How Master Data Management Unified Financial Reporting at Nationwide Insurance

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.

Another, more complex example is how business units defined geographic information. Gopal says that different applications had geography rolled up differently (for example, Eastern/Western or Northeast/Midwest). But in various applications, Illinois could have been in the Western region and in others it could have been in the Midwestern region. “Aggregating data from various sources, taking in the ‘rolled up’ level, made [achieving] an enterprise [view] very difficult,” Gopal says. Even with a mature data governance program, he notes, the classification and reclassification process is “never ending” because there are always “people coming back with creative ideas on how you can improve the workflow [of the MDM system] to work better with the applications.”

Tool Time

It was only after the requirements, definitions and parameters were mapped out that Gopal’s group began looking at technologies. Gopal had two rules to guide them: First, all financial-related systems had to be subscribers to the central book of record. Second, none of the master data in any of the financial applications could ever be out of sync. So the Focus team’s final step was to evaluate technologies that would follow and enforce those rules.

The team reasoned that it had neither the time nor the inclination to invent MDM technology at Nationwide. “We wanted to start off on the right footing from a TCO perspective; with only 24 months you don’t have a ton of time to build a lot of stuff,” Gopal says. His team sought out best-of-breed MDM toolsets from vendors such as Kalido and Teradata that would be able to tie into their existing systems. (See “Nationwide’s MDM Toolbox” for a brief description of the technologies that make Focus work.) Gopal wasn’t overly “worried about [technology] execution” because he had assembled this type of system before and knew that the technology solutions on the market, even in the most vanilla forms, were robust enough for Nationwide’s needs.

What did worry him was Nationwide’s legion of financial employees who didn’t relish the idea of changing the way they went about their work.

The Culture Wars

Though Jurgensen, Rosholt and Keller weren’t involved in the day-to-day minutiae that accompanies a massive project such as Focus, it was never far from their minds. The Focus team needed their support at almost every turn. A transformation unlike anything the 36,000 Nationwide Insurance employees had ever seen was at hand. Rosholt knew he had to make one of the most important sales of his career. “You have to sell the vision, and the benefits,” he says. The most difficult part was getting everyone to take their medicine because it was good for the enterprise. “In some businesses, it wasn’t a ‘win-win,'” Rosholt says. “In the smaller, more compact businesses, they’d say, ‘I’ve got a very simple system and we’ve been working on this for 15 years. Why are you disrupting my life?'” And to a degree, Rosholt felt their pain. “You really couldn’t make a strong argument that the way they live today is going to be dramatically better, because a lot of it was about the enterprise,” he says.

At the beginning of the program, Nationwide formed a “One Finance Family” program that tried to unify all the finance folks around Focus. Executives were also able to identify those employees who were most affected through weekly “change meetings” and provide support. In addition, executives placed dedicated communications personnel who were responsible for communicating and managing change through the meetings and media channels.

The Focus team had to remain resolute. The overarching theme, that there would be no compromise in data quality and integrity, was repeated early and often, and execs made sure that the gravity of the change was communicated before anyone saw any new software.

Finally, in March 2005, with three waves of planned deployments ahead of it, the team started rolling out the new Focus system.

One of the first businesses to make the transition was one of CIO Keller’s divisions, Nationwide Shared Services, which handles document services and sourcing, among other functions. (His IT division also was an early adopter.)

“We were a guinea pig,” he recalls. “We had pretty good [financial] systems and were able to do what we needed to do, pre-Focus. We wanted parity to do what we did before. It’s a harder sell to people who weren’t getting the business benefits.” But it was clear that Focus was the better—and only—way.

Wednesday Night Pizza

Transformational IT projects, with spirited kickoff parties, awkward executive speeches and quirky gifts for the project team (T-shirts saying “I Survived Focus”) are infamous for a precipitous drop in enthusiasm shortly after launch. Both Rosholt and Keller have seen their fair share of good and bad projects. “We’ve seen it all,” Rosholt says.

Keller’s experience not only taught him about the need for high-level sponsorship but also the necessity for creating a forum for ongoing discussions. This was especially critical for Focus because, by nature, MDM transformations require continuous debate and dialog regarding changes to how employees describe, manipulate and share the very data that defines their jobs. Thus was born Wednesday Night Pizza, a weekly gathering of the executive steering committee members (CFOs, finance controllers, and IT leaders and project managers). The meetings started at 5 p.m. and occasionally ran until 10 p.m. “Rarely did it last less than two or three hours,” Rosholt says. “We would bang through all the issues that changed every day.” Team members sat face to face, over pizza, and worked through key change management and data governance challenges, always sticking to the 80/20 rule and always with a silent nod to the immutable 24-month deadline.

The fact that Rosholt was a regular attendee was not lost on anyone. “Having the clarity of what outcomes you need and having [Rosholt’s] decision making weekly was absolutely critical,” Keller says. Or as Gopal puts it, “We needed that hammer to remove some of the bottlenecks.”

Looking back, Rosholt says the cost of the pizza was a cheap price for what the group accomplished every Wednesday. “There were so many lessons learned on the issues around change management and communication and how you line people up to do their jobs,” he says.

On those front lines, the work was grueling. “There were some days we wondered if there would be a light at the end of the tunnel, and were we ever going to get through this?” recalls Butler. “We had two years. The clock was ticking.”

Keller was acutely aware of the demands on his IT group. “Were there any times when people were working weekends and holidays and the schedule got questioned? Yes,” he says. In fact, according to Keller, the 280 or so members of the IT team eventually would put in 1.2 million hours, including overtime, on the project.

But by fall 2005, there was light at the end of the tunnel. The team could see the new business processes and financial data governance mechanisms actually being used by Nationwide employees. And it all was working. “They saw the value they were creating,” recalls Butler. “The ‘aha’ moment came when we finally got a chance to look in the rear-view mirror.”

At Last, the ROI

That happy “aha” moment didn’t last long. More than a year after the final wave of Focus was rolled out to the last business unit, the team is still working to finish that remaining 20 percent of functionality, those requests that were set aside during the initial push and watching as data volume on the system reached more than 150 million financial transactions per month.

“Do [the executives] have things they would have loved for us to go after, to get to the next level of evolution? I think so,” says Gopal. Improvements to the system, including enhancements to depth at which executives can dig into the financial data, are ongoing, Gopal notes. “We’ve come a hundred miles, and we have another hundred to go.”

Nationwide execs concede that the system is still evolving but say substantial gains are everywhere. The first benefit of the transformation that Rosholt mentions is something that didn’t happen. “You go through a project such as this, in a period of extreme regulatory and accounting oversight, and these things can cough up more issues, such as earnings restatements. We’ve avoided that,” he says. “That doesn’t mean we’re perfect, but that’s one thing everyone’s amazed at. We went through all this change and nothing coughed up. Our balance sheet was right.” Therefore, Nationwide has one less thing to worry about, one more thing to be confident about.

Next, Rosholt notes that users of the Focus system are experimenting with its new features. For example, Nationwide’s Scottsdale Insurance business unit will soon be able to identify and analyze its most profitable customers. “All of this used to be in an Excel spreadsheet that they always had to reconcile into the financials,” Rosholt says. “Now we can understand what value proposition we bring our customers and what value proposition our customers bring us. This is a big change for our industry.”Nationwide now also has the flexibility to change the regional structures in how it designates its core lines of businesses. For example, Rosholt says that when executives decide to install a new geographic-based reporting structure in the property and casualty insurance operations, moving a business line from one state or region (Midwest) to another (Northeast), the process “would have taken nine months,” he says. Now it takes just a couple of days. The end result is that execs and business-unit managers can now get a clearer and more accurate picture of how Nationwide’s state and regional lines are doing—and get it much faster.

Last, but certainly not least, Rosholt can now give Jurgensen a more immediate, accurate and comprehensive picture of Nationwide’s financial health.

It took nearly 30 days to close Nationwide’s books for 2006. With the new system in place, the amount of time necessary has declined significantly: 19 days to close Q1 2007; 16 days for Q2; 15 days for Q3. The target is to get that down below 10 days by 2010.

As for the goal to grow Nationwide’s net income, the company recorded $1.1 billion in 2005 and topped that with $2.1 billion in 2006. For those on the Focus team, that’s the kind of financial news that is always a pleasure to deliver to senior executives.

“It’s nice,” says Butler, “when they can see their financials in a timely manner.”