Listen to latest Podcast from our Insights to Action Podcast series titled as SAP’s Birgit Starmanns on “360-degree View” for Finance and Risk Management. Learn how a 360-degree view applies to products, customers, vendors, employees and putting together a complete picture for strategic decisions such as M&A.

Also, below is a transcript of the podcast episode:

Jim Hunt: Hello, this is Jim hunt for Bramasol’s Insights to Action podcast series. We have Birgit Starmanns back with us. She’s the global head of the Office of CFO COE Thought Leadership Strategy and Programs in the SAP Global Center of Excellence for Financial Risk. Today we’re going to talk about the 360 degree view of risk processes, employees and accounting. So Birgit, it’s really great to have you back again.

Birgit Starmanns: Thanks so much for having me back.

Jim Hunt: So why don’t we start off with an overview of what a 360 degree view is?

Birgit Starmanns: Well, 360 I feel is a term that has been thrown around a lot, but if you look at the classic definition, it’s really the process of gathering all the information that there possibly can be about a topic. So the idea is that there’s not just one measurement of success, but there are many elements that are part of it. So a lot of times you will think of 360 employee evaluations or project evaluations. And if you think about a project as an example, the success of it depends on a lot of different things. So yeah, there’s the outcome and we’re done, but was it successful? And how do you know, was it finished on time? Was it early? Was it late? And then when you look at a quality outcome, to not go into a very elaborate project management discussion, was there quality product.

For example, we’re designing a product and we put it out there into the market. Yes, we did that. But how do we measure that? So from a manufacturing standpoint, it might be very much a quality product, but what if no customers want it to buy? Was the project still a success that reached its ultimate goals? So that goes back to what are we trying to accomplish and how do we measure it? And when it comes to business, we’ve heard about 360 degree view the most when it comes to customers, really looking at the 360 degree view of a customer. But that can really be related to all types of business partners, whether it’s customers, whether it’s vendors and yes employees and with new technologies, finding what that comprehensive view is and all the details that you need to measure to really find out. Did you have a successful outcome in those relationships, in those projects that you have with these external partners? That’s the most critical. Have all the touch points been identified and how are we really going to manage success?

Jim Hunt: Right. It reminds me of the kind of tired old doctor’s joke about how “the surgery was a success, but the patient died.”

Birgit Starmanns: Yeah. I hate that joke. I would just put a financial spin on it. My joke is always “with all the allocations that we do in a company, every profit center showed revenue. So it was successful, but the company went under.”

Jim Hunt: Yeah, that’s even better. Very apropos. So let’s drill down a bit and then let’s expand on what 360 means with regard to the customer.

Birgit Starmanns: Well, with customer, we hear about it a lot with the customer and withcustomer relationship management. Now we talk about customer experience, but it’s very easy to say, we get the most revenue from customer X. So therefore that is our most profitable customer. So if you look at it that way, then that’s great. We get the most revenue from one customer, but we might not have taken into account some of the other areas. So for example, do we always have a collections issue with them? Do they constantly dispute our invoices say, well, this is not what we’re going to pay because of “fill in the reason”. Are there a lot of extra costs because they always want an expedited delivery. And because they’re a large customer, we don’t charge them extra for that. And especially in some of the more service oriented types of businesses, you know, what does it cost to actually get a project or what is the cost to actually deliver a product or to gain a new customer.

And those factors all have costs associated with it. So if you have a customer that spends a medium amount of money, but never has any disputes, never asks for anything expedited, the relationship is great. They might actually be a more profitable customer than the customer that spends twice as much, when we end up really digging into the profitability because of all those disputes, because of all those collections issues because of the returns. So if you never, for example factor returns into the equation, they might be buying a hundred pieces, but they return 90 of them. So they’re not necessarily the most profitable customer. And then we can also drill down to more levels of detail. For example, what are they buying? Are they a great customer when it comes to one of our business units? Are they a not so great customer when it comes to another one of our products or another one of our business units, whether that’s based on geography or product line, whatever that might be.

Birgit Starmanns: So there are a lot of different things that go into that and then to take it from there, just from a financial standpoint, that means that we can’t just look at the accounts receivable, general ledger account. There are other general ledger accounts that actually handle the costs that are associated with some of these other items that I just talked about. So if you only look at the accounts receivable account, you might not even notice that a customer is not as profitable as you think they are. So even soft outcomes need to come into that equation, which we’re not going to get from a GL account. So is it worth it to continue to work really closely with the customer? But they’re a great reference for us. Well, yeah, because that translates into profitability for other areas as well. So all of these things, it’s kind of like throwing a rock into a pond and just seeing the expansion of the circles,

Jim Hunt: Right. And I would assume things like opportunities to expand your relationship with the customer factor into that as well. You might have that big customer, who’s never going to buy anything but what they’re buying now. But if you have a medium customer that is an early adopter of new products, you’re going to introduce, so there’s more opportunity with them.

Birgit Starmanns: Definitely, definitely. And then it depends on the industry. So something like consumer products, you’re probably not going to work with customers to make something that’s very specific, but in a lot of the engineering areas, yeah. Even, for example, airplane manufacturers or bridge designers, things can be very specific for a customer. So sometimes there’s also the opportunity to work with a customer to create a whole new product that might not have been out there in the past.

Jim Hunt: Right. And then in the business we’re both familiar with, the software consulting business, if you have a customer that you can build to standard and you can reuse the effort and the knowledge that you’ve built, rather than working with somebody who’s totally custom, where you’re never going to reuse what you did for them.

Birgit Starmanns: Oh, that’s true. Which is kind of interesting. Because that’s I guess how SAP was formed. Right. When I started my consulting career back in 1990, everything was a customized development project, everything. So we called it at the time packaged software, I was part of a Price Waterhouse. And then there was a whole practice on packaged software, which eventually rolled into almost exclusively an SAP practice.

Jim Hunt: So let’s flip the script here and talk about 360 with regard to vendors.

Birgit Starmanns: Let’s do that. It’s interesting that we usually, when we think of 360, we think of customers, we think of employees, but we don’t necessarily think of vendors. But actually it’s critical to have a good working relationship with your vendors as well. And that goes back into the whole accounts payable side of the equation. So a lot of times we really want to have strategic vendors so that we can, from a manufacturing standpoint, build the things – – the items that we want to produce and then in turn sell to our customers. So of course there are costs of the ordered materials, raw materials, semi-finished goods, and any potential discounts that we might get from those vendors. But there are other factors that are going to impact the product that a manufacturer can produce. So is the vendor reliable in terms of delivery when it comes to timeline, are they late? Are they early? Are they just in time? There are actually a lot of manufacturing concepts where you might not necessarily want a delivery early because you might not have a place to put it in your warehouse. So scheduling of that can be very critical. And then also, is it a quality raw material or a quality finished good? Because if it’s not, we can’t just build it into a product because that’s going to, down the line, make the company’s customers unhappy. So having a view of the quality of the products that a vendor supplies is also very important. So again, it’s that, it’s that rock that creates waves further on down the line. So it’s not just a money equation. There are other aspects that go into it. But again, it’s not just the accounts payable. For example, do I need to reorder? Or I needed to reorder from a different vendor because the quality did not meet our expectations from vendor A. So we had to order from vendor B. So we have to take a larger view of not just one vendor, but look at the bigger picture,

Jim Hunt: Right? Or you might have a lot of incoming inspection rejects from a vendor. And so you, you have a lot of product having to be replaced or delays for your manufacturing.

Birgit Starmanns: Exactly. And yeah, that also impacts your entire manufacturing schedule, if you’re a plant that makes more than one product, you might have already retooled for something else and then you have to go backwards and that impacts other product lines. So all of these things can cause endless waves.

Jim Hunt: And then another one that struck me, thinking about the data sources associated with vendors and accounting practices, you might want to push payables out to 57 days, but maybe you have some vendors, small ones that are really valuable to you that really can’t live with that. They need prompt 30 days or discounts for quicker payments. And you need to be aware of that in your 360 view of the vendor so that you don’t hurt the relationship.

Birgit Starmanns: I completely agree with that. Although then I would expect that those vendors might try to renegotiate to get that Net 30 instead of a Net 60. But yeah, if it’s kind of a handshake agreement and you are aware of that, then you might not want to push that out. I think things like the pandemic have, have really brought those things to light also. Everybody tries to hang on to their money as long as they possibly can, but it does impact the entire value chain.

Jim Hunt: Right. And then you mentioned an oft-forgotten group, the employees. Let’s talk about a 360 view of employees.

Birgit Starmanns: Right. A lot of times we talk about 360 evaluations, which is not what I’m talking about here. With 360 evaluations for performance review, it’s not just from your manager, it’s also from peers, from other groups that you work with, maybe even external parties like partners. But in this case, if you look at a financial point of view, I have to go back to a whiteboard that I saw, I think when I first got trained for SAP back in 1990. This was the mainframe days and one of the salespeople got up and she drew this incredible whiteboard. And she said, yeah, when you talk about the number of employees, what are you talking about? The active employees? The part-time employees? Your consulting employees? The people that you’re still paying benefits to? And the point was: all of these are different.

Birgit Starmanns: And depending on the department that you’re in, you might have a different definition of what that is. But now when we take that into the compensation to get a little bit more specific, it’s not just the base salary, there are a lot of different factors. So there’s the base salary. There is bonus. There are different types of bonuses. There are additional rewards, potentially. There are matching programs when it comes to retirement accounts. There are matching programs when it comes to stock purchase accounts and there are options. There is medical and retirement matching. So when it comes to compensation again, it’s not just the salary and not just salary and bonus, but really taking a look at all those different things that make up a total package. So while it’s not really a supply chain or value chain or, or sales issue, employees are really the lifeblood of any company. So taking that whole bigger package into account is also important.

Jim Hunt: Right. And as you pointed out here again, you have a variety of situations, especially with consultants, you may have people who’ve been working with your company for a decade that are embedded in your culture, embedded in your teams. They feel like an employee, but they’re actually a consultant.

Birgit Starmanns: That is very true. And that goes back into the whole idea of soft factors, not just hard financial facts, but yeah, you’re probably paying those consultants a little bit more on face value, but then you’re also not paying all of those things they used to call “fringe benefits” although they are core benefits, right. Things like medical bonuses and 401ks, et cetera. So, yeah, you can’t really put that kind of face value even on that comparison. And then you want to make sure that you really retain the best employees for you. Right. So it, again, can’t just be a numbers game.

Jim Hunt: Exactly. That’s a great overview of the three key groups. Talk a little bit about, in summary, how we put all these pieces together and how it relates to helping the company in the bigger picture as well.

Birgit Starmanns: Yeah. I think putting all these things together is really where we’ve been helped by technology. Because, even in the finance area, I know everybody in finance still loves their spreadsheets, but that’s why you actually see a lot of Excel-like, spreadsheet-looking applications when it comes to finance – – in addition of course, to the graphs and the overviews, et cetera. But having all of that information in one place, I would say, now that we have something like S/4HANA finance, we have all the information in one place.

Because for example, if I’m just looking at my overall receivables and there’s something wrong with the accounts. I don’t know what customer it is now. I have to go to a different report to figure out what customer it is. Or I have to go to different reports to find out which products or geographies might be impacted. So the idea of having everything in one place to be able to take a look at some of those cross connections is really critical. Having the information in real time without having to wait until period end, or having to wait for an overnight job to run is also really helpful in making decisions. If you’ve got a customer on the phone right now, you don’t want to say, “Oh, I have to run an overnight job and please call me back tomorrow”. That’s not good either. So being able to have the information at your fingertips in order to make decisions is very key. And then also having some of those artificial intelligence and machine learning processes in place can really help you extrapolate.

And one of the overall examples for having all of this information in one place is the classic merger and acquisition example, right? So a company is thinking about buying someone and there might be multiple companies that they can acquire. But they could also compare it to what it would take to create that product themselves. So having some of that technology available for some of your own information, as well as combining it with external information is very key when it comes to M&A. And again, it can’t just be one factor. What is the cost of the company that I’m going to buy? What are other things that are related to that? How does the cost compare to valuation? What is that going to look like in terms of number of employees that I’m going to be taking on? What is the different culture of this organization versus my organization? So the numbers are a critical piece, but as with everything, there’s always that human factor that needs to come into play. So we don’t want computers to rule the world. We want them to help us rule the world, so to speak,

Jim Hunt: Right. And if you adopted a 360 view paradigm and used it extensively in your own company, you’ve got a mental structure and analysis structure to look at that potential acquisition and apply some of those questions. Maybe not in the same depth that you would do internally, but you can get a feel for how their customer base fits as you expect it to, or would their employees fit in your organization? You have the 360 analysis structure to be able to gain knowledge about potential acquisition.

Birgit Starmanns: Yeah, absolutely. And we’ll see after the pandemic, whether we see more or fewer acquisitions taking place, but it’s an interesting concept to take kind of what started out as a 360 degree review process and expanding it to customers, expanding it then to vendors and employees, and then further expanding it more to projects and strategic decisions for a company. So there’s a whole range where the 360 concepts can be applied,

Jim Hunt: You know, it brings to mind a question for me about the big picture of obviously as SAP based companies move to S/4HANA, there’s a whole lot of built-in integration to be able to see across the whole company. But I’m assuming that things like SAP Analytics Cloud can in the interim pull disparate pieces together and help give you this 360 view.

Birgit Starmanns: Yes, it does. I mean, it does the same thing for us because we rely on that for a large part of our analytics ourselves. But even if you aren’t on an integrated platform yet, then yes, it can definitely take information from other external sources. So whether you’re doing that directly in the SAC or whether you’re doing that through S/4HANA, for example, or through a Central Finance scenario, ultimately we look at the analytics and SAC. SAP Analytics Cloud can pull information, not just from S/4HANA, but it can pull information from wherever you happen to store it. If you happen to store it in different places, you might have to understand those links and build some of those linkages into your reporting to make sure that you’re not double-dipping on a report for example, or leaving something out. So that’s another advantage of putting it on top of S/4HANA, because everything is already consolidated there for you, but at the same time, yes. If you have disparate systems or if somebody still insists on using a spreadsheet for some outlier office, you can still pull it in.

Jim Hunt: Very good. Any wrap-up that you want to add – or any tips and final thoughts?

Birgit Starmanns: Well, I think it’s important that we remember to not just look at one angle as we do any kind of evaluation. It’s very easy to say, I’m just going to look at the general ledger, but even within the general ledger, there are different breakdowns right. Or different dimensions, whether it’s customers, vendors, products; those kinds of things, and it’s key to be able to look at all of those different dimensions and pull them all together when it comes to decisions and again, inserting that human element into it. So really being aware of, and going out and looking for all those details is key to make sure that you’re not surprised.

Jim Hunt: Great wrap up. Thank you. Once again, I never fail to learn when I talk to you – – and I really appreciate it.

Birgit Starmanns: Thank you so much, Jim. I appreciate you saying that.

Jim Hunt: Have a good day. Thanks.

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