4 reasons controller struggle to provide performance root-cause insights & how to help them

Controller / analysts are the backbone of every organisation. As manager you rely on their analysis to provide you with reliable data to act upon. Unfortunately the data provided tends to offer only an overview of the situation and zoom in on specific details of this situation.

What controller / analysts struggle to provide, are actionable root-cause analyses for your operational performance.

Analyses, which would enable your team to create action plans on how to address these root-causes and improve your performance based on a precise knowledge of the root-causes and their significance.

The reasons controller / analysts struggle to provide root-cause analyses are:

1) traditional data analysis tends to be 2-, max. 3-dimensional

2) data silos, especially when controller / analysts are imbedded in operational functions

3) management experience and expectation

4) disconnect between analytical competence and in depth operational understanding

1) Limited data dimensions

Root-causes for performance issues are rarely simple. There are usually a range of potential causes and you as a manager need to know, which the actual root-causes are and how strongly each root-cause effected your performance in order to effectively address the situation.

Let's take slow moving inventory as an example. There tend to be 5 different potential root-causes for a slow moving inventory build-up:

• Forecasting failures

• Rapid demand changes and slow reaction times

• Issues with the inventory planning parameter in your purchasing system

• Wrong decisions of your purchasing team

• Inaccurate / strongly delayed inventory level reporting

Now let's take a look at the different reports you usually get from a controller / analyst:

• a slow moving inventory report, providing you with a stock volume (dimension 1), in relation to your sales (dimension 2), and maybe another stock classification (dimension 3)

• a forecasting accuracy report, providing you with the forecasted volume (dimension 1), the actual sales volume (dimension 2)

These can tell you which SKUs are slow moving. And how accurate your forecast is. And if you are lucky somebody combines them for you, so you can actually see how your slow moving inventory correlates with your forecasting accuracy.

But even if you were to receive such a combined report, providing you already with a 4-dimensional report, you would still be guessing how much of a role the other potential root-causes play.

Because even if forecasting accuracy for your slow moving inventory is very low, that doesn't mean this is the root-cause with the strongest impact. If for instance your purchasers don't consider the forecast in their actual purchasing decisions, fixing forecasting accuracy does not solve your problems.

But this step to combine the data into a 4-dimensional report unfortunately is already pretty rare in many companies. And limited data dimension is actually not a cause, but only a symptom of the following root-causes that need to be addressed.

2) Data silos

One common reason why controller / analysts don't combine more data into multi-dimensional reports are data silos. Either the controller / analyst doesn't know the additional data exists or does not have sufficient access to it.

This is especially the case for organisations without a centralised controlling / analyst function but instead functional analysts (e.g. sales analysts, purchasing analysts).

Even worse, though unfortunately far too common, is an unwillingness to share data, preventing centralised controller / analysts to include crucial data in their regular reports because they can't hold the report back long enough in order to wait for the missing data to arrive.

And again, this is not actually a root-cause but only a symptom, caused by the next root-cause.

Maybe we take a brief pause to define what is actually a root-cause vs. a symptom? You arrive at a root-cause when there is no deeper reason revealed by asking "why?" about a situation - at least no deeper reason inside your control. Take for example data silos. Your knowledge of their existence does not immediately help you to eliminate them. There are reasons why they exist. A minor reason are technical limitations, but as with everything, those could be overcome if the management put in the resources to overcome them, so then why doesn't management do that?

3) Management experience and expectation

Most managers expect to get the same reports in fixed intervals. And we have seen enough manager sitting over those reports, making every time the same cross-references, adding manual calculations etc. to be sure that most managers, despite insisting on the frequency and timeliness of the reports they get, are not fully satisfied with the content of the reports they get.

So why do they still insist to regularly get these same inadequate report?

Because:

a.) they are used to these reports and

b.) they don't know how to get to better reporting or how that would look like.

But they create a workload for the controller / analysts that leaves them barely any space to work on consistently improving the reports they provide to create better insights.

And our own Actionable Insights analyses took consecutive teams of operational and analytical professionals years to develop and fine-tune. Which leads to the last reason preventing controllers from providing this level of insights.

4) Disconnect between analytical competence and in depth operational understanding

Even though most controller / analysts have an excellent general understanding of the company they work for and a really good understanding of the different operations involved, they for obvious reasons lack the in-depth operational experience necessary to understand the different operational root-causes the performance issues their company is experiencing could have. And you can't analyse for something you don't know or understand.

At the same time most operational experts lack the data analysis skills, or honestly the patience to co-develop more meaningful insights. And often enough the cross-functional experience to overcome data silos.

How can you empower your controller / analysts to provide performance root-cause analyses?

1. Centralise controller / analyst functions and remove data silos

2. Rotate controller / analysts through the core operational functions and train them on basic tasks like forecasting, inventory planning, purchasing

3. Provide space and set incentives to constantly improve reporting insightfulness

4. Challenge controller / analysts to experiment and fail with new reports (believe me - nobody develops that level of Actionable Insights without getting a number of reports wrong in the process ....)
   

Some might consider this list a costly investment, but experience shows that the hidden cost (especially in the form of lost improvement opportunities) are much higher.

Just reflect on the number of action plans or initiatives you have run over the years to improve margins or cash flow and which showed little or only temporary effects. I wager that at least 50% of the performance issues you tried to address could have been efficiently and effectively addressed if your internal data had been used better to provide you with actionable insights.

We hope this article has inspired you to enable your controller / analysts to provide better root-cause insights. Please feel free to use more of the resources in our blog or contact us for a free consultation to see whether we can help you and your team drive continuous margin and cash flow improvements through Actionable Insights.