The performance ideas blog

Blog

  • Why sparklines sparkle in a dashboard

    SPARKLINES SPARKLE

    One of the key features of the dashboard in any car is the fact that it is on a ‘single page’. Car dashboards are usually very simple and it doesn’t take us more than a few seconds to familiarize ourselves in a new vehicle. Could you imagine driving a car with a complicated dashboard? Could you imagine having to scroll through multiple pages to get a speed reading while you are driving down the German Autobahn with 200 km/h? The answer is no.

    THE CONSTRAINTS

    Good management dashboards should be concise as well. Executives especially don’t have the time and patience to scroll through multiple pages of information. But that often creates a problem: We have a lot of information to show but there is limited space. This problem arises especially when we want to show trends. A typical dashboard might want to show profits, margins, win/loss ratios, revenue, pipeline across multiple regions. One way to display this rich set of data in a table. But tables are ineffective in quickly displaying trends. And they take up a lot of space. The other option would be to show multiple line charts. But those take up a lot of space as well.

    THE SPARKLINE

    Information design guru Edward Tufte developed a solution for this problem. He created a new but very simple chart called a ‘Sparkline‘. He describes them as “data-intense, design-simple, word-sized graphics”. In other words: sparkline charts are very small, yet they display vital trend data. Take a regular time series such as revenue by months. Stick that into a sparkline chart. Below is an example:

    Simple sparkline charts

    ELEMENTS

    When you look at the example above, you will notice how easy it is to spot the general trend: the Conservative Party is loosing ground. You have also noticed the little dots. IBM Cognos 10 allows you to color code the low, mid and high point. (red, black, green). The Green Party is gaining. You can hover your mouse over the line to get the actual value. This type of chart simply provides the ability to obtain a quick overview of the general trend and all that within a very tiny amount of space.

    SPARKLINES AT WORK

    Sparklines truly show their full potential when you supplement them with metrics or other charts. Take a look the next example:

    Sparklines in action

    The above object allows us to review margins across regions. The sparklines quickly display the trend. The trend is supplemented with more detailed information. Notice how concise and compact the total object is. And here is an example where we can see the sparklines integrated into a regular dashboard:

    A sample IBM Cognos 10 dashboard

    The upper part allows us to quickly provide an overview of critical metrics across different dimensions.

    SPACE SAVERS

    In a prior blog post I discussed the bullet chart. Those charts are also quite small and highly useful. When you combine the sparkline with the bullet chart you have a powerful combination. Notice how much information we are able to absorb (trend, actual value, current performance). A traditional line chart would take up a lot more space.

    Sparkling Bullets

    SPARKLINES – A FINAL WORD

    Sparklines are great for displaying trends. This is ideal for supplementing current information (e.g. YTD Sales). They are tiny, they are easy to use and they are easy to understand. However, they will not replace a traditional line chart. Line charts are definitely a better choice when you want to perform a more detailed analysis. Next time you build a dashboard try to incorporate some sparkling charts.

     

  • Finance Forum – EMEA v1.0

    Just a quick hello from the road. It’s one of those very exciting yet extremely busy weeks. The IBM Finance Forum events finally kicked off in Europe. The first event was held on Wednesday in the beautiful town of Wiesbaden in Germany.

    Which door would you take?

    Wiesbaden is known for three things: It is the capital of Hessen, there are some natural springs that have healing effects and there is one of the few well known casinos in Germany. It is the beautiful casino building in the heart of Wiesbaden where the first Finance Forum for the season kicked off. We had a great crowd of well over 250 finance & IT professionals. I had the honor to deliver the IBM keynote. Delivering the keynote at these events is always exciting. But it is especially exciting this year: there are so many great and game-changing things to show.

    Apart from many interesting customer & IBM speakers, we also have a few really interesting external keynote speakers. In the US, David Axson will be delighting the audiences. He is a true performance management visionary and inspirational speaker. Make sure to check out his latest book called ‘The Management Myth Buster’. In Europe, Steve Morlidge (author of the book ‘Future Ready’) will be sharing interesting insights about how to improve your forecasting processes. And there are some other speakers as well. Stay tuned for updates. Check out this link to find out about all the dates.

    Below are some impressions from the day. I really hope to see many of you at our upcoming events. My personal schedule is update on this website.

    Soundcheck at 7:30am
    How cool is that? Multi-touch planning powered by TM1.
    The Kurhaus in Wiesbaden…how nice is that?

  • Hands-up! Here comes a bullet chart

    Executives often want to have a quick overview of some key metrics to find out what the state of their business is. Questions like: Are my margins on target? Is customer satisfaction within an acceptable range? What is the size of my pipeline? All this information is typically summarized in a dashboard. The easy thing is to simply put this into a table. But tables are hard to read. And they take up a lot of space. The other popular option is to put the data into a gauge chart. But gauge charts take up a lot of space, too. And if we are honest with ourselves: they are really hard to read. Granted they look cool. But do they tell a story in an effective and efficient manner? Probably not.

    A BULLET

    A few years ago, Stephen Few introduced a new chart that promises to fix the shortcomings of the above described approaches. It is very simple but powerful chart and it is called ‘Bullet Chart’. Cognos 10 allows us to leverage these charts. Below is an example:

    Let’s take a look. The above example shows the election results of a fictitious political party. The blue bar in the middle indicates the actual value (4.8%). The short black bullet towards the top indicates a target measure (e.g. budget, forecast, etc.). Color shades display ranges of performance (e.g. poor, acceptable, good). We can quickly see that the party missed the target but the result falls into the acceptable range. It is indeed a very simple chart that provides a lot of information in a concise manner: Target, Actual, Performance Rating. In Cognos 10, you have the ability to set five different performance zones in different shades or colors.

    A STACK OF BULLETS

    One the things I like about the bullet charts is the fact that you can easily stack them. That makes the bullet chart an ideal way of communicating multiple measures in a dashboard. It is easy to get a quick overview and the stack is very space efficient. In Cognos 10, we can have vertical or horizontal bullet charts.

    The stack of bullet consumes little space

    CAUTION?

    The are just two minor downsides that I see with the bullet charts. The chart in its pure form does not allow us to show the future trend or forecast. Also,  it does not display history. It is a simple snapshot in time. But the last shortcoming can easily be mitigated by combining the bullet chart with a sparkline. (I will look at sparklines in the next post)

    Toss those gauges! Take a look at the bullet charts next time you design a dashboard. But make sure to train your users. Despite its simplicity, I have seen some people struggle to understand this chart. We don’t want our users to bite another bullet, right?

  • Charts? Yes, I know….

    Dashboarding….Part 2.

    Yes, we do know that we shouldn’t eat those chips. Yes, we do know that we should read more books. Yes, we know that we shouldn’t drink that much coffee. But…..BUT…..We all know that there are small things we can do that could really have a big impact on our life or job. But we still don’t do these extra little things but they take time and effort. We are all guilty of that. I am for sure. Most of us can tell some stories about that.

    CRITICAL SKILLS

    About a year ago I had a revelation. Together with two hundred other business and IT people, I was listening to a presentation about common data visualization mistakes. YAWN…. How exciting. A few minutes into the presentation it dawned on me. I actually didn’t know all that much about proper charting techniques. I had never actually paid much attention to it. By looking at the reaction of the other attendees around me, I noticed that they were in the same boat. How can that be? We are all professionals that are dealing with data on a daily basis. Yet, so many of us have never paid much attention to proper visualization techniques.

    THE MAGIC PIE

    What is the message?

    That day I decided to make a change.  I felt a pressing need to learn more about charting techniques. And when you look around you can easily see that many of us need to make this change as well: We use ugly pie charts left and right, we create meaningless 3D visualizations and we connect data points that should not be connected. And that is not too surprising. Nobody ever really taught us how to properly visualize data and when to leverage which type of chart. To make things worse, nobody ever questions this. Executives seem happy with their colorful 3D charts. I will never forget the day when my then-boss at a traditional German company almost fell off his chair when saw a ‘cool’ 3D diagram I had produced with Lotus 1-2-3. But at the end of the day, many charts do a very poor job at telling a good story about the data.

    DATA IS THE NEW OIL

    Data volumes grow. The speed and volatility of business are increasing. As a result, we all need to make sure that we find meaningful trends and insights in our growing pool of data. There is a lot of insight to be unlocked. Many people are therefore saying that ‘data is the new oil’. But in order to really get the best out of our data we need to learn how to visualize it properly.

    THE POWER OF VISUALIZATION

    As John Medina points out in his bestselling book ‘Brain Rules’: “Vision trumps all other senses.” The nerve pathways of our eyes to brain are extremely powerful. John Medina continuous by saying that “Professionals everywhere need to know about the incredible inefficiency of text-based information and the incredible effects of images”. In other words: dry tables of numbers just don’t cut it. A picture says more than a thousand words. Let’s create charts that tell a powerful story. And those charts are especially useful when we utilize them in dashboards. Dashboards should be visual to allow users to quickly absorb and digest critical information.

    CHANGE

    Charts can convey a powerful message

    We should therefore all take the time to learn more about charting techniques. And it’s a simple thing to do. Pick up a copy of one of Stephen Few’s books (see below for a list of recommended reading). Roam around the website of visualization artist David McCandless (I wrote about him a while ago). Play with your current numeric reports and put them into charts. Compare the different stories. Over the next few weeks, I will write some posts about some of the powerful charting options in IBM Cognos 10. IBM Cognos 10 comes with almost 160 different chart types. There are some fantastic tools in there that can really make your data fly. Make sure to follow along to get some tips and tricks.

    Recommended reading:

  • What photography taught me about dashboards


    Photography and dashboards? Huh? Fire and Ice?

    Photography is a big and important hobby of mine. And it is a tough hobby. There is a lot to learn and the opportunity to make mistakes (read: create photographs that really suck) is huge. It starts with understanding your camera, deciphering basics like Aperture, Shutter Speed and ISO. But the hardest thing for me is photographic composition. Composition focuses on how we design a photograph. Over the past few years, I have studied many master photographers and read a bunch of books trying to educate myself and to improve my pictures (a tough mission as my artistic brain is completely underdeveloped). A few weeks ago, I realized that photographic composition can teach us a few things about Dashboard design. Dashboards should be highly visual after all and they need to convey information in a short-period of time.

    1. Less is more: Many successful pictures have been reduced to a bare minimum. Each element in the frame has a distinct purpose. You will hardly ever find a great photograph which contains empty coke bottles lying around for no purpose. It would create a distraction. By reducing the elements in the frame a photographer creates focus. The same is true for dashboards. We have so much information available. People therefore try to cram as much into a dashboard as they can. And we stick logos, banners etc in there along with messy charts and reports. But less is more. If we reduce the building blocks to a minimum, we can help managers focus on the important things.
    2. Arrange carefully: Successful photographs are able to convey a certain message. The message is crafted by arranging the elements in the frame in a certain way. In other words: we can’t just find a nice scene or object but we need to carefully consider where to place items. The same applies to dashboards. Stephen Few for example points out that we should place the most important block in the upper left corner. That’s where the Western world starts reading. That way we can ensure that managers focus on the most important element first. Also, we can employ different techniques to direct our eyes. (see some examples below).
    3. Choose colors wisely: Different colors communicate different things. Our eyes focus on bright elements before they refocus on darker elements for example. Red or bold elements alert the eye as opposed to darker colors or thinner elements. A great photograph therefore utilizes colors with purpose. Sometimes colors take away from the meaning of a photograph. Black & White would be the obvious choice in that case. When it comes to dashboards we should employ the same considerations. Colors and fonts should be used with careful consideration. Too many dashboards are colorful without a specific purpose and it confuses the message. “What should I look at? I can’t see the tree in the forest.” Careful color choice helps direct the attention to the important items. For example, you can highlight an exception in red. But color preference is also a personal choice.

    Here is an example where we can see these principles at work:

    The overall scene

    The scene is quite busy. The yellow color is not really useful. Not a good photograph. Basically a typical snapshot.

    This photo creates focus. There is only one element in the frame. Much better. But it is kind of boring.

    This photo is much better. It is more dynamic. Same object, different placement. What a difference!

    Yet another version. This photo simply works. It is dynamic and the object is placed in the right spot. Color is not needed in this case. The picture works as a black & white.

    Here are some examples that highlight how these things apply to dashboard design. Consider each box as a representation of an object (chart, query, etc.). Look at the first really sloppy design attempt. Looks weird? Well, it does happen quite a bit. Take a look at this beautiful collection of crazy, busy dashboards collected and displayed by Hichert & Partner.

    Performance Dashboard
    Want some candy???

    And now look at the following layouts below. They are simple. There is no added noise that distracts. Notice that the light blue matches the design of this blog……Notice how the careful placement of the boxes makes a difference. The lines indicate how a typical user walks through the content. Also, note how the use of color changes things.

    Dashboard DesignNext time you develop a dashboard be careful with your design. It does make a huge difference. Just these three things alone can have a big impact on the effectiveness of your dashboard.

    If you are interested in this topic, please get in touch with me. We will be running some workshops about this topic across Europe in Q1 & Q2. Also, I will create a few additional posts about enhancing your dashboards with great charts over the next few weeks. Make sure to come back here!

    “What you communicate depends both on the blocks you select and on the ways you arrange them”,

    Freeman Patterson, Master Photographer

     

  • After the Oscars

    Just quick thought today while I am waiting to board the next plane It seems to me that there is a bit of a common theme at the Oscars and Golden Globes this year: Communication. ‘The King’s Speech’ is probably the big winner along with ‘The Social Network’. Both movies relate to how we as human beings communicate with each other.

    Colin Firth plays the king who struggles with his speech. He needs to inspire his nation and has to overcome some serious challenges with the help of a talented coach. ‘The Social Network’ shows the audience how Facebook was created along with the different human struggles (and lawsuits) along the way. Both are fascinating movies. Both movies deal with communication. Is there a reason for that?

    Communication still is a major problem for us as human beings. Not only in our private life but also in business. And the issues seem to grow in this changing world. We are all traveling, we are busy, we deal with complexity. Here is the Dad who travels for business and wants to connect with his family. There is the finance manager who needs to communicate the brutal truth that the numbers are revealing. Or take the sales person who is trying to sell a new and complex product to a new customer who ‘who just doesn’t get it’. We sit through mind-numbing corporate slide shows without a clear message. But most importantly a great majority of people want their voice to be heard. And that is exactly what these movies are about. The kings is looking to convince his nation. Facebook is helping people connect with their friends and family so that their voices are heard and transmitted.

    Luckily we have technology today. There is email, there are iPhones, there is Twitter. We use Powerpoint to deliver our message. We have Business Analytics to find meaning in data and communicate the information to our teams. The people in Egypt used Facebook and Twitter to organize themselves.

    But at the end of the day we are still struggling with the same problems: how can we best get our personal message across? Technology is the enabler we still have to do the heavy lifting.

  • The great productivity leap?

    THE GREAT STAGNATION

    Last Wednesday evening while waiting for a connecting flight at Vienna airport, I came across an interesting eBook by Tyler Cowen: ‘The great stagnation“. Thanks to the iPad, I ended up reading the entire short book on the flight back home. To keep things short, Tyler Cowen looks at some of the reasons why the US economy is in a slump. One of the key points of the book is that the US (along with the majority of the Western world) have hit a technological plateau that results in slower growth, slower increases in median income and also slower productivity gains. While some of the earlier innovations such as the steam engine, refrigerators, air travel or TV had a huge impact on our overall quality of life and also our productivity, many of our recent innovations like the internet have had less of on impact (compare having or not having a fridge with having access or not having access to the Internet, or look at the options that air travel opened up for international trade).

    PRODUCTIVITY

    This blog post is not intended to be a book review, although I do highly recommend this quick and insightful read. But there is an interesting aspect that Cowen mentions: productivity gains are slowing down. We have already grabbed the ‘low-hanging fruit’ by exploiting machinery for example. This got me thinking: What about all the great technology that we have implemented in the past 20 years? Could it really be that we are not experiencing substantial productivity gains by using this technology in a smart way? The statistics apparently say no (Cowen points out that the productivity surge in the US from 2009-2010 was mostly driven by a substantial reduction in headcount). And what about Business Analytics? Shouldn’t that help us be more productive and to drive profitability?

    ARE WE REALLY PRODUCTIVE?

    To answer that question let’s take a look at a very simple example: the office of finance. A few weeks ago, I posted the results from a survey we conducted. It showed that many professionals still conduct their work by copying and pasting data into spreadsheets. And that type of activity is error-prone and takes a lot of time. As a matter of fact, many finance professionals still spend a solid part of their week loading, scrubbing & massaging data. And the resulting reports often leave a lot to be desired. They are static and not interactive. The result? A bunch of highly qualified and highly paid individuals do work that they shouldn’t be doing. Wikipedia defines labor productivity as “amount of goods and services that a worker produces in a given amount of time”. Spreadsheet maintenance hardly qualifies as a service or good, wouldn’t you say? In other words: whether we like it or not, many of us have a very low level of productivity.

    BUSINESS ANALYTICS AND PRODUCTIVITY

    Business Analytics has a huge potential to help us increase productivity. And I would argue that there is plenty of ‘low-hanging’ fruit. Think about a story that happened to me a short while ago: A CFO decided to implement a dashboard of about 50-60 KPIs (let’s not start arguing about that part…). His team was excited and started building a 65 page Powerpoint master template. The CFO was delighted. Guess what – three people spent almost two weeks per month on preparing this dashboard. Lot’s of time was wasted on extracting data from different source systems. Lot’s of time was wasted on creating Excel lookups, queries and charts. To sum it up: A big waste of time. The low hanging-fruit came in the form of a traditional BI platform. We hooked up the source systems, created the reports once, linked different charts to Powerpoint and voila: the monthly reporting book. It took one person about a day per month to check & refresh the data (there was still some manual labor involved). Consider the difference: three people for 10 days vs 1 person for 1 day. 30 man days vs 1 man day. Not bad?

    THE BEGINNING

    Based on my own experiences, I would argue that we have a huge opportunity on hand. Many companies have started Business Analytics projects but a lot projects are still highly focused and not pervasive. Once we start pushing capabilities out to a broader audience, we should be able to see significant increases in productivity. And this is not only about driving efficiency. This is also about driving effectiveness: just imagine what we could do, if we had the ability to understand our customers better. Just imagine what we could do, if we clearly understood which products are truly profitable. Business Intelligence allowed us to get to a lot of this valuable information. But I believe that we have only scratched the surface. The addition of predictive analytics to the mix offers completely new opportunities for all of us. I frequently work with some clients that have done some amazing stuff with the software. And their overall corporate performance is very impressive. I highly recommend reading the IBM CFO study which provides some great examples and insights about this topic. We just have to get started! What are you thoughts?

  • Visualization of unstructured information

    The other day, I attended a great exhibit that was put together by my friend Bernhard Lermann (@lermann) and his companion Jens Semjan. Their Munich exhibit called “The Eternal Timeline Show” is highly unusual, very entertaining and informative. Apart from educating me on a few things, the exhibit certainly triggered a lot of thinking around data visualization.

    THE ETERNAL TIMELINE

    Eternal Timelines

    What is so special about this exhibit and what is the relationship to visualization? Very simple. Lermann & Semjan decided to visualize history. We have all read history books. Many of them are quite boring and lengthy. The two artists decided to take a different approach by creating visual timelines around certain topics. In the exhibit you can find a timeline for Apple, for example. Another timeline focuses on the history of networking. All this is displayed on long sheets of endless paper. The spectators are able to walk the timelines up and down. Apart from some classic history themes (epidemics, revolution, etc..) there are also some interesting newer topics such as tweets that led up to the revolution Egypt a few weeks ago.

    ENGAGING VISUALS

    The timelines represent an excellent example for visualizing unstructured information. What I found is that many people walked the timelines up and down. And many people showed a reaction: They stopped, they thought, they discussed. It was quite interesting to watch. But not surprising. We all know that pictures say more than words. Being able to physically walk the timelines spectators are getting engaged with history. They are also able to relate events (just move over to the left…). Last but not least, I found that I had absorbed a lot of knowledge within a very short period of time. Visuals do that for us. They help us make connections.

    THE LESSON?

    You Tube was here! The history of networking

    Visuals are extremely helpful. They help us identify trends, see patterns and they sometimes connect with us on an emotional level. There is plenty of room for us to leverage this powerful tool in business. Let’s start visualizing our monthly variance reports. Let’s visualize the behavior of our customers. We can all save a lot of time and we can have more fun at work. There is ample of opportunity for us to visualize our data and information. This exhibit is a fine example of that. It inspired me and many other people. If you happen to be in Munich, make sure to stop by the exhibit or get in touch with the artists. Also, make sure to watch David McCandless’ presentation about data visualization at TED.

  • Business Analytics in action….a seriously cool workshop

    BUSINESS ANALYTICS EXPERIENCE

    Have you ever wondered what it was like to run a large company? Have you ever wanted to make big risky business decisions with worrying too much about the results? Well, I have some good news for you!

    Purchasing and implementing enterprise software like IBM Cognos can be a complex undertaking. It starts with finding the right vendor, understanding how the software can help fix business issues and it continues with obtaining buy-in from the business. Especially the last issue is not trivial. I have personally spent countless of days and nights working with different client sponsors on crafting careful messages about how the new processes and the software will help the business. My personal lesson learned is: selling change is not easy.

    THE EXPERIENCE FACTOR

    But there is a recipe that works in many cases: Rather than show and tell, let the business experience the difference. This is something we can learn from a car salesman: A car salesman does not spend time talking about the benefits and cool features of a car. No, he offers a test drive. During this test drive, I am able to experience the benefits hands-on myself. I am able to visualize how the new car can help me. If I like the car, I like it. And I know when it feels right.

    THE BUSINESS ANALYTICS EXPERIENCE

    How does all that related to Business Analytics? Very simple: Together with Roland and Patrick Mosimann (authors of the popular book the Performance Manager) we created a business simulation workshop that allows you to run a fictitious company using the IBM Cognos platform. And let me tell you: This is one fun workshop because you get to run a large company. It is called: The Business Analytics Experience

    THE CONCEPT

    Future ChipsThe workshop is typically run with groups of 8-16 people. We split the participants into competing teams. The objective for each team is to run the fictitious company ‘Futurechips’. Together with the group facilitator, we start by analyzing the situation of the company. The Cognos 10 platform provides vital information such as a financial review, overview of products, markets, etc.. This helps answer some critical questions such as: Why was the prior management team let go? What is the financial situation? What are the opportunities for the new year?

    ENTER THE SIMULATION

    How is Futurechips performing?

    There is a lot to discover. Futurechips seems to have a bright future but the prior management team made some strange and short-sighted decisions. And it is fun to make these discoveries. The teams therefore get fully emerged into the game after a few minutes. After a short while solutions and ideas spring up. The teams start discussing. And it doesn’t end here: We actually get to make some critical business decisions. What markets do we want to focus on? Which products do we want to invest in? How should we adjust our pricing models? What is our overall strategy for the fiscal year? We do this by developing short strategic plans in IBM Cognos 10. The data that we enter is then fed into a sophisticated simulation engine that provides detailed feedback.

    THE COMPETITION HEATS UP

    Business Analytics Experience WorkshopAt this point, it is not untypical to see some serious competitive behavior (all in good fun!) between the groups as we compare the results from the first few quarters. We find out that we did some things right. We also find that the teams missed a few points. Plans and strategies are refined. And so it continues. There are more decisions to be made and the simulation continues to provide feedback.

    THE BENEFITS

    Ok. That sounds good? But what does that have to do with Business Analytics and what does that have to do with selecting software and implementing it? Very easy. The workshop allows the participants to experience how Business Analytics software can help them make better business decisions. Just to be sure: we do not talk about the software itself during the workshop but we use Cognos 10 to perform our analysis, to prepare our decisions and to help develop the detailed plans. The participants use the Business Analytics tools to gain insights and to prepare their decisions.

    WHO, WHAT, WHEN?

    Who should attend the seminar? Anybody who wants to learn more about business analytics (sponsors, project managers, CIOs, CFOs, business managers) and all those of you who are already implementing the software and who need to sell change within their organization. The workshop is a fantastic way to let business users experience how their work can change. It is just like test driving a new car!

    Does that sound interesting? It really is. I LOVE running these workshops. It is a simulation and a game after all. As a matter of fact, we have many returning customers that want to participate over and over again.

    Check out IBM’s website for more information and a current schedule of events. Our team is also happy to run these business analytics workshops in-house. Hope to see you at one of these workshops soon!

  • A conversation with the King of KPIs – David Parmenter

    DAVID PARMENTER

    Two winters ago, I traveled to Prague to speak at a large conference about Performance Management. As the taxi approached the hotel which was set beneath the breath-taking castle, I felt a sense of excitement: I was just minutes away from meeting a king for dinner. Not any king. Not a member of the scandal-ridden European royalty houses. No, I was about the meet a true thought-leader in the performance management community. His nickname is ‘The King of KPIs’. I am of course talking about the management guru and author, David Parmenter. David was one of the other speakers at the conference and we had the opportunity to exchange some thoughts ahead of the conference.

    For those of you who do not know David Parmenter, you are really missing out. David has authored a number of bestselling books like ‘Key Performance Indicators – developing, implementing and using winning KPIs’ and the ‘Pareto’s 80/20 Rule for Corporate Accountants’. He is also a great speaker who truly knows how to inspire his audience.

    Earlier this week, I had the great opportunity to re-connect with David Parmenter. He is about to publish a new book called ‘Winning CFOs: Implementing and Applying Better Practices’.

    Christoph Papenfuss: David, your new book focuses on providing CFOs with hands-on advice for increasing the performance of their companies. What prompted you to write this book?

    David Parmenter: I have been increasingly aware that many CFOs are not finding enough time to keep abreast of best practice.  They are spending a disproportionate amount of their time putting out fires. The “winning CFOs” book is an update of the Pareto book including additional material that a CFO would need to know in order to be a leader and business partner.

    Christoph Papenfuss: In the past, CFOs spent a lot of time on developing a detailed annual budgets. But the increasing volatility has shifted the focus away from fixed budgets towards flexible plans and forecasts. Why should CFOs consider moving towards a more flexible forecasting approach?

    David Parmenter: As I say in the book, “The standard annual planning process takes too long, is not focused on performance drivers, is not linked to strategic outcomes or critical success factors, leads to dysfunctional behavior, builds silos, and is a major barrier to success. By 2020 there will be few progressive organizations using the annual planning process to allocate resources. Quarterly rolling planning will be embedded and we will; all look back and wonder why we ever did annual planning.  As a CFO you need to be abreast of this change and ensure you are not one of the doubters who claim the “world is flat”.

    Christoph Papenfuss: Many business managers are literally afraid to submit a realistic forecast as they fear repercussions in the form of higher targets or poor performance reviews. As a result, we find that many organizations submit forecasts that mirror the plan. What can CFOs do to encourage objective and honest forecasts?

    David Parmenter: There has to be a major shift in the way we set up performance based remuneration, away from rewarding progress against a future target to measuring performance retrospectively based on relative measures. Secondly there needs to be a paradigm shift in the way we forecast.  There needs to be a separation of targets from forecasts and a rule that a forecast should tell the truth and not what we want to hear.  Both of these issues are discussed, at length, in the book.

    Christoph Papenfuss: Even today many finance organizations are highly dependent on spreadsheets for compiling their monthly forecasts and reports. What is your opinion on that and how do you see this changing in the future.

    David Parmenter: Being an expert in Excel is career limiting and should be removed from your CV.  It is like applying for a job as a test driver at Ferrari and having on your CV a gold medal for driving a horse and carriage.  All accountants, including CFOs, need to have on their CV, a statement to the effect that they have a working knowledge of a forecasting software.

    Christoph Papenfuss: Many thanks for taking the time, David. We are all looking forward to reading your new book.

    You can learn more about David Parmenter and his work on his home page. His new book is scheduled for release on April 5th, 2011.