# Presentation: 732289

## From High Priests to Strategic Business Partners

- Ten lessons learned from the evolving role of finance at PNNL
- Presentation to the Tri-Cities Washington Chapter Institute of Management Accountants (IMA)
- Erik Pearson
- December 1, 1999
- Shilo Inn

## $488 million business volume
2,200 research                    projects 
3,400 staff 
Multiple federal                         and private clients
Consolidated laboratory includes DOE, Battelle and leased facilities

- 2,200 research                    projects
- 3,400 staff
- Multiple federal                         and private clients
- Consolidated laboratory includes DOE, Battelle and leased facilities

**PNNL Economics**

## The Lab has six principal steps in its annual business planning cycle

**The Lab has six principal steps in its annual business planning cycle**

- March

- April - May

- May - June

**Expectations**
**& Aspirations**

**Situation Analysis & **
**Strategy Formulation**

**Strategy Integration**
**and FY00 Targets**

- May - July

- August - Sept.

- October

**Business Plans & **
**Investment Proposals**

**Management **
**Reviews & Decisions**

**Lab Agenda & **
**Budgets**

## Disclaimer

- The following opinions are solely those of the author....

## Lesson 1:  Get the facts right!

**Estimate budget shortfall**

**Revise budgets through painful process**

**Discover major error in shortfall estimate**

## 2.  Compare apples to apples

## 3.  Present data that matches your customer’s     intuition

- FY99 BV by Mission Area

- FY99 FTE’s by Mission Area

## 4.  Understand the economics of your     business

## 5.  Models are important

- _Variables_
- Sales
- FTE’s
- Travel
- Subcontracts
- Client mix
- Accounting changes
- Service costs
- Labor rates
- etc

- Scenario 1

- Scenario 2

- Available Resources

- Available Resources

- Economic Model

## 6.  Financial analysis is only part of the story

- Bubble area represents FY00 requested funding

**Notes:**
The Business Council reviewed all the proposals.

“Value” = Benefit to Lab and Financial results*
“Confidence” = market attractiveness, ability to compete, initiative planning and execution* 

## 6.  Financial analysis is only part of the story      - cont’d

**Notes:**
Last year there were modest increases in Science and National Security, offset primarily by decreases in Environment.  There were also modest increase in the evolving area. Looking forward, there are significant requests in the science and national security budgets and smaller request in Environment and Energy.

## 7.  Persistently measure the right things

**7.  Persistently measure the right things**

**Facility & Business Operations**

**Operational Excellence**

**Effective Business Management**

- OSHA Measures
- Process Improvement
- Self-Assessment Results

- Sales
- Business Volume
- Direct FTE
- Facility B&U Rate
- Labor Multiplier
- Attrition

- Analysis:
- Sales is on track to achieve FY99 targets driven by success in National Security offset by declines in DOD, NASA and other 1831 sales.

## 8.  There are many way to look at the data

**Sales by Product Line Steward**

**Sales by Mission Area**

**Sales by Client**

## 9.  Present data and analysis consistently

**9.  Present data and analysis consistently**

## 10.  Match data to decisions

**10.  Match data to decisions**

**Projections**

**Rates**

**Available**
**Resources***

**Individual**
**Budgets***

- *Adjusted during the year to reflect actual results

- Sales

- FTEs

**Notes:**
Project funding drives overhead budgets
“User pays” model for space & many internal services

## 11.  Design the finance system to match the       needs of the business

**How we choose to manage the business**

**Business Processes**

**Financial System Design**

- Right!

**Business Processes**

**Financial System Design**

- Wrong!

**How we must manage the business**

## With appreciation

- 	Thanks to
- 				Tom Baranouskas,
- 				Greg Turner,
- 				Susan Davidson,
- 				Marty Conger
- 				and their staff!
- They have made PNNL finance a true strategic partner in our business!