Keep the figures coming - and spare executives their blushes

By David Longworth

By David Longworth

20 August 2000

Managing expectations is what life on the stock market is all about, and many's the story of the chief executive who has been caught unawares and had to fall on his sword. Recently, ICL chief Keith Todd became the latest casualty, as the once great British IT services company had the plug pulled on its float by its Japanese parent Fujitsu, making a mockery of Mr Todd's repeated promises to see it through to flotation ever since he became chief executive in 1995.

In other cases, executives have made positive noises about financial results only to be left at the end of a quarter with lots of egg on their faces - and hit by a dangerous slide in their share prices. Such pronouncements show senior management are often frighteningly out of touch with what is happening at the grass roots of their companies, which might sound a note of familiarity with many.

Part of the problem is accountants. As the guardians of the checks and balances in a business, they are loath to release figures at month end, never mind approaching the end of a quarter. Yet it is actually relatively easy to infer accruals based on previous performance as the period end is approaching, and to predict with near-total accuracy what results are going to look like.

Assuming their mindset can be changed to accommodate a rolling forecast, the difficulty lies in gaining access to the variety of applications that hold the information - budgeting, forecasting, planning and core accounting systems. So many companies, particularly smaller outfits, still use manual consolidation and data gathering techniques that un- derstanding how they're perfor-ming at any point in the middle of the period becomes quite hard.

This is where the web can help, providing what's termed a "portal" into the various applications and presenting them all on a web page in standard format. Dave King, chief technology officer of budgeting and planning software vendor Comshare, says: "From a high-level viewpoint, everybody understands what they would like to end up with, but it never gets hooked back up to the strategy. It's not technically difficult - the technical issues are actually easier to address than the business issues."

Comshare has developed a system it calls management planning and control (MPC) which links budgeting, management reporting and analysis together. It uses the web to pull together access from a number of existing documents, and with a standard traffic-light system it can notify executives as to how they are doing against pre-set goals: red for bad, green for good.

The difficulty then comes in making sense of such alerts. The way data is summarised up to a senior level means that even with the capability to drill back down to the lower-level detail, it can be hard to see where a problem is coming from. If the chief executive sees that a particular division is underperforming in one month, pressing the panic button rather than picking up the phone to the line manager for an explanation may be the wrong response.

One potential answer to the problem is artificial intelligence (AI). Computer Associates, for example, is de- veloping Neugents AI technology. This, the company's executives love to predict, will one day be able to search through masses of data and, based on lessons learned from previous performance, alert execs to performance problems before they happen.

Neugents is available in a generic format for building e-business applications today. At the recent launch of Neugents ii, New Scotland Yard's Phil Stoneman revealed how the police force was looking to use it to predict the recurrence of bulk crimes like robbery, burglary and auto crime. But soon after this, Charles Wang, the long-standing chief executive and founder of Computer Associates, stepped aside as the company unexpectedly reported poor results and its own share price collapsed. Maybe it needs to start taking its own medicine.

* This column is provided by TBC Research, an events, publishing and research group. Contact www.tbc-research.com