paraphrase King Arthur: although you may be indeed brave, don’t be a loony.

Why Another Auditor Can’t Fix Your Audit Problems

Do either of these scenarios sound familiar?

  • You hired a Big Four Audit firm to assist with fixing some internal control deficiencies. It cost an absurd amount of money and they provided you with narratives and process flows that were never implemented. Your team is left without a plan or the resources to roll it out. This results in a significant deficiency or material weakness around internal controls.
  • Your company recently went public and spent a lot of time and money hiring an audit firm to assist with 404 compliance. After three months, your controller asks for an update. The audit firm has created some inaccurate policy/process narratives and hasn’t started a risk assessment or built controls documentation. Your Audit Committee isn’t happy.

Both of these are true stories. In each case, we’ve helped our client determine the root causes of deficiencies and implement the appropriate process solutions.

Those who come from the Big Four or another audit firm are familiar with the following audit process:

  1. Risk assessment and walk through: Identify and categorize risks (mostly using PCAOB guidance and previous audit results). Walk through the process and identify any other risks.
  2. Testing Plan: Identify sample sizes, timing, and test scripts.
  3. Test: Test the trial balance and internal controls.
  4. Results: Review with four levels of management and then offer an opinion.

This tried and true testing process allows the audit team to catch any significant errors or fraud. Auditors are trained to work long hours, know what’s needed, and find significant deficiencies. But they should not recommend changes or corrections, as this could create a serious conflict of interest. If they did, they would be met with the wrath of the PCAOB (the auditors’ auditor) and the Department of Justice!

This process is ingrained in the minds of external auditors and problems can arise if they join the industry or an advisory group. Many can break this mindset as they take on positions in industry. Yet for those who never leave audit, the find-the-problem mentality doesn’t morph into fix-the-problem.

Taking it even further, many audit and consulting firms employ the SALY method: Same As Last Year. This is a practice where the firm just repurposes deliverables from previous years or clients. This leads to deliverables that aren’t tailored to your needs or processes.

The Audit Mindset

Audit firms impact in the following ways when assisting clients with their internal controls framework:

Audit Mindset

  • Audit firms will work with Internal Audit and Internal Controls to identify risks and control deficiencies
  • Audit firms struggle with recommendations and do not tend to possess the knowledge to make processes more efficient
  • Audit firms don’t have change management experience and struggle with process owner and end user communications
  • Audit firms employ the SALY method—no personalized touch

Don’t hire an audit firm with the expectation that they will change/improve business processes.

Auditors have an ingrained methodology that works great for analyzing risk, but they miss out on the crucial piece of recommending and implementing changes. Even though more and more audit firms are getting involved in controls rollout, there is still a huge gap in their process and change management experience.

The Trenegy Mindset

Trenegy performs the critical tasks of remediating controls weaknesses with process solutions.

Trenegy Mindset audit

Trenegy is a management consulting firm that understands your business processes, systems, compliance requirements, and the proper way to roll out change while improving efficiencies.

How to Implement Internal Controls That Work

In a period of rapid change driven by historically low and volatile crude prices, publicly traded companies cannot lose sight of their controls framework among the chaos. Finance departments need help keeping the controls framework in place and operational in the face of emerging risks and opportunities. Finance doesn’t simply need more internal auditors to tell them what’s wrong, but the CFO needs a team that can:

  • Analyze emerging risk
  • Design effective processes and controls
  • Test controls and fix underlying deficiencies

Risk Environment

Don’t fly blind. The risk environment is always changing, even more so as market volatility increases. A recent survey shows that only 5% of CFOs and Audit Committee chairs receive “informed perspective on emerging risk” from their Internal Audit department.

This environment is driving companies to pursue extreme measures to manage financial exposure, but the exposure to financial reporting risks is often placed on the backburner. Both the conservative approach of hunkering down to shed costs and the opportunistic approach of making acquisitions while prices are low breed new risks. Risks identified in previous assessments must be reanalyzed as this business climate renders each decision more critical.

When performing this year’s risk assessment, be aware that the integrity of segregation of duties is threatened each time an employee is laid off. Each revenue accrual should receive greater scrutiny as your firm hovers near earnings targets, and emerging threats like cyber security can impair your controls framework.

Process Design

A control only functions if:

  • The process it exists within is effectively managed
  • All employees know which aspects of the control they own
  • The process is scalable to control for future risks

For example, a firm may capitalize on this downturn and purchase a strategic target with seemingly similar business processes. However, if the company has only ever operated within the confines of the United States, their vendor management control process will reflect that risk level. The majority of all Foreign Corrupt Practices Act investigations occur because of payments to foreign vendors, and if the acquired company conducts business across borders, old processes won’t identify red flags.

The only way to control for the above risk, and scores of other risks, is with effective process management. Roles and responsibilities must be delineated between accounting, operations, and legal to appropriately vet all new vendors, and the process must be scalable no matter whether you use a checklist or a vendor management system.

Underlying Deficiencies

Do not let a control deficiency fester. Finding the underlying cause of a failure is critical. Internal auditors are the in-house experts on discovering control concerns, but you need a team to remediate as soon as problems arise. On the surface, many control deficiencies appear like isolated incidents with straightforward remedies. However, material and systemic weaknesses like tone at the top, resource availability, and technology flaws often reveal themselves during remediation.

On the flip side, what may seem like a doom and gloom scenario – control deficiencies pervasive through your entire organization – might have an antidote. Your internal controls team must analyze the root cause of each problem and search for trends that link them. For example, if you notice repetitive failures within journal entry support, account analysis and financial reporting key controls, don’t jump to the dreaded conclusion of “failure of accounting governance.”

Instead, look for what precedes all of these processes: closing the books. Implementing an improved accrual process to facilitate closing your subledgers on the first day of the month will give accountants more time to perfect journals and analyze accounts, and provide managers more time to review final reports.

How Trenegy Helps

Trenegy provides a comprehensive review of an organization’s risk environment by drawing on years of experience advising multi-national publicly traded companies. We work across organizations through accounting, finance, HR and operations to help design and implement effective controls with a focus on efficiency and future flexibility.

Trenegy does not simply identify and report control deficiencies. Once we have identified failures in the process, we develop a specific course of action to remediate the underlying causes of control failures. By leveraging our expertise in ERP implementation, process design and COSO 2013, we build strong controls around the people and tools you have invested in.

We arrive with both an attack plan and an exit strategy. Whether you recently became a public company and need a controls framework built from scratch or are trying to maintain a stable control framework in an volatile market, our focus is on providing the finance organization deliverables and strategies that can be used long after we are gone.

How to Do More With Less in IT

This article first appeared on Peter Purcell’s CIO.com blog: Tech and the Business of Change

Many companies are striving to be more agile, efficient and productive in response to uncertain economic conditions in 2016.  Capital projects have been cancelled while companies shift their attention to surviving in the current environment without hindering their ability to expand in the future. Functional areas are facing significant pressure to cut costs and “do more with less.” Successful cost reduction or right-sizing efforts result in organizational realignment, process improvement and system changes.

Cost reduction initiatives will have a significant impact on IT. Not only will IT be asked to do more with less, but IT will also face increased demand to make changes to existing systems in support of functional area realignment. Forward-looking CIOs and IT departments should proactively focus on:

  • Reducing costs
  • Increasing efficiency
  • Improving security
  • Migrating to the cloud

Reducing costs

The unfortunate reality is that companies are overpaying for IT services. The real challenge for a CIO is to perform an unbiased review of operations when identifying cost reduction opportunities. IT personnel will state that IT is already lean and cannot endure additional budget cuts. Cost reduction opportunities will be identified if IT starts by focusing on licensing fees, projects and personnel. None are easy to attack, but are areas that should be reviewed.

Companies pay maintenance on software that is no longer used. While initiatives to review software licenses and determine which maintenance fees should be discontinued are started, they are rarely finished. Personnel hate this exercise because it exposes rogue software purchases and raises questions about IT’s ability to control access to the technical environment. This is a worthwhile exercise given the potential savings that can be quickly identified. A similar exercise can be performed on existing hardware platforms, but may have a smaller benefit.

The IT steering committee should review all projects to determine which can be cancelled or delayed. Reviewing upcoming projects is easy if the right guiding principles are created and used. Only continue the projects that increase revenue, impact market share or support compliance. All other projects should be delayed. In-flight projects should undergo the same scrutiny, but may require more discussion.

Reviewing the IT organizational structure to identify cost savings is a difficult, yet necessary exercise. Most IT departments have grown along with the company without significant thought for optimal organization structure. When times are flush, it is easy to add personnel to plug gaps without determining the long-term impact on costs. Realigning the organization around a framework like COBIT 5 will help ensure business is properly supported in the long term.

Increasing efficiency

IT and business should work together to determine how to better leverage existing systems to improve process efficiency. A quick review of trouble tickets can help IT develop an inventory of complaints where workflow, configurations and heavily modified code are hindering employees’ ability to perform day-to-day activities. A joint effort to change processes while refining system configurations can have a huge positive impact, sometimes leading to elimination of positions within the business.

Changing business conditions or processes could also lead to elimination of heavily modified code reducing the amount of effort required to support the system. Specialized external resources may no longer be needed to monitor and continually modify the code. Internal support resources could be redirected to focus on other areas that can increase business efficiency.

Extending the existing systems with new modules or add-on capabilities may be counterintuitive in a down economy. However, this is the perfect time to take a hard look at how new functionality can support revenue-generating processes. IT should work with business to ensure processes are rationalized, efficient and effective. Then determine if additional functionality is required to support the new environment. A strong business case could lead to implementation of new CRM, field service, asset management or other systems.

Improving IT security

IT breaches, no matter how minor, can lead to a significant expense. The consultant fees and data loss liability can quickly add up whenever a system breach is detected. IT can work with the business to increase employees’ awareness of cybersafety. Implementing new processes and awareness programs is tantamount to an inexpensive insurance policy to avoid the cost of a breach. Successful cybersecurity programs can also help reduce the need for expensive cybersecurity detection, penetration and removal tools.

Migrating to the cloud

Companies that have data center managed services contracts should take a hard look at migrating to the cloud. Many data center contracts were not written with clauses to reduce capacity if a company shrinks. As a result, companies are paying for more capacity and service than needed. Going through an exercise to determine the cost savings of moving to the cloud can encourage the managed services provider to reduce contract costs. If not, then moving to the cloud can often reduce the overall cost of running core systems. And moving to the cloud will help ensure IT’s ability to support growth in the future efficiently and cost effectively.

It is difficult to tell exactly what is going to happen to the economy this year. However, IT should get ahead of cost reduction activities, striving to be agile, efficient and productive.

The Bitterness of Poor Quality: Why Reliability Matters!

I always wanted a two-seater German sports car. A few years ago, I finally checked that item off my bucket list when I found a great deal. I was the owner of a beautiful, champagne colored, road-handling machine. It was a dream come true. Until my dream broke down.

Just a few miles from home my dream car started smoking, and flashing messages told me that I was having a catastrophic transmission failure. I spent an hour waiting by the side of the road for a tow truck and then waited weeks while the dealer fixed my new car. All the waiting, the expense and the inconvenience were irritating. And the irritation made me angry. And the anger made me bitter.

And at the end of the day, the bitterness was caused by a broken, small and inexpensive aluminum bracket that allowed a transmission fluid line to become disconnected.

I recalled a saying a friend of mine learned early in his career:

The bitterness of poor quality remains long after the sweetness of low price is forgotten.”

This is an important idea to remember when developing your operational excellence strategy. But how does a company design a program that ensures reliability? How can your organization ensure that whatever product or service makes you money will be available when called upon?

There are five features to a superior reliability program. These aspects, when properly applied to your internal product production and asset strategy, and when applied to your supplier network, ensure that your customers and clients will not experience the bitterness of poor quality.

1. Set the right tone from the top.

It is important for your employees and suppliers to understand that reliability will not be compromised. Recent examples have shown how easily an organization will take the path of least resistance when it perceives that management doesn’t care (airbags from Japan, diesel emissions from Germany, etc.) One step to setting the right tone is to ensure quality-related concerns are addressed thoroughly and rapidly when they arise.

2. Address reliability holistically.

Inspections alone will not guarantee reliability. Quality must be promoted through:

  • Improved management practices and policies,
  • Streamlined processes and procedures,
  • Built-in quality in the design and manufacturing of your products and those from your suppliers,
  • Robust maintenance procedures to support your assets, and
  • Strong supporting technology infrastructure.

3. Work on a few high-impact items.

Research shows that an organization working on less than three enterprise initiatives is successful. When that increases by one or two more, the chances of success drop significantly. Focus on and prioritize where reliability will have the biggest impact on the bottom line and work on that first. Once these reliability items have been conquered, move on to the next challenges.

4. Be data-driven.

There’s an old adage: ask five experts what the right answer is and you’ll get fifteen different opinions. Therefore, use data to take emotions out of the equation and get the right answer.

5. Keep going.

An excellent reliability program never ends. Continuous improvement needs to be incorporated into the organization’s culture. Once this spirit of continuous improvement is established, the challenge will shift from motivating employees and suppliers to think about reliability to ensuring focus on the right priorities.

Don’t leave your customers and clients stranded on the side of the road, tasting the bitterness of poor quality.

This is the third in a series of articles on operational excellence. Trenegy helps companies successfully manage operational excellence.