Your firm just completed a multi-million dollar Enterprise Resource Planning (ERP) project to consolidate the information system resources of two business entities. The project is seven months late with cost overruns of $800,000. Fingers are pointing everywhere as to who is to blame for the delay and extra costs.
Management would now like to undertake a more extensive information technology project that involves near-field communication (NFC) used within its retails outlets. If successful, the value to the company in additional customer insights and incremental sales could be substantial but implementation risk given prior information technology project roll outs are high.
As a financial planning and analysis (FP&A) or corporate financial analyst, you have two weeks before the next monthly reporting cycle will occupy your time. Although you are very happy to have the new ERP system up and running and the ability to access internal data faster and more accurately has made your job a whole lot easier as well, something about the completed ERP project doesn’t place you in the camp that wants to celebrate its completion with a cake and a gold medal. What would be prudent? Put the project to bed (or in a grave?), or do some digging and find out more about the project before the next large scale information technology project is undertaken? Is a project post-mortem analysis appropriate?
First Ask Yourself, Should I Do An Analysis?
As a best practice, the answer will always be yes. No matter if a project was a success or failure, big or small, you can always learn something from doing a post-mortem analysis, but we live in the real world and time is a valuable resource. Arguably, time is more valuable than money and any other natural resource in the world today. So use it wisely. Just because you can do a post-mortem analysis does not mean you should.
One approach you might take is to ask yourself the following five questions regarding a proposed post-mortem analysis, to validate its relevance, benefits, resources required and any sponsored advocacy for the program.
- What relevance does the project have to the business and finance decisions currently being addressed, or to future decisions?
- Would the analysis contribute to any new company knowledge that could enhance management’s general perspective on the business, markets, competitors, or its resources?
- Would the absence of a post-mortem analysis leave the company exposed to any financial downside?
- How much time and resource would be involved to perform the post-mortem analysis?
- What sponsors, if necessary, exist who will assist in pulling together the analysis?
Bear in mind that given the significance of the project undergoing review and the personalities of the project sponsors involved, you may encounter wholehearted support, lukewarm interest, or outright resistance. If you sense from conversations with staff & managers around the company that your proposed analysis will encounter.
If you sense from conversations with staff & managers around the company that your proposed analysis will encounter resistance, tread carefully. To investigate past projects, you may need some backup (Doesn’t this seem like a police TV drama?), providing legitimacy for you to carry out your work. For example, when reviewing past capital projects one year after completion to ascertain if the anticipated return on investment (ROI) was obtained, it is not uncommon to find no way to track cost savings that were anticipated or sales revenue captured. When managers are pressed as to why further documentation is not available resistance and defensive behavior is not uncommon.
Having reviewed and satisfied all five questions, gaining sponsorship approval, the next step would be to draw up elements of a post-mortem analysis.
Project Post-Mortem Analysis: The Good, The Bad & The Ugly
Think of a project post-mortem analysis as a blend of a history lesson and training tool. It can take the form of a formal document, with a summary of the project, its timeline, major decision, project outcomes and recommendations. It also can be at the other extreme a brief meeting of project participants, providing recollections of their assessment of work conducted, impediments encountered and recommendations.
The depth, structure and intensity of any post-mortem analysis will depend on the time available to complete the analysis, the size of the project in both cost and span of people or departments touched within the company and the priority given to determine root-cause of success or failures by senior leaders.
The common element of both a formal or informal approach is that recommendations are offered that can be incorporated into current or future project processes, staffing responsibilities and decision methods. This is the principal benefit of a project post-mortem analysis.
The unfortunate part of a project post-mortem analysis is that it resurrects past activities and decisions that project participants might just as well want to forget. Project bonuses may have been expected upon the completion of the project but not given or given and less than expected or new project assignments can be altered, based on new intelligence of how project staff navigated through the challenges encountered. Every effort should be made to remind team members you are not a muckraking journalist but are there to make the process better for them and for all. Your quest is to identify company processes that failed, or need further attention, identify successes and to mitigate financial exposures. Improving processes should by all appearances be welcomed by everyone.
Improving processes should by all appearances be welcomed by everyone.
In the worst case scenario, your early investigative finance work sets off a chain of warning calls and you get a visit by a high-level executive to cease and desist your project post-mortem analysis. This could even be from your VP of Finance, VP FP&A or the CFO or CEO. Depending upon your political capital accumulated from previous and successful contributions to your firm, you can tactfully challenge the request, citing the answers you developed to the five questions alluded to earlier in this article, but tread carefully.
Being an FP&A or corporate financial analyst requires a thick skin, a strong ethical foundation and supportive finance leaders within your firm. While you mull over taking this approach, you might strengthen your resolve by reading Patricia Cromwell’s Postmortem as well (It certainly can’t hurt!).
“THE LIFE OF THE DEAD IS SET IN THE MEMORY OF THE LIVING.” MARCUS TULLIUS CICERO
In your conversations with leaders that challenge you, stay in an inquiry mode. Remind them that your work is to identify current and future risk exposures; understanding the history of previous projects that did not perform as expected. This would appear to be fair game for a financial analysis. Your non-defensive mode should help to defuse tension, expose landmines that you haven’t previously encountered and convey your alignment to supporting activities that strengthen the company.
Keep It Real
Financial analysis can have the outward appearance of a walk through Mr. Rogers’ Neighborhood. The realities are often times quite different. From the outside investor and bondholder pressure companies to increase financial performance and can produce tightly wound managers and leaders. These pressures are felt just as greatly by internal finance teams but the political and financial ramifications can be much greater for ones’ career on the inside. FP&A or corporate finance analytical work can sometimes touch on sacred cows that can threaten to bury ones career, or leave one smelling like a rose, depending on the day.
Knowing both the upside and some of the downsides to post-mortem analysis that you will want to skirt, you can also see the opportunities that this kind of analysis provides. You can further extend your reach and interaction across divisions, functional area, or less frequented departments.
As your intelligence gathering improves, by cultivating an expanded group of contacts and developing lasting friendships across a company your power, control and reach will also increase lending you greater flexibility and income in life and career. Remember, your job is not to win every battle but to win the war.
Last and most importantly, your perspective and appreciation for fellow colleagues is also enhanced, as you see more insightful ways to view the business the more and varied types of analysis you perform.