Forgive me if I now divert into telling you a quick story about my time spent on the Microsoft Excel team way back in 1991. (Yes, I know you were not born yet, but I assure you that computers had been invented. Just hop up here on my knee and shut up.) 

Everybody thought of Excel as a financial modeling application. It was used for creating calculation models with formulas and stuff. You would put in your assumptions and then calculate things like “if interest rates go up by 0.00001% next year, what percentage of Las Vegas homeowners will plunge into bankruptcy?” For example.

Round about 1993 a couple of us went on customer visits to see how people were using Excel.

We found a fellow whose entire job consisted of maintaining the “number of injuries this week” spreadsheet for a large, highly-regulated utility.

Once a week, he opened an Excel spreadsheet which listed ten facilities, containing the name of the facilities and the number 0, which indicated that were 0 injuries that week. (They never had injuries).

He typed the current date in the top of the spreadsheet, printed a copy, put it in a three-ring binder, and that was pretty much his whole, entire job. It was kind of sad. He took two lunch breaks a day. I would too, if that was my whole job.

Over the next two weeks we visited dozens of Excel customers, and did not see anyone using Excel to actually perform what you would call “calculations.” Almost all of them were using Excel because it was a convenient way to create a table.

It’s now twenty years later, and spreadsheets are a ubiquitous tool in our daily work, and they seem to breed and grow ever more complex all on their own.  Yet we still treat them as if we’re just creating simple tables – no programming protocol, hardly any checks and balances, and very little standardization.  The spreadsheets we create today are enormously more sophisticated, complex and critical to core finance processes, so we must treat them with more rigor as well.

I presented a research paper on this last year in the UK.  I’ll be honest, it’s a little dry.  Probably better to watch this short video instead.

• Finance professionals would like to close twice as quickly as they do now.
• The #1 factor that continues to make the close process a challenge is the abundance of manual activities and undocumented (or not standardized) processes.
• Finance professionals spend between 11% and 30% of their time on closing the books now.  But, if they could close faster, efforts would be redirected to strategic planning and process improvement.

This is an incredible catch-22.  As finance professionals, we want to speed up the mechanics of the close in order to win back time for strategic activities and process improvement.  But without first dedicating the necessary resource and technology, the close process will forever remain unchanged.

I am a big believer of making a series of small improvements as opposed to one big ambitious change.  For critical processes like the financial close, small ideas are not only much less risky, but they can be implemented quickly.  On the other hand, so many expectations (and managers and vendors and project plans) ride on a big change that they can paralyze the team into inaction.

So for 2012, look for small ways to start building your own process improvement arsenal.  Whether it’s setting up ACHs to reduce check processing or experimenting with new tools, you’ll soon find those small successes beginning to transform the close process.

If you need more inspiration, here it is — a stunning case study of how one company completely disrupted the retail industry through a mountain of individually small process improvements.

But I AM thinking of you.  Merry Christmas.

The term “resisting change” suffers a bad rap because it connotes a deliberate effort to fight back.  But often times, a shift in our environment sneaks up on us (new technology, process restructuring, etc.) and we fail to “embrace change” simply because we haven’t noticed anything different yet.  Perhaps simply learning to notice what’s different is the key to continuous process improvement in the workplace.

Now, what about me scouring the city’s grocery stores just so I can recreate my traditional Thanksgiving turkey in Santiago?  Is that resisting change or embracing change?

1. Reduce the total amount of work.  Generally, more control points = more work.  So in order to reduce the amount of work, consider reducing the number of controls.  The key to doing so without compromising governance is to favor process level controls and discard transaction level controls.  For example:  Approving individual journal entries is a transaction level control.  A possible process control replacement would be to approve a master journal entry listing.  Often, one process control can replace multiple transaction level controls.
2. Reduce the effort to execute each control.  Steer clear of manual controls and opt for automation as much as possible, so that the work is not driven solely by brute force.  That means redesigning controls to leverage new application features, or exploring a combination of system controls to replace a manual activity.  As an added bonus, the more automated the control activity, the more data will be captured by the system.  And that translates to readily available information for the auditors and less time wasted on data gathering and photocopying.

Enterprise technology and risk mitigation techniques are evolving faster than ever today, creating terrific opportunities for us to refine and fine tune critical business processes.

Caring for critical path activities during the close is just like caring for a high maintenance girlfriend.  The key is to create meaningful face time.

When I used to consult for Fortune 1000 companies, one idea I consistently suggested to clients was to hold a 15-min daily touch point during the close to address critical path issues.  Daily group meetings may seem ludicrous in the heat of the close, when you’re already missing out on dinner with the family and a good night’s sleep.

(And you might add that it’s just what a consultant would recommend — more meetings!)

But here is the thing:  Teams that are serious about a streamlined close know that they can lose hours at a time waiting for an important issue to be resolved over email.  Emails are easy to fire out.  Unfortunately, once they are in someone else’s inbox, they become one of many other competing priorities that the person may or may not get to right away.  A few hours of dead time becomes significant when the close is measured in days and not weeks.

The trick of the daily 15-min touch point is to, well, keep it within 15 minutes and yet achieve results.  Here is how you do it:

1. Schedule late in the afternoon with about two hours left in the workday.  Why?  Productive meetings have action plans.  But a good meeting also gives the impression that once those specific actions are completed, there is no more work to be done.  So hold the meeting late in the afternoon after much of the daily work is done.   Then, come up with action plans that the team can finish before everyone goes home.
2. Only discuss activities on the critical path.  Focus on two questions:
• Troubleshoot– How to salvage critical path activities that are falling behind on schedule and are delaying the team?
• Anticipate – What major activities are coming up in the next two days that may derail the close timeline?  No need to go too far down the critical path.  Remember, you’re reconvening tomorrow.
3. Start on time.   And don’t worry.  The whole team will ensure it ends on time.

Everything else can be relegated to email.

Why, in your close checklist! 

Most close checklists contain all the activities to close the books.  If you’d like good information to design a faster, tighter close, add these two data points after each task as part of your next close:

• The date and time the task was actually completed

Actual completion date and time let you isolate all the close tasks that are: 1) Completed late in the close 2) Completed after the scheduled date 3) Not completed.  And this is a great starting point to start zoning in on the culprits that are delaying your close.

How?

Small variances build up over time and cross the threshold to become a material write off.  Material items must be recorded in the close period.  And because the accounting team cannot close the books until after the last journal entry is in the ledger, recording a material adjustment from reconciliations completed days or weeks after month end may actually prolong the close process.  Small unreconciled variances, on the other hand, are immaterial.  So, even after they are identified and proposed as write offs, they can be recorded in the subsequent accounting period, with no impact to the close timeline at hand.

Don’t let small unreconciled variances pile up.  Even though they fall under the materiality threshold, write them off regularly in the subsequent accounting period.

Similarly, if the monthly close timeline habitually experiences delays, a good way to approach this problem is to review journal entry activity: Is there a preponderance of adjustments originating from reconciliations at the end of the close?  Are there activities that can be completed earlier in the process?

I completed a 3-month project recently.  On my last day, my client brought her daughter (“T”) to the office.  We worked for a few hours, and then hit the town for pizza and a visit to the Museum of American Finance (an obvious choice for us financial folks).  T also made me a new business card – a rebranding if you will.

Beyond clients loving my work, I prize these personal experiences the most because they signify trust and friendship.  The workplace demands professionalism, which can mislead us to think that we must discard our personal lives at work.  This is a dangerous attitude in an environment where organizations are making big changes to adapt to the new competitive landscape – become lean, divest/acquire, restructuring, etc.  The bigger the change, the more team members have to rely on and trust each other to successfully deliver.  Building trust takes time, and is infinitely harder when teammates don’t have the opportunity to know each other at a personal level.

In the first one we put out, Steve showed you how easy it was to compromise a poorly designed spreadsheet.  So of course, now we have to talk about building better ones.  The truth is that there are plenty of ways to design high quality spreadsheets, and solutions can get very sophisticated.  But we want to focus on what’s immediately implementable, has the biggest impact potential and requires the lowest effort.  Why low effort?  Low effort means lower resistance, and that translates to higher likelihood of user acceptance (the path of least resistance can be an awesome thing).  We picked out some easy yet often misused or underused techniques that, when applied correctly, will instantly improve your spreadsheet’s infrastructure.  That means your spreadsheet will be harder to “break” and easier to use.

• Cell Lock and Sheet Protection — Most everyone know how to activate these two features, but we see a lot of inelegant use.  We’ll quickly show you how to do it right to save time and prevent errors.
• Adding Visual Cues — Displaying key assumptions, assigning colors based on cell type, adding a legend, etc.  These require little technical prowess.  Anyone can do it pretty easily.
• Version Control — What can be more messed up than using an outdated version of your work by mistake?

..and a few more.

This video runs just under six minutes.

I have the full job description below.  I interviewed the CEO, Sharon Feigon, a few months back.  This company is at the very forefront of an evolution.  The North American car sharing market is estimated to grow to $3 billion dollars by 2014 and the existing supply is not even close to filling the demand.  Dense cities like Chicago will represent a large portion of this market, which means I-GO is poised for exponential growth.  But that’s only part of the vision.  I-GO is dedicated to transforming the way Chicagoans travel and permanently lowering greenhouse gas emissions through its business model.  What is also very striking to me is that in its certified LEED Platinum* office, employees all have a youthful and energetic vibe, yet the company is an off-shoot of a 30-year-old think tank and is rigorously disciplined in research and analysis.  It’s like having the best of both worlds!

I-GO COO Job Description

*Want to know what being LEED Platinum is like?  Four words: Ice-Ball Thermal Storage

That is why we made this video clip – to start making connections between functionality, usage and business implications.  We share a few examples of how seemingly harmless functionalities, like changing font colors and cell formats, can be the source of serious mischief.  The voice in the clip belongs to Steve.  In six minutes, he will show you how data can be concealed or disguised in a spreadsheet, sometimes in plain sight!

Steve and I team up quite frequently to collaborate with clients on building spreadsheet management programs to prevent things like this from happening, and these examples stem from real observations in the field.  So, for the record, Steve and I discourage the practices demonstrated in the video.  But frankly, it’s much more fun to show you the evil stuff than to drone on about responsible stuff.

If you like this, let us know and we’ll make more.

“Avoid the Pitfalls of Bureaucracy: Uncontrolled bureaucracy is another challenge to a strong community.  Like many other vulnerabilities, it can be the outgrowth of what is good and valid.  “We need better controls,” we say…[w]e staff up quickly to cover a new project.  Yet, the weaknesses that grow out of bureaucracy are deadly:  too many levels; too many check-off points; unclear decision-making rights; lack of accountability; lack of motivation; and, ultimately, lack of timeliness in achieving decisive results.”

So true.  But how do we tame the beast?  Let’s take the example of internal controls.  We need better controls.  But, how do we build better controls without creating too many layers, without diluting accountability and without delaying decisions?

The answer is through good pruning.

Here is what I mean: Taming bureaucracy is about tweaking existing infrastructure to fit the business.  At the simplest, we do it by removing outdated requirements and introducing new activities that strengthen the business process.  That is how processes evolve.

Except that it’s not so easy to do.  Adding controls is no problem.  It makes us feel more secure.  But removing controls?  Restricting the number of controls to strengthen the governance environment is a counterintuitive concept in today’s risk averse environment.  Piling controls on top of controls is easy to do.  It takes more confidence, more discipline and better understanding of the process to selectively prune the control set to achieve the same results.  That is why I am sharing three counterintuitive techniques to help you think through the decision the next time there is talk to add another control into the process.  Because when we add and never subtract, we feed the beast.

1. Discriminate Often. Preventive controls keep bad things from happening.  Detective controls catch bad things after they happen.  The better the preventive controls, the fewer detective controls you need.  So, before adding another control to “catch” errors, it might be smarter just to perfect the preventive controls that are already in place.
2. Don’t Share Responsibility. Controls operate best when there is exactly one owner.  Adding multiple owners or multiple review will ensure that the control will work less often and less timely.
   
3. Don’t Rely on Colleagues. If a control must be added, automate as much as possible to lessen the burden of the control owner.

My friend Kristen is sharing a case study on exactly this topic at a Chicago Roundtable I am chairing in a few days.  The topic is officially called Optimizing Controls.  But it could just as well be titled Becoming Less Bureaucratic. Hear it from someone whose confidence and expertise come from years of building internal controls “from scratch” at up-and-coming companies and stripping down key controls for the Fortune 1000.  If you are in Chicago and would like to attend, you can email me to RSVP.  It’s free for The Institute of Internal Auditors (IIA) members.

Related Articles

• Bureaucracy (Formerly Known as Efficiency) (backofficemechanics.com)

The answer is YES.  If you’re not finding what you need, don’t leave empty-handed.  Write me and see if I can help.

So here is a question I got:  Why is there more work for the back office at month end? (hat tip to the person who typed this into the search box today).

For finance and accounting professionals, “month-end” generally refers to right before the end of the month and up to a week after the month ends.  More works happens during this time because:

1. There is more sales activity.  The revenue group will typically make an end-of-month push to hit sales goals, which means more processing volume for the accounting and administration groups that record those sales.
2. More payment and collections activities occur at month-end.  Everyone is focused on performance at month-end, which means your collections group is doubling up on collection efforts around that time, and that translates to more processing work.  On the flip side, your accounts payable group is also fielding vendor requests to remit payment, resulting in more check runs.
3. Month-end is when the company must account for its performance by publishing financial statements.  So the accountants are:
   • Finalizing the month’s transactions.
   • Fixing errors in the ledger.  Errors that are not addressed timely show up during month-end close.
   • Producing financial statements and reviewing them for accuracy.  Potentially, the financials are also distributed for multiple levels of senior management review and field review.
4. The bulk of the financial analysis also gets done at this time, following the production of the financial statements.  Analysts are looking at the month’s performance and comparing to prior month, prior year, budget and forecast to explain variance.
5. Month-end (and quarter-end) is when most of the company’s key internal controls in the finance and accounting occur – Reconciling balance sheet accounts, reviewing system access, completing checklists, etc. – just to name a few.
6. On top of all that, there is still the day-to-day work that must be done, like pay employees, attend meetings and conference calls, etc.

In short, during the month-end process, a lot of work must happen in a short amount of time.   I don’t know the situation of the person who posed this question, so I’ll take a few guesses:

• For auditors, consultants and vendors, the month-end close window is not the best time to expect superior cooperation from Finance and Accounting.
• If you’re planning a back office initiative, consider designing it around the month-end and quarter-end close.  People will thank you because it shows that you are thinking from their point of view.  Or, break up a big initiative into smaller bits.  Here is an example of how an account reconciliation effort can be positioned and introduced as a small idea.
• For back office professionals, the key to improving the month-end close experience is to move the above-mentioned activities out of the close window as much as possible.  Then, organize, streamline or automate the rest.  Here is one tip to start.

• The relevance of the information captured.  Relevance can refer to the quality of data captured or its timeliness.
• How easy or difficult it is to generate the dashboard on a regular basis.

Quadrant 4 is where we want our dashboards to fall – super helpful to the audience and a breeze to pull together.  But, it’s somewhat of a holy grail.  And in the quest to get to quadrant 4 with the best of intentions, we often end up with a dashboard that is somewhere in Quadrant 1, 2 or 3.  I want to share a few examples and fixes.

Quadrant 1:  Not Relevant, Easy to Compile

This is the classic case of what can happen when we select data based on what’s readily available as opposed to what’s important.  To the extent the two are not the same, we end up missing key analysis to present in the dashboard.  The end result is a dashboard that’s relatively straightforward to compile but doesn’t provide very good insight.  And without good insight, the dashboard is not usable.

The Fix:  Rethink the data to move up on the Relevance scale into Quadrant 2 or 4.

Quadrant 2: Highly Relevant, Difficult to Compile

In the effort to produce more meaningful and more insightful dashboards, we often end up here – a dashboard with great insight that takes days or weeks to produce (or is exceedingly complicated to produce).  Unfortunately, a dashboard typically lives for months and even years, and activities that require lots of effort or manpower to execute, such as a high maintenance dashboard, are difficult to sustain month after month.

The Fix:  Looking on the bright side, this is the second best place to be in the matrix.  Automate where you can to move down on the Ease of Compilation scale into Quadrant 4.

Quadrant 3: Not Relevant, Difficult to Compile

Does anyone choose to produce a dashboard that is both difficult to create and irrelevant?  Well, no.  But it happens, mostly when we set our sights on a Highly Relevant, Difficult to Compile dashboard but do not commit the resources.  Once the initial excitement dies down, the result is a great dashboard that comes a month late every month.  Also, you’ll find yourself doing all kinds of ad hoc analysis and extra work in the meantime to satisfy your executives’ need for insight.  At this point, the dashboard loses usability because most of decision-making now occurs through ad hoc analysis.

The Fix:  This is the most difficult quadrant to exit, because the dashboard often “drifts” here through time.  And by then, there is expectation to produce it every period as the “official” version to validate the ad hoc analysis.  It is imperative to automate where you can to move down on the Ease of Compilation scale into Quadrant 4, because realistically, neither the dashboard nor the extra work will go away soon.

1. The dashboard is set against a white background.  The lines are clean, minimal, and no fancy fonts are used.  In short, there is nothing here to distract the reader from the data.
2. The green and red arrows are used in a way that respects both colors’ inherent meaning.  Green = Good.  Red = Needs Attention.
3. The arrows are intentionally less precise than the Percent Change numbers next to them.  For example: Janet’s -4% drop is not shown as red, and Scott’s 3% gain is not shown as green.  This great use of visual cue tells the reader that even though every rep is experiencing a variance, very real changes are happening to Mark and Mary.  The rest of the gang is going steady for the most part.
4. The first three quadrants compares the reps side by side.  This fourth quadrant lets the reader review each rep’s product mix in more detail.  Using the toggle functionality allows the creator to present detailed information by individual without the need to take up valuable dashboard real estate.
5. The creator could have created a pie chart for each person: One for Scott, one for Mary, and so on.  But he did not.  In general, avoid comparisons between two or more pie charts if at all possible.  The brain has a hard time figuring out the areas across pie slices to calculate how much bigger one slice is than the others.  In this case, the creator chose wisely to use a stacked bar chart, which is basically a linear presentation of a handful of pie charts (imagine pie charts “unraveled”). 

If you want this dashboard, visit the article link to download the Excel template.  And here is a great post on the most abused graphical tool of all time!

The crux of creating a great dashboard is to correctly answer the question:  What to measure?

While it sounds technical, this question is actually extremely personal.  Let me break it down for you:  When you are the one tasked with creating the dashboard, what this question really means is “What am I going to illustrate to my executive as important?”  What you present on this dashboard will reveal to the senior executive the range and depth of your perspective toward the particular process/product/initiative being measured.  And sadly, when managers pull together dashboards, the most common critique is that the dashboards lack “big picture perspective.”  That can mean anything from having too much detail to focusing on the wrong stuff to not capturing enough of the right information.

So how can we make sure we don’t fall into the trap of missing the big picture?  Well, one well-meaning advice I’ve gotten over the years is to “think like an executive,” which sounds right on.  But for those who can’t readily channel their “executive-ness,” this piece of advice is too vague to action.  For a manager who’s involved in the day-to-day execution, the biggest pitfall in creating an executive dashboard is the approach of leverage all the detailed information at the manager’s disposal to build it from the bottom up.  Actually, a much safer way is to temporarily ignore what you know and go top down instead.  I am going to show you how.  And when you do this, you will be thinking much more like an executive.

• Don’t put up barriers before you start. So you have a day or two to whip up a dashboard. It’s tempting to start inventorying all measurable statistics and then cherry pick your metrics from there.  While the strategy seems practical and efficient, resist the urge! When you start to go down that path, you are right away establishing a bias.  At this point, don’t limit your choices by focusing only on known statistics. Allow your mind the luxury to just think about what should be measured (mindset = what is important?) and not what can be measured (mindset = what is available?).  Of course, ultimately the dashboard cannot display something that is not measurable.  But keep reading and I’ll show you why this mindset is important.
• How do you decide what should be measured?  Well, the dashboard measures progress towards a future state, right?  So, describe the outcomes of this happy future state.  For example, here is an outcome scenario from a project to boost a company’s customer collections capabilities:

Days sales outstanding (DSO) is fewer than 30 day. We treat our customers firmly but with respect. The staff workload is balanced, and the receivables and collections employees are proud to lead a best-in-class department. Hooray!

Now, write down how your dashboard can tell you whether or not you are progressing toward this outcome.  Using the example above, I would want to measure DSO. Easy.  Also, my customers and employees are important, so I’d also want to know that I’m not treating them poorly.  This is an example of something that is important to measure, but the metrics may not be in my initial inventory of available data. Yet we know that customer satisfaction and employee workload can be quantified, so now I can work on how to get that measurement.

• One of the biggest confidence boosters is to compare your initial metric selection with a leading practice or a standard to see what others have deemed as important. But your dashboard will almost always require some customization due to your organization’s unique circumstances and focus. For example, if an organization is struggling with a particular issue, I will always design more coverage on the dashboard for that issue (e.g., select more metrics, select metrics that are one or two levels deeper, etc.) regardless of the industry standard measurement.
• Be Fair.  Being fair means telling the story from both sides. When selecting an efficiency-related metric, also consider metrics that are accuracy-related. Processing volume should be compared with workload, dollar savings compared with user satisfaction, etc. Following the second step well should cover this. But if you are unclear, take the dashboard and complete this sentence:

I see a lot of focus on __A__ in the dashboard. Too much focus on this may compromise __B__.

“B” may be the quality you want to supplement in the dashboard.

At the end of the day, the dashboard uses numbers to tell a story to the executive, who will use that story to make decisions. So, it’s imperative you tell that the story right by:

1. Not limiting yourself before you start.
2. Knowing the future state outcome and design the dashboard to show how close the organization is to achieving it.
3. Gut checking against (but not blindly following) leading practice or industry examples.
4. Being fair with the information presented

A great dashboard (and possibly your ideal mate?) must hit three marks: brains, beauty and usability:

• Brains: The right elements are measured. Results prompt thought, decision and action.
• Beauty: Draws the reader to the data. Captures attention by minimizing distractions.
• Usability: Practical and adaptable. Fit for the purpose and the benefits justify the cost.

Hit the trifecta and the dashboard will transcend beyond a mere collection of data points to become a powerful executive tool. Missing even one of the three elements will noticeably reduce the dashboard’s effectiveness.

Beauty (i.e., Functional Design)

If you’re a back office dweller like me, you exercise your left brain all day.  You are a pro at analyzing, reasoning, planning, evaluating and concluding logically (you sound wonderful, by the way).  And the visually oriented right brain?  Well, it kicks in much less often, and is generally called on when deciding between Arial or Times New Roman font for that report.  And what a hard choice that can be!

So when it comes to creating dashboards, unsurprisingly, we often put little emphasis on incorporating Beauty.  That is a mistake.  Beauty goes beyond making the dashboard “look pretty.”  Incorporating beauty into a dashboard is the concept of leveraging functional design to create an environment that is most conducive for analysis.  That means:

• Creating optimal readability through good content placement and use of visual cues to direct the reader.
• Removing distractions or noise that detracts the reader from the data.

Here is the thing. Most of the time, noise and poor readability are built into the dashboard unknowingly, and readers/users pick up those distractions intuitively, which results in a shift of focus away from the actual data.  Hint: If you have ever thought to yourself that a piece of content looked “busy” or “off” but can’t explain why, your brain is probably being distracted by poor design. So here are a few tricks that I learned along the way to help dress a dashboard for optimal readability and minimal noise, so that the data can come through loud and clear. Let’s start with color.

Background Color

Treat the background like a clean canvas and avoid anything ostentatious.  While we want everyone to pay attention to our dashboard, using a wild background color will get you the wrong kind of attention.  The dashboard’s background should be very plain and unobtrusive.  In fact, it’s almost always best to keep the background color white or a faint gray, because you may need to use a secondary background color later to separate different bodies of data.

Cell and Text Shading

Choose muted colors over bright colors. Harmonious colors invite. Opposing colors distract. The dashboard should look calm and professional, not loud and disorganized.  And the chosen color combination can play a big part (Yep. Colors can look disorganized).  You don’t need to be a color expert to pick clean, inviting and professional-looking colors.  The secret?  Stick with subdued and muted shades.  No matter which hue, muted colors always complement each other to give off a “pulled together” look.

See the difference here:

Visual Prompts

Some colors have inherent meaning.  For example: Green = Good.  Red = Bad.  Yellow = Warning.  Personally, I love to use Gray.  In certain situations, however, Gray can denote “Not Applicable.”  Using colors that contract their inherent meaning will confuse the reader.  Respect these visual prompts whenever possible.  Here is an exaggerated example:

A Conversation with Sharon Feigon, CEO

Sharon and I talked about a hundred things:  the Center for Neighborhood Technology (CNT), Hybrid Electric Vehicles, the CTA I-GO Card, her own journey to I-GO, and more.  Each topic is worth its own post, but here are her stories about pilots, technology, and change that really resonated with me.

Pilot to Help Build the Game Plan

Back in the late nineties, car sharing was not a proven concept in the United State yet.  We got the idea from Europe, where car sharing is more common.  When we decided to bring the concept to Chicago, however, it was unclear as to whether the community would welcome that.  There is so much emotion attached to car ownership in our culture.  And for many people, their cars are extensions of their personalities and are a big part of who they are as individuals.

So we decided to pilot the program with four cars – two in Edgewater and two in Hyde Park.

The response was overwhelmingly positive.  There was no question that Chicago was ready for this.  But, from the pilot, we also learned that it was not very cost-effective to keep the fleet in opposite ends of the city when it came to servicing and maintaining the vehicles.  Any other company probably would have consolidated the fleet.  But one of our core objectives was (and still is) to make car sharing available to as many demographics as possible, which meant that prices must be competitive, and cars must be widely available.  We didn’t want to raise prices to cover the costs, but we also were not willing to pull out of either neighborhood.  In the end, we made the decision to stay in both places, but to fill out the route with vehicles.  This decision was critical in that it basically determined our growth strategy.

Last year, we wanted to know how well electric vehicles (EVs) would do as part of our fleet, so we piloted the concept with two EVs.  Once again we learned all sorts of interesting things from the data gathered.  We learned that some folks wanted to drive the vehicles so badly that they would bypass the nearest I-GO car and travel to a more distant location with an EV just to experience the vehicle.  We also found that not everyone remembers to plug the EV back in after driving, which can be a big problem for the next driver!  These are great findings to incorporate into our planning and design process as we prepare to expand our fleet with more than two dozen EVs in 2011.

Know When to Infuse Technology to Scale

In the old days, when we had just a handful of cars, we’d put the ignition key in lock boxes.  The member would punch in the code to get to the key.   After he’s done driving, he would write down the usage information on a pad of paper in the car, and someone from I-GO would come and collect these pieces of papers for invoicing.  While many car sharing programs in Europe still rely on this method, this manual and paper-based model would never have gotten us to where we are today – 15,000 members and a fleet of over 200 vehicles.  Just the administrative costs alone would be staggering.  And there was the user acceptance issue as well.  The process was very cumbersome to members and demanded that they adjust to our needs, when we should be adjusting to their habits.

Today, you scan your I-GO membership card on the windshield and the vehicle unlocks, and you can access the ignition key inside.  The vehicle tracks your usage and sends that data directly to the billing system.  You can even call customer service (24×7) through the vehicle if you have a question and want to speak to someone.  Being able to offer service that is easy, immediate, and secure is a big reason we enjoyed tremendous growth.  And introducing processing automation means we can transfer administrative cost savings to our members by keeping prices low.

A Lockbox from the Old Days

Today's Key Card Access

No Matter How Big the Change, Success is Certain When Stakeholders Buy In

Our mission is to reduce the cost of transportation for consumers, improve air quality, and promote healthy lifestyles and neighborhoods.  When I-GO launched, we knew that we were going against an established cultural mindset. But Chicagoans have identified with our mission so well that, ironically, driving an I-GO vehicle (and not owning a car) also makes a certain kind of statement now.

Sharon Feigon

A Few Other Interesting I-GO Facts:

• A car reservation takes about 60 seconds to become live, which means you can make reservations super last-minute.
• I-GO’s headquarter (the Center for Neighborhood Technology) is one of only 88 LEED Platinum certified buildings in the world.  Take the virtual tour here.

Regardless of the country, fraud and corruption infiltrates every type of business and industry. However, certain countries have higher levels of fraud and corruption than others.

According to the Association of Certified Fraud Examiner’s (ACFE), the world’s largest anti-fraud organization, 2010 Global Fraud Study:

• The typical organization loses 5% of its annual revenue to fraud.  Applied to the estimated 2009 Gross World Product, the figure translates to a potential total loss to fraud of more than 2.9 trillion dollars.
• The frauds lasted a median of 18 months before being detected and averaged at least 1 million dollars.
• Asset misappropriation schemes were the most common forms of fraud, and
• Small organizations are disproportionately victimized as they typically lack the anti-fraud controls compared to their larger counterparts.

The initial detection of occupation frauds (asset misappropriation, corruption, and financial statement fraud) are through tips.  These tips mostly come from employees but also from vendors, customers, and competitors.

To give you a better glimpse on the reach of corruption, The Transparency International’s (TI), which is a global coalition against corruption, produces a yearly corruption perception index that measures the perceived levels of public sector corruption around the world.  Below is the 2010 Corruption Perception Index.

Most companies have dramatically increased their mitigation of fraud and corruption by

• Integrating fraud investigation techniques and methodologies into their audit programs,
• Implementing specific compliance programs such as to address  the Foreign Corrupt Practice Act (FCPA),
• Building an internal anti-fraud and anti-corruption team, and
• Supplementing their internal efforts with an external forensic accounting professional.

For companies that are still moving in the right direction, there are a few small steps that will help mitigate, although you can never eliminate, the risk of fraud and corruption.

• Build the right relationships: Take more time to meet and mingle with the data entry and lower level individuals.   Although sometimes seen as data crunchers, these individuals have a wealth of information.  I can’t count the times I have discusses the basic processes and procedures to discover that they were unknowingly committing fraud at the direction of their superiors.
• Test the hotline: Even though a company may have implemented a whistle blower hotline, your field visit is an ideal time to not only reinforce the importance and use of the hotline to the local employees but to also test that it actually works.   Yes, I know what you’re thinking.  The hotline was implemented by a reputable organization and it should work.  However, I have tested multiple hotlines during field visits and found that sometimes the hotline number is difficult to access or the message did not have a local language option.  The hotline should be very easy to access and user-friendly.
• Trust your instincts: Where there is smoke there may be fire.  While reviewing items you may come across an unrelated transaction or a comment made by fellow employee.  Because we don’t have the time to analyze every transaction, it is up to you to effectively determine which ones stay on your radar.   To help with a flood of information, I traditionally create and priorities a Potential Risk Item List which also helps in connecting some of the jigsaw puzzle pieces.
• Fraud Training: You should take advantage of multiple and sometimes free training opportunities from various external organizations such as the Association of Certified Fraud Examiners (ACFE), the American Institute of Certified Public Accountants (AICPA), and the Institute of Internal Auditors (IIA) as well as complementary in-house presentations from forensic accounting professionals.

I know you’ve always wondered about its origin, so here it is:  The checklist is actually an innovation in aviation. It was invented in 1935 after a Boeing prototype crashed during takeoff due to pilot error, killing both the pilot and passenger. After the disaster, a group of test pilots created the first checklist to govern takeoff and landing procedures to prevent a similar incident from occurring again (and avoid dying themselves).¹

The act of completing a checklist certainly has negative associations.  Checking stuff off of a list seems mundane, bureaucratic, and even a little drone-like.  But here is the thing.  A well-designed and executed checklist has surprisingly powerful effects.  Consider this:

One surgeon, acclaimed as a major “thinker” behind the ongoing healthcare reform², has scientifically proven that the use of simple checklists dramatically reduces hospital errors during patient care. In a 2006 experiment with Michigan hospitals, using a checklist to govern just one complicated activity (the insertion of central lines) resulted in 1,500 lives saved and $175 million dollars in cost savings over eighteen months.³

What does this mean for finance and accounting professionals?  Well, performing surgery is not dissimilar to closing the books in that both environments:

• Demand accuracy and precision
• Require expertise in a complicated area
• Rely upon a coordinated effort by multiple individuals to accomplish the objective
• Are deadline-driven and may cause sleep deprivation

If you’re not in the habit of following a close checklist during the period-end close, creating and using one at the activity level during your next close will give you some pretty exciting results:

1. Fewer mistakes: Having that whole list of activities in one place with names assigned to each task make it memorable to everyone. That means there is less of a chance someone will forget to record that adjustment or complete that reconciliation.
2. Removal of bottlenecks: When each person’s responsible tasks are outlined in the checklist, it is much easier to determine who is overloaded, who is underutilized, and redirect resources to smooth out the workload.

And that’s just the tip of the iceberg.

To learn more than you ever thought possible about checklists, get Dr. Gawande’s latest book.  To learn just a little bit more about the close checklist, click here.

The Back Office Mechanics Blog by Nancy Wu is licensed under a Creative Commons Attribution-Share Alike 3.0 United States License.

It’s the shortest.

That’s important, because process improvement means Change.  And Change is hard enough to commit to on its own without the added pressure of introducing a host of new practices.  That is why I’ve put together an exceptionally short list (and “list” is an overstatement) made up of only two things.  These two things strike that good balance between ease of implementation and results to generate the most value for your effort.  So, for those who don’t have the appetite to launch a big effort or endure a big change right away, here are the two small but highly impactful ideas that can be immediately applied to strengthen the account reconciliation process.

As an added bonus, it looks nice.  So display as wall art to spread the word and help make Change “stick.”

Download the Shortest, Sweetest Best Practices List Ever (PDF)

And if you’re feeling ambitious and want to do more, here are two wonderful thought leadership pieces on the topic:

• How to Improve Account Reconciliation Activities by PwC
• Reconciliations — A Sustainable Approach by Protiviti