How Master Data Management Unified Financial Reporting at Nationwide Insurance

As Nationwide grew, its data became siloed and scattered, making it increasingly difficult for the company to get an accurate picture of its finances. Here's how it brought all that data into focus.

In a span of three short years, between 2000 and 2002, Nationwide Insurance got a new CEO, CIO and CFO. Jerry Jurgensen, elected by Nationwide's board in 2000 to replace the retiring CEO, was hired for his financial acumen and his ability to transform a business's culture.

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Michael Keller was named the company's first enterprisewide CIO the following year. He had 25 years of IT experience managing big infrastructure and systems integration projects. In 2002, Robert Rosholt replaced the retiring CFO and joined the others in Nationwide's Columbus headquarters, bringing along deep experience in all things financial.

The three were old buddies who had worked together at financial giant Bank One. Now they held the reins at Nationwide and their goal was to take its dozens of business units, selling a diverse set of insurance and financial products, to a higher level. In 2001, Nationwide was profitable to the tune of $138 million and board members had billion-dollar aspirations for that line item.

But to get there, Jurgensen needed financial snapshots of how Nationwide was doing at any given moment. And getting them wasn't so easy.

In fact, it was almost impossible.

The Fog of Finance

"When you're dealing with 14 general ledger platforms and over 50 applications," Rosholt says, "it was enormous work to get the financials out."

The problem lay knotted in a tangle of systems and applications, and some 240 sources of financial data flowing in and around Nationwide's business units. The units had always run independently, and that's how financial reporting was handled. "There was a variety of [financial reporting] languages," Rosholt says, which affected Nationwide's ability to forecast, budget and report. "It was difficult," says Rosholt, to ask, "How are we doing?" Keller's situation was no better.

"One of the first questions I was asked when I joined was, How much money do we spend, total, on IT?" Keller recalls. "The answer was, we didn't know. It took weeks to put that answer together."

Inside Nationwide

Nationwide Insurance, a diversified insurance and financial services company

Headquarters: Columbus, Ohio

Revenue: $160 billion in assets; $21 billion in annual revenues

CEO: Jerry Jurgensen

CFO: Robert A. Rosholt

CIO: Michael Keller

Employees: 36,000

IT Employees: 5,500

Focus Project Fast Facts: 280 team members worked 1.2 million man hours (including overtime) over 24 months

Jurgensen wanted to be able to run Nationwide as if it were one unified enterprise. He wanted, in Rosholt's words, "to do things that are common, and respect the things that are different. And that was a big change." Indeed, the transformation the company embarked upon in early 2004 was daunting—a master data management makeover that would alter how every Nationwide business reported its financials, how accounting personnel did their jobs, how data was governed and by whom, and how the company's information systems would pull all that together. The goal was simple: one platform; one version of the financial truth. Simple goal. But a difficult challenge.

What Is Master Data Management?

Master data management projects come in all shapes and sizes. Most often, MDM addresses customer data management requirements, hence the term customer data integration, or CDI, which is often used interchangeably with MDM, though many contend the concepts differ. But MDM, as it's now used, boils down to a set of processes and technologies that help enterprises better manage their data flow, its integrity and synchronization. At the core is a governance mechanism by which data policies and definitions can be enforced on an enterprise scale.

The result is much more than just clean data. MDM offers companies a tantalizing vision: a "single version of the truth" gathered from vast databases of internal assets, says James Kobielus, principal analyst of data management at market researcher Current Analysis. Heard it all before? "MDM is a relatively new term for a timeless concern," Kobielus concedes. That hasn't tempered vendor enthusiasm. Vendors of all stripes—BI, data warehousing, data management, performance management, CRM, ERP—are rolling out their disparate products under the MDM banner. Forrester reports that MDM license and service revenue from software vendors and systems integrators will grow from $1.1 billion in 2006 to more than $6.6 billion in 2010.

Even with all the vendor buzz, research conducted last year shows that CIOs are struggling with data management: 75 percent of 162 CIOs surveyed by Accenture said they want to develop an overall information management strategy in the next three years in order to "leverage that data for strategic advantage." But a Forrester Consulting survey of 407 senior IT decision makers at companies with more than $250 million in annual revenues found that manual efforts remain the dominant approach for integrating data silos.

That's because an MDM transformation is as much about mastering change management as it is about data management. As Kobielus says, "In the hyper-siloed real world of enterprise networking, master data is scattered all over creation and subjected to a fragmented, inconsistent, rickety set of manual and automated processes." Good master data governance can happen only when the various constituencies that own the data sources agree on a common set of definitions, rules and synchronized procedures, all of which requires a degree of political maneuvering that's not for the faint of heart.

Nationwide's MDM Toolbox

Nationwide Insurance's master data management project required the integration of its back-office systems and front-end user interfaces. Here's a look at the key players:

BACK END

  • EMC storage technologies
  • Informatica data management and integration platforms
  • Kalido workflow software and MDM repository technologies
  • Oracle databases
  • Teradata enterprise data warehouse

FRONT END

  • Hyperion planning and reporting tools
  • IBM Websphere integration software
  • Microsoft financial applications
  • PeopleSoft ERP general ledger, performance management and reporting applications

Nationwide began its finance transformation program, which included its MDM initiative, called Focus, with its eyes wide open. The executive troika of Jurgensen, Rosholt and Keller had pulled off a similar project at Bank One and thought it knew how to avoid the big mistakes. That, in part, is why Rosholt, who had ultimate say on the project, would not budge on its 24-month time line. "The most important aspect was sticking to discipline and not wavering," he recalls. And that's why the technology piece was, from the outset, the last question to be addressed.

"It wasn't a technology project," insists Lynda Butler, whose VP of performance management position was created to oversee Focus (which stands for Faster, Online, Customer-driven, User-friendly, Streamlined). She says that Nationwide approached MDM first and foremost as a business and financial project.

Nationwide considers the project, which made its deadline, a success, although everyone interviewed for this article stresses that there's more work to be done. Says Keller: "There's a foundation to build on where there wasn't one before."

Getting Started on MDM

"Fourteen general ledgers, 12 reporting tools, 17 financial data repositories and 300,000 spreadsheets were used in finance," says Butler. "That's not real conducive to 'one version of the truth.'"

Early in his tenure as CEO, Jurgensen's concerns about the company's financials weren't limited to the timeliness of the data; he was also worried about its integrity and accuracy. He and other execs knew that faster access to more comprehensive data sets would allow for better trend analysis and forecasting decisions, and strengthen budgeting, reporting and accounting processes. For example, because Nationwide had such a variety of businesses, the company carried a lot of risk—some easily visible, some not. "So, if equity markets went down, we were exposed," notes Butler. "But we didn't realize that until the markets actually went down. We needed some enterprise view of the world."

One of Nationwide's subsidiaries, Nationwide Financial Services, is a public company and has the requisite regulatory and compliance responsibilities (such as Sarbanes-Oxley), but the rest of Nationwide Insurance is a mutual company owned by its policyholders, and doesn't have those requirements. Rosholt says the entire company will move to Sarbox-like requirements by 2010, and the Focus project provided a kick-start to unifying the rest of the company's financials to accommodate more stringent accounting practices.

Executives also knew that common data definitions among all the business units would provide comparable financial data for analysis (which was difficult, if not impossible, without those definitions). "We needed consistent data across the organization," Rosholt says. "We were looking for one book of record."

The Focus project team began envisioning the scope and plan in January 2004. Rosholt handed off day-to-day responsibilities on the finance side to Butler, his "change champion," who had worked in corporate headquarters and in a business unit. "I had the dual perspective and see both the needs of the businesses versus the needs of the enterprise," she says. "I could play devil's advocate with myself."

CFO Rosholt went back to his Bank One roots and recruited Vikas Gopal, who had proven his mettle on similar projects, to lead the IT team. All together, Butler and Gopal would have 280 project management, finance and IT folks working on the transformation.

Vast Project, Defined Rules

Rosholt was the business sponsor (with Jurgensen providing high-level support), and he laid down several rules at the start. The first was that he was not going to budge on the 24-month schedule. "When you take longer, you don't get that much more done; you just burn people out, spend more money, and it's more frustrating," Rosholt says. "So you set stretch goals and go after it."

With no wiggle room on the time line, the team, with Rosholt's encouragement, followed what it refers to as the "80/20" rule. It knew that it wasn't going to get 100 percent of the desired functionality of the new MDM system, so the team decided that if it could get roughly 80 percent of the project up and running in 24 months, it could fix the remaining 20 percent later. "If we went after perfection," says Rosholt, "we'd still be at it."

Keeping in mind that no one would get everything he wanted, the Focus team interviewed key stakeholders in Nationwide's business units to understand where their pain points were. "We went back to basics," says Gopal. "We said, 'Let's talk about your financial systems, how they help your decision making.'" The team then determined where senior management wanted to focus and presented it with a choice of 10 different financial competencies. "Do we want to be the best company that does transaction recording? Or enterprise risk? Or analytics?" Gopal says.

In other words, people were introduced to the concept of making trade-offs, which allowed the Focus team to target the system's core functionalities and keep control over the project's scope.

You Say Tomato; I Say Tomahto

After interviewing the key stakeholders and identifying the core functionalities—business planning, capital optimization, risk management, analysis and interpretation, record and reporting, organizational management, stakeholder management and accounting policy management—the next thing the team did was create a data governance system. The system instituted repeatable processes and specific rules for compiling, analyzing and reporting the financial data on both a business-unit level and an enterprise level. The process would take place on a daily basis and would touch all of the back-end systems (for example, the PeopleSoft ERP system) and the front-end (Hyperion and Microsoft financial applications). "Pre-Focus, there was no data governance," Butler says. "We had to put in some policies, rules and procedures [for managing the data] at the top of the house, which at times has had a contentious relationship with the business units." In other words, business units had run independently for so long, with their own definitions and own bookkeeping methods, they couldn't see the value in common data sets.

Nationwide formed a data governance group whose members, from finance and IT, would be the "keepers of the book of record," the rules of the MDM system, Gopal notes. The group's charge was to figure out how each business unit's financial data definitions would transform into data sets that could be standardized and imported into the MDM financial system. But first, because there were hundreds of sources and classifications of data, it was critical that the various business-unit stakeholders on the data governance team agree on definitions. If there are two different ways to classify one data set—for example, if one unit calls a Nationwide product "Standard Auto" and another calls the same product "Std Auto," or similar differences in defining "purchase order," "invoice" or "customer"—then the system is worthless. "You simply cannot have both," Gopal says.

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