BPM: How, then, would that forecast translate into the development of detailed business-unit budgets?

Smith: In my view, at the end of the day, a budget process at any company is a political process. I have to say it's no different at GT than anywhere else I've worked. It usually starts with some kind of top-down view of the organization and what kinds of results and stretch goals the senior management team establishes for the company. We had an annual budgeting process. The CEO and I would set a sales target based on reasonable forecasts of what we thought our bookings were going to be. We'd plan on a budget of whatever it was — say, $X hundred million in sales — and then we'd prepare another budget that was at 80 percent of that and then a stretch budget that could be as much as 150 percent of that.

We'd ask the managers, based on our high-level assumptions, “Tell me how many people you need in manufacturing. Tell me how many labor hours you need, how many shifts you've got to run, how much material you have to buy.” That was one part of it. The other part, particularly in engineering, was, “OK, we want you to work on these four or five new products this year.” So we would have them budget for that.

BPM: How did you generate the three different budgets?

Smith: Well, there were two ways. One was in the planning application itself. Out of the box, it comes with several dimensions, which actually enables you to take the data and say, “OK, give me a plan at 80 percent of target” or “Give me a plan at 150 percent.” It literally calculates 80 percent of the projected number or 150 percent of that number, so it quickly gives you an idea of what all the budgets might look like.

But we didn't want to do that because it's not really true. Things don't really work that way. So we asked the line-of-business managers to do targets and then to do another iteration at 80 or 150 percent of plan.

BPM: Every manager generated three budgets?

Smith: Yes. And once we had the analytical capability of Hyperion and a little template, it was really pretty easy to do. It was not a lot more work for the managers to create three budgets. I've been in situations where people do it in Excel. It can get pretty ugly and time-consuming. But with this kind of tool, right out of the box all of managers' head counts, all their salary information, and certain other kinds of information can be preloaded and prepopulated for them.

BPM: So they would get it preloaded with the data for the present year and then they would project the next year off of that?

Smith: Yes. We already had information preloaded for every employee in the company, and for all the overhead rates, inflation rates, social security, and taxes. All that was done for the managers. So they could spend more time really thinking about, not just how to build the budget, but “OK, what do I really need? What are the key drivers, and what are my key assumptions?”

BPM: What kind of budgeting process did you use before Hyperion?

Smith: Before we migrated we just used Excel.

BPM: Did the managers create three different budgets in Excel too? That must have taken a while!

Smith: Yes, absolutely. Last year I was amazed. From the time we rolled out our budget to the managers to the time we presented our first draft to the board took two weeks. Which is pretty remarkable.