Paul Schuster
VP, Corporate Finance, & Treasurer
Trustmark Insurance Co.

Industry:
Health & life insurance

System Setup

General ledgers:
QuickBooks, JD Edwards, GEAC

Budgeting & forecasting:
Longview Solutions

BPM Magazine: Could you describe your performance management software configuration?

Paul Schuster: We have three different general ledgers that are in use, depending on what business units they are applicable to. We acquired a small health advocacy company last year, and we still have them on QuickBooks. We bought a $100 million third-party administration (TPA) company about 10 years ago that uses JD Edwards, and the insurance operations, which are the largest portion of our business, run on GEAC. Because of their very different operational needs, we haven't incurred the costs to move them to a single accounting system. All three ledgers feed their actuals into Longview, which became our official book of record.

For budgeting, planning and forecasting, consolidations, and financial performance, we also use Longview. We implemented Longview starting in 2005 and went live at the beginning of 2006. We do something that's a little unique, in that we have very detailed monthly business reviews (MBRs) of all of the major business units. Every month, we review their financial performance and see how things are going. And then we also review the three major support areas: IT, the claim-paying area, and managed care. We are primarily a health insurance company but also have a life insurance division as well as the TPA and health advocacy businesses.

In the monthly business review process, the individual meetings vary from an hour to 3 hours for each of the business units as well as for the three major support areas. About 10 percent of the time is spent on what happened, and 90 percent on what's going to happen. At each MBR, every area forecasts by month, in detail, the balance of the current year and the entire next year's plan. We don't really do a rolling 12-month because with certain things, like salary planning, once you cross year-end, things reset. But we are always forecasting the balance of current year and the plan for the next year. In November, we start locking the plan down for presentation to the board in December, and this will become our official next year's plan. We take, on a monthly basis, about 9 to 10 different passes at next year's plan. And it's done in great detail.

BPM: How do you come up with the forecast?

Schuster: It's all driver-based. Everything we do is about what drives the business. For example, revenue for us is driven by new sales, persistence of existing clients, and changes in rates. We look at each one of those. What drives sales? What drives persistency? Every element has numerous drivers behind it, and these are examined in detail.

The idea is that you have to understand what's driving the business at that level of detail so that you can best learn how to manage it. Because you manage the future -- you don't manage the past. This is the reason that we don't spend a lot of time on what happened, other than to learn from it. We're always comparing our assumptions about what was going to happen with what actually did happen. Why was there a difference, and what does that do to how we now plan to manage the future? It's very analytically driven, very intense, and prior to having an effective tool, we were doing it through hundreds of Excel workbooks.

BPM: Would it be possible to estimate how many individual drivers go into each business unit's forecast?

Schuster: We have drivers and subdrivers and sub-subdrivers. For example, just looking at the sales calculations in one of our business units, we see that there are several pages of calculations of what's driving it. I'd say that collectively, for everything that we're doing, there are thousands of drivers. And we do them each month, for every month remaining in the current year and every month of the next year.

BPM: How many people are involved in doing the forecasts for these drivers?

Schuster: Every business unit and every support area does it.

BPM: Does it tend to be all of the budget managers across the company who are involved or is it at a higher level?

Schuster: It's management across the company. We have 240 active users, and many of them are in the system many times a month. At any given hour of the day, there are 20 to 40 users. There tends to be a period of time when we have to start cranking up before the meeting starts when we'll have 100 users in the system simultaneously.

BPM: How did you do this with spreadsheets?

Schuster: Not very well! Each business unit had multiple spreadsheets. To give you an idea of the level of detail, we do our salary planning and forecasting per person by month, by salary, and then by every component of benefits. Before we put in the Longview solution, I had to use this monstrous Excel workbook -- it was 55 megabytes, 225 linked worksheets -- to try to do these calculations for over 2,000 employees every month.

Excel isn't designed to do that. The new version of Excel has more capacity to handle these monstrous things, but it's just not a good thing. Yes, you can link, you can use macros, but still you're trying to use a PC, a personal computer -- and the key word there is "personal" -- to handle enterprise-wide work. It doesn't comply with Sarbanes-Oxley or the controls over financial reporting that are applicable to the insurance industry. It just wasn't a viable long-term solution.