With a need to continuously improve performance, BEC aimed to change its management model significantly. How could it support the empowerment of employees to manage their financials?
BEC took an important step towards transforming its working culture by replacing a spreadsheet-based top-down budget process with a “beyond budgeting” philosophy supported by IBM® Cognos® TM1®.
Drivescultural change with a decentralized planning model that boosts accountability
Increasesfinancial transparency, assisting managers and employees to take rapid action
Saves costson a corporate level, boosting value for customers
Business challenge story
Transforming working culture
Financial institutions face the constant challenges of coping with market volatility and handling increasing levels of regulation. Having the right IT services in place is important if banks and financial service providers are to stay competitive and prosper, especially in difficult conditions.
Danish IT provider BEC specializes in helping both mainstream and niche banks keep up with compliance regulations and stay one step ahead of market trends. The company offers a full set of IT services as SaaS—everything from software development and maintenance, to IT operations and customer support. In all, BEC offers all the IT services needed to operate a bank in Denmark.
Lars Klepsch, Chief Financial Officer at BEC, explains: “We offer a comprehensive suite of solutions that help Danish financial institutions operate effectively. As a company, we operate on an unusual business model, in which we are largely owned by our customers. This means our goal is not to make significant profits, but to achieve the greatest cost-efficiency and keep our customers competitive.”
He continues: “In recent years, several market conditions have changed, and on top of that, new players such as online lenders and mobile payment providers have ramped up the pressure on traditional financial institutions. Altogether, the changes have made it imperative for our customers to reduce their costs. Our job is to help them achieve this by providing the best value service possible.”
To continually increase the value offered to its customers, BEC decided to introduce an innovative new management model and to transform its organizational culture. BEC aimed to move away from a heavily centralized, top-down approach to budgeting, and towards a “beyond budgeting” philosophy, empowering its employees.
Lars Klepsch continues: “We wanted to provide the transparency needed for our managers and employees to manage their financial responsibilities in an efficient and modern way. We simply needed a new way of managing financials supported by a clear scope of responsibility and adequate financial insights.
“We knew this would be a big cultural change and that the shift would be difficult for our managers and employees—especially those who have been managers for a long time in a budget heavy environment. Shifting from a centralized budget environment to an empowered ‘beyond budgeting’ culture is not intended to be easy—it is intended to boost performance.”
Previously, the central finance department at BEC created budgets and forecasts using a top-down process. These financial plans were updated periodically, at fixed times during the year, but offered little insight into day-to-day expenditure. The finance team relied on spreadsheets to consolidate input from the business and update the budgets—a time-consuming, cumbersome method that restricted the level of financial transparency within the company.
Kasper Gustafsson, Financial Controller at BEC comments: “If we were going to accomplish the fundamental culture shift that we were aiming for, we needed to re-think our IT landscape. We began to look for a system that would enable each manager and employee to take control of their expenditure on a day-to-day basis.”
Empowering managers and employees
To deliver instant transparency and a financial management tool for its managers and employees, BEC decided to replace its spreadsheet-based system with a set of processes that embody “beyond budgeting” principles. Underpinning this philosophy is the idea that each manager and employee should take responsibility for their own financials, and be free to adjust their forecasts whenever necessary—instead of having to align with the schedules of a fixed and work-flow based budget cycle.
However, this does not equate to letting go of the control that traditional budgeting creates an illusion of—on the contrary, moving to “beyond budgeting” increases the level of financial responsibility. At BEC the cultural shift was supported by a control environment based on dialogue and supported by the finance department.
To enable this transformation, BEC needed a more automated and optimized way to model and update its financial position. After a review of various software packages, the company decided to build its new solution on IBM Cognos TM1. The BEC team enlisted the support of IBM Premier Business Partner Kapacity to handle the on-premise deployment stages and ensure a smooth, seamless implementation.
Kasper Gustafsson adds: “It was important for us to work with an implementation team that understood precisely what we were trying to achieve with this activity. When Kapacity approached us, they instantly understood our philosophy and the cultural change we were aiming for, and we were delighted to work with them.
“When IBM and Kapacity demonstrated how the solution can update financial data, we knew we had the right kind of platform for the job. We were especially thrilled with the in-memory technology that allows the solution to calculate results quickly.”
With the help of Kapacity and the IBM Cognos TM1 technology, BEC implemented a decentralized financial system that places responsibility in the hands of managers and employees. The new system enables monitoring of cost and income, and the making of forecasts as needs evolve. BEC chose to deploy the solution in incremental stages, helping to embed the new application quickly and allow users to become more familiar with their new responsibilities over time.
Kasper Gustafsson explains: “Most of our managers and employees are more used to working with a simple fixed budget, rather than having to take full financial control themselves, so it is a considerable cultural change for them. We’re using the IBM solution to make the change as easy as possible and the financial model combined with the solution design from IBM reduces complexity where possible.
“For example, when a software project for a client involves the use of infrastructure components, the project manager does not need to know the price of a terabyte of storage, or how to amortize an investment in a new server; they can just estimate the number of servers and size storage they need, and the IBM solution works out the rest. This saves time, reduces confusion, and provides a clear view of overall costs, making it easier to identify opportunities to increase efficiency and cost reductions. It is not designed to embrace every little detail, but designed to support the right decisions.”
Delivering maximum value for customers
With the Cognos TM1 solution from IBM and Kapacity, BEC is on its way to achieve the fundamental cultural change that will help it deliver even more cost-effective services for its customers.
Lars Klepsch elaborates: “We started this journey with a vision largely in accordance with the McGregor theory of management. We aimed to move from the ‘x theory’ of centrally-directed management towards the ‘y theory’, in which we put in place the conditions that allow managers and employees to take responsibility and strive to achieve organizational goals.
“We are making good progress with driving this change. Previously, we had a culture in which our managers and employees did not have sufficient financial insight to take enlightened decisions, without having to use self-developed spreadsheets. Today, thanks to the IBM solution, we have the financial transparency that is needed in the organization to keep a constant eye on financial performance and to take fast action if spend suddenly increases in one area.”
The job of the central finance department at BEC is also changing for the better. The team no longer faces the burden of completing consolidations using spreadsheets, and is now well on its way to generating aggregated reports on financial performance for any level of the company at the click of a button. This allows for a much more dialogue-oriented finance department supporting the organization in the constant chase for performance improvement.
BEC believes that transforming its working culture will generate significant cost savings that can then be passed on to its customers. The company estimates that in time the overall change will reduce costs by DKK 200 million (USD 29 million) every year—the equivalent of 20 percent of its total annual expenditure.
In addition, BEC’s new approach offers greater flexibility to help its customers make smarter decisions on costs, as Lars Klepsch notes: “We are now much better placed to provide an instant response on the cost impact—for example, if clients want to reduce the number of users on one of our software platforms, or decrease the number of transactions. This level of transparency enables them to be more agile and responsive with their financial management.”
He concludes: “A cultural change without the right tools and processes to support the implementation is a non-starter. With help from IBM and Kapacity, we have established a great platform to support and drive our ongoing cultural transformation. Furthermore, we now have a system that is already helping us deliver greater flexibility and better value for our customers.”
BEC is a Danish IT service provider with over 50 years’ experience developing and implementing systems for financial institutions. Based in Roskilde near Copenhagen, BEC’s products include capital markets platforms, reporting and compliance tools, business intelligence software, wealth management technology, and digital self-service applications for online and mobile banking. With around 700 employees, the group in 2016 generated total turnover of DKK 1.4 billion (USD 200 million); BEC accounts for DKK 1.2 billion. BEC is part-owned by its clients in the Danish financial sector.
- Cognos TM1
- Planning Analytics
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IBM Premier Business Partner Kapacity A/S is a leading provider of analytics solutions in Denmark and beyond. Kapacity offers consulting, proof-of-concept, implementation and training services, and has offices in Copenhagen, Aarhus and Kolding. To learn more about Kapacity, please visit kapacity.dk .