The Affinity Sutton Group (ASG) is investing in Enterprise Resource Planning (ERP) technology as a platform for growth. All the major business processes which are currently supported by a myriad of different systems are being migrated into one system. This migration has provided an opportunity to redesign most of the processes. It is a chance to introduce more efficient ways of working e.g via ERP enabled automation and workflow. Given the size and scope of the exercise significant levels of benefit were anticipated primarily in terms of freed up staff time – leading to cash savings or directed towards areas of the business needing to increase their capacity. Develin was asked to develop analytics that would identify the value that could be realised through better ways of working. The result has been used to calculate the Return On Investment (ROI) for the programme – a number that needed to be agreed and that the business would commit to deliver. This case study outlines how this was achieved.
The business of agreement.
The challenge was to provide answers before any of the work to redesign processes had started. The numbers produced would need to reflect the scale of the enterprise and stand scrutiny from the managers who would be tasked with their delivery. Doubt and uncertainty about their origins would make the task of agreeing an appropriate ROI all the harder. It was vital to have a strong foundation of evidence.
Evidence through data.
To help provide that evidence, a team of ASG Management Accountants built an activity catalogue and database that captured in plain english what every department and team did across the business. Structured by process and cost centre it included estimates and measures of time for each activity. The data was to be used three ways: 1) To calculate the benefit from better process designs: From the database we know the cost of each activity within each process. The core of the exercise was to estimate how a new process design would alter this cost.
2) To enable accurate scenario modelling: Having the most up-to-date records for events such as Neighbourhood Housing Officer visits and repairs visits we could use this data to demonstrate the effect that better technology will have – e.g. on the frequency of events, the number of people needed, and the cost of each event.
3) To analyse risk: Finally, we have sufficient data with which to spot patterns e.g. in customer activity and behaviour and in the tasks needed to look after properties. We are using this data to help identify groups of customers and properties at greatest risk of triggering high cost activities.
The outcome was a calculation for the ROI that could be broken down to the level of individual activity within each process. It is possible to see how the benefit will be delivered, from where in the business it will come as well as the timings and phasings involved. It was a complex exercise and not without its challenges. E.g. Business Managers wondered initially how they could provide numbers that depended upon work that had yet to be started. It was possible however to review the narrative for each activity in the database and to arrive at a shrewd estimate for the effect that a redesign of the process would have. Estimates were shared, challenged and cross referenced where possible to benchmarks from elsewhere. Where estimates were not possible, or thought not to be robust enough, additional evidence was needed. In some instances this took the form of models that simulated the impact of process changes within real life scenarios. There was an element of the ‘black box’ about these. Nevertheless their outputs were also challenged and cross referenced where possible to benchmarks. Thanks to the methodical and detailed nature of the work the team was able to deliver well argued cases for change. Each had its weaknesses and flaws, but taken together they represented a convincing and widely accepted statement for the level of return that could be expected and how it will be delivered. The ROI is a substantial figure and it has been agreed.
An important legacy
ASG already had a vision in place for a more ‘value centred’ Management Accountancy service. It is more focused towards initiating change and better equipped to take on this sort of challenge than is typically the case. They were able to hit the ground running. Nevertheless this exercise has left them much better equipped in terms of analysis and consulting skills as well as knowledge of the business. They are being seen increasingly as legitimate agents of change with a deep understanding of commercial practice. The benefit from this legacy has not been included within the ROI for the programme. It will however be felt for many years to come. Look out for our article ‘Management Accountants as catalysts for change’ within the CIMA journal ‘FM Magazine’ for June 16. It covers this story in a little more detail.