Gary Cokins
Gary Cokins
![Gary Cokins - The Strategic Controller](/2/images/280_0_5719195_737949.jpg)
Gary Cokins, CPIM
(gcokins@garycokins.com; phone 919 720 2718)
Gary Cokins (Cornell University BS industrial engineering/operations research) 1971; Northwestern University Kellogg MBA 1974) is an internationally recognized expert, speaker, and author in enterprise and corporate performance management (EPM/CPM) systems. He is the founder of Analytics-Based Performance Management LLC www.garycokins.com . He began his career in industry with a Fortune 100 company in CFO and operations roles. Then 15 years in consulting with Deloitte, KPMG, and EDS (now part of HP). From 1997 until 2013 Gary was a Principal Consultant with SAS, a business analytics software vendor. His most recent books are Performance Management: Integrating Strategy Execution, Methodologies, Risk, and Analytics and Predictive Business Analytics.
All of my books are at:
https://www.goodreads.com/author/list/47692.Gary_Cokins
Linkedin.com contact:
https://www.linkedin.com/in/garycokins
Contents
25. Cokins Excuses and Barriers Preventing EPM + a Pleasant Brief Chat
24. Historians versus Futurists – Who is More Valuable?
23. Interview of Gary Cokins describing EPM
22. Who Are the Animals of Corporate Performance Management (CPM)?
21. The Many FP&A Rooms of the Organization Mansion
20. The Long Arc Bends Toward Justice
19. A Primer Lecture on Activity-Based Costing (ABC)
18. CFOs – Are They Vanguards or Villains?
17. Profitability Analytics as a 'West Side Story'
16. Beethoven’s ‘Eroica Effect’ and Corporate Performance Management (CPM)
15. The Strategic Cost of Quality
14. Measuring and managing patient profitability
13. Are Accountants Homo Accounticus?
12. Management Accounting 101, 102 and 103 Courses
11. Identifying and Measuring the Cost of Error and Waste
10. Why Use ABC
9. Movie Sequel – “Accountant Pirates of the Caribbean”
8. Some Accountants are the Blind Leading the Blind
7. The CFO’s Expanding Role – Reality or Delusion?
6. How Many Types of Key Performance Indicators (KPIs) are There?
5. Does Accounting Undermine Managers' Ability to Make Good Decisions?
4. A Passionate Appeal for Activity-Based Costing (ABC)
3. Put Your Money Where Your Strategy Is
2. How Marketing and Finance Think differently
1. Measuring and managing customer profitability
25. Cokins Excuses and Barriers Preventing EPM + a Pleasant Brief Chat
Many often question why organizations are hesitant or slow to move forward with implementing systems and adopting progressive methods including analytics.
Below are two categories that I have accumulated for my field of enterprise and corporate performance management (EPM/CPM) methods with advanced analytics. The two categories are Excuses and Barriers.
Excuses for not implementing EPM methods
We are profitable, so why does it matter?
We will purchase software that will fix our problems.
We already know our “true” costs from our general ledger financial reporting system.
We have done it this way forever. And we don’t do that here. We already know everything. It is in our heads.
We are a small organization. We’ll worry about better methods when we get larger.
All this hype is just made up stuff from highly paid consultants.
No one looks at the reports I create, so there is no point generating better reports.
We cannot afford better software to fix our problems.
We are way too busy doing other things.
We don’t know where to start or how to get started.
Barriers: Reasons for the slow adoption rate of methods and systems
Dirty or low quality data.
Disparate hardware as data sources.
The perception that implementing EPM/CPM methods is too complex, and not worth the effort.
Human nature’s resistance to change.
Fear of others knowing the truth … or its flawed truth.
Not wanting to be measured and held accountable.
Excel Hell.
Insecurity and confidence deficiency – obsession to know “who else has done it” rather than judge if it just makes sense to do. (The ROI dilemma.)
Confirmation bias – starting with preconceptions to be validated.
Stove-pipe rivalries.
Misalignment of incentives. Poor KPI metrics and targets.
Not realizing that line managers have less interest in historical reporting and greater interest in predictive outcomes.
Inflated expectations that analytics is the magic pill … to cure all problems.
Lack of or weak leadership (which is not the same as management).
Gary Cokins, CPIM
(gcokins@garycokins.com; phone 919 720 2718)
http://www.garycokins.com
A Pleasant Brief Chat
April 24, 2024
Carlo Attademo:
"Gary,
Just read.
I believe that all those reasons are true but in my opinion the excuses are predominant in reality.
I explain why.
My Linkedin contacts that take part in my poll are generally of a high-medium profile with regard to Education and Experience.
As a result if most of them (now 65%) find ABC techniques as their favorite costing methods, I believe that it means the main reasons consist of "internal" factors that have little to do with the technical issues concerning the ABC adoption.
One above all, the Finance managers' conviction not to get many business's people to buy into ABC.
The lower employees/workers in the hierarchical ladder (generally not very educated) in the real business life will oppose the ABC implementation since they see it like a further ERP implementation plus an unknown new costing method.
All this will translate in the eyes of the finance managers into a strong opposition and a waste of time,
In my opinion, the opposite to what I had before doing the poll, It needs to focus not only on CFOs an managers but also on the other employees through formation/persuasion courses.
If you want to, I will post your article on my website in your page.
Gary Cokins:
"Carlo …I agree with you.
The resistance and barrier to adopting ABC has little or nothing to do with technology, systems, or software. It is due to people.
24. Historians versus Futurists - Who is More Valuable?
Some analysts dig deep into historical information to glean insights once hidden. Other analysts are obsessed with predictive analytics and Big Data to foresee the future. Are these in actuality the same person or are they two different rivals with their own ideology?
Crystal ball versus a rear-view mirror
Futurists enjoy taking out their crystal ball and projecting future innovations. They are typically wrong. George Orwell’s book 1984 that was published in 1949 did not come close with its projections. In the 1960s I recall a Walt Disney television show describing automobiles that required no driver and were guided by some form of magnet-like strip imbedded in the street’s or highway’s roadbed. Nice try.
In contrast, historians research the past to determine what lessons might be learned that can be applied today. For example, historians examine the judgments, policies, and actions of past USA Presidents and international government leaders to assess what actions may best serve citizens today.
Do futurists or do historians provide relatively more valuable information? Futurists make us think by being provocative. Historians through their rear-view mirror allow us to reflect on what worked or did not work in the past.
Why is this “more valuable” question relevant for today’s organizations? It is because many organizations fail to successfully execute their executive team’s plans and allocate an appropriate mix and level of resources to complete those plans. This involves strategy and budgeting – two disciplines that are widely criticized today.
Historical lessons applicable to strategy execution and budgets
In the author Stephen Bungay’s book, The Art of Action, he reflects on lessons from war and military campaigns that apply to leadership skills and planning. He specifically addresses how an organization can implement and achieve the formulated strategy and plans of its executive team. In his book he draws on battle tactics of the 19th century Prussian army.
Bungay’s premise is that the leaders of almost all organizations can define reasonably good strategies. Where executives often fall down is leading their organization to implement their strategy. Bungay describes this problem as gaps and advises how to close the gaps.
His assertion is that similar to military campaigns in war when a strategy encounters the real world then three types of gaps appear. He describes gaps in terms of expected results and reality: outcomes, actions, and plans. Gaps result from complex and difficult to predict environments that all organizations deal with and are made more severe with globalization – the reduction of international borders for commerce and information. The three gaps are:
1. The knowledge gap - the difference between what we would like to know and what we actually know.
2. The Alignment Gap - the difference between what we want people to do and what they actually do.
3. The Effects Gap - the difference between what we expect our actions to achieve and what they actually achieve.
Based on Bungay’s deep knowledge as a historian of military practices, he observes that a key to successful strategy execution is delegating more decision-making authority to managers and employee teams.
Empowering managers and employee teams
Bungay describes lessons from the 19th century Prussian army in this way. Following an unexpected military defeat the Prussian military’s tactics were reformed. Lower-level officers were given more flexible command to make decisions. What mattered is that they fully understood the battle mission. By providing more decision rights to the officer corps, this resolved a problem that the higher the military leaders are from the battlefield, then the less they are aware of the current situation. Officers could pursue local actions as they saw fit.
The Prussian army solution following its prior defeat was the institutionalization of military genius with centralized and elite generals and increased accountability of the field officers with rewards based on their performance and outcomes. This reform was successful, and the army conquered other countries.
In today’s terms of managerial methods, the parallels of the Prussian army reforms are applying the balanced scorecard methodology and adopting the participative budgeting concepts.
The balanced scorecard’s primary feature is the development of a strategy map that visually displays on a single page a dozen or more cause-and-effect linked strategic objectives. Using four sequenced components (referred to as “perspectives”) the linkages move from employee learning, growth and innovation to process improvement initiatives to customer loyalty objectives which result in the financial objectives’ outcomes. The key performance indicators (KPIs) reported in the balanced scorecard are derived from the strategy map. The KPIs monitor the progress toward accomplishing the strategic objectives, and by each KPI having targets assigned, the foundation for accountability is established and alignment of managers’ actions with the executive team’s mission and strategy are achieved.
The participative budgeting concept views the annual budget as a fiscal exercise done by accountants that is disconnected from the executive team’s strategy and is usually insensitive to forecasted demand of volume and mix. It acknowledges that budgeting annual line-item expense limits are more like shackling handcuffs for managers who may need to justifiably spend more than was planned and approved many months ago in the past in order to capture benefits from newly emerged opportunities. The participative budgeting method advocates abandoning the annual budget that quickly becomes obsolete. It proposes replacing the budget’s controls by giving managers the freedom of decision rights. This includes hiring and spending decisions without requiring approvals from superiors. It invokes controls by monitoring non-financial key performance indicators (KPIs) against the targets defined by the executives in the balanced scorecard’s strategy map. Managers do not escape the need to be held accountable with consequences. The time frame is not annual but rather dynamic.
Historians versus Futurists
The message here does not mean organizations should not be researching emerging and imminent new technologies and methods, like analytics and Big Data. The message is that granting decision rights to managers but holding them accountable with consequences is effective at closing the three gaps. And this a lesson learned from historians.
The takeaway from this message is germane to understanding PACE’s Profitability Framework. While some seek a step-by-step instructional manual, the problem with these is that they take a one-size-fits-all approach, and the real world is more complex than that. In contrast, the Profitability Analytics Framework gives you a methodology to find the answers and knowledge you seek. It helps you investigate your company through several lenses including formulation, validation and execution of your strategy focusing on costs, revenues, and investments. It enables clear thinking to systematically investigate answers to critical questions and provide the wisdom you need to move forward in a profitable way.
If you are a seeking to close the three gaps, isn’t it time you looked more into the Profitability Analytics Framework and what it can do for your organization?
Gary … Gary Cokins
gcokins@garycokins.com
"This content may be found also on https://www.profitability-analytics.org/"
23. Interview of Gary Cokins describing EPM
“Enterprise and Performance Management (EPM) methods include: Profitability reporting (using activity-based costing [ABC] ); Strategy maps and balanced scorecards with KPIs; Lean management with lean accounting; Quality management with the cost of quality (COQ); Driver-based budgeting and rolling financial forecasts; Enterprise risk management (ERM); and data science and analytics.”
The full video interview is available here: