Breaking down finance silos - inside Fannie Mae's General Ledger transformation project with Workday

Jon Reed Profile picture for user jreed April 7, 2023
Workday's AI/ML Innovation Summit provided a chance to delve into notable projects - including a major Workday Financial Management initiative with Fannie Mae.

Workday customer Fannie Mae at Workday AI/ML Summit
(Fannie Mae at Workday AI/ML Summit)

The Workday AI/ML Innovation Summit sparked compelling discussions - enough to take up a three part video review with Constellation's Holger Mueller and me.

Given the surge in public debate over AI/ML, Workday's enterprise AI plans took center stage - and rightly so.

But I'm always struck by customers running cloud applications at enterprise scale. Innovating around the edges is one thing - but in the enterprise, running mission critical applications at cloud scale is still rarer than you might think - including finance.

I am ultimately swayed by two things: customer impact and customer adoption. Fannie Mae checks those boxes for Workday. Fannie Mae also scored quote-of-the-show honors, via Michael Lee, VP Finance Technology, Fannie Mae:

I'm sure everyone's heard of the saying that 'If you don't have a seat at the table, you're most likely on the menu.'

Putting cloud financials to the scale test

More on that quote shortly. Given I first heard about Fannie Mae's plans with Workday Financial Management in 2020, the progress is notable. As for scale, Bela Kazakhova, VP Loan Accounting,  Fannie Mae told us: Fannie Mae owns or guarantees approximately 27% of total mortgage debt outstanding in the US, with $4.2 trillion on the asset side. In 2022, Fannie Mae's 8,000 employees helped about 2.6 million US households to rent, refinance or buy a home.

In September 2022, Workday shared these stats with us:

  • 90% of Fannie Mae's assets are now managed through Workday's Accounting Center.
  • Time to close is 30% faster.
  • The reconciliation process is 37% faster.

Fannie Mae went live on Workday Financial Management in January 2022. They use Workday's Accounting Center as their accounting engine, Workday Prism Analytics for reporting and Workday as the General Ledger.

Not just a cloud migration - a culture change

But as Michael Lee told us, this is much more than a change in finance software. After a career in "high flying startups," Lee joined Fannie Mae in 2009, to take on the challenge of a large scale transformation:

This wasn't simply about moving to the cloud. It was changing the way we were working. It was figuring out how to change our culture. It was really about, 'How do we get to a next generation architecture?' That's ROI and business-focused outcomes.

The pandemic threw major project curveballs. Lee continued:

In late 2019, I was flying back and forth from Los Angeles to Washington, DC [Fannie Mae's headquarters]. I barely got a chance to know my 400-person technology team. In the midst of all that, the General Ledger transformation started. On top of that whirlwind, we had the great shuffle, remote work at home; this pandemic happened. All the while, Bela and I were trying to marshal 200-plus people from Fannie Mae to commit to this program.

Ambitious projects need strong partnerships:

It's been a heck of a journey. I'm not trying to sound disingenuous; we could not have done it without Workday's [team]. So as Bela said, it started in earnest in March of 2020 at the start of the pandemic, and we celebrated with champagne in May 2022, in-person at our offices.

Lee quipped: "We partied like rock stars." Workday Chief Customer Officer Sheri Rhodes asked Lee about the initial selection process. As Lee told us:

Workday ticked all the boxes for us. Multi-tenant, the data operating model, their cloud native solution to security, especially for a risk averse company like Fannie Mae. I can tell you about all that Workday did to help us on our sustainability initiatives in support of our home buyer and homeowner experience; I could tell you about how it can help us reduce Fannie's carbon footprint. I can tell you about how Workday rallied all of their product engineering teams to help us meet our feature requirements.

But the truth is: what I admired most about Workday was: it has a culture that I wanted to see at Fannie Mae. There is a thing called Conway's Law, where the communication style of a company will mirror the design of a system. And when I saw Workday, I saw a growth mindset; I saw a very well thought out M&A strategy; I saw an agile mindset. And I said, 'That's the company I really want to partner with.'

Overcoming project challenges

Getting to Fannie Mae's scale put the Workday partnership to the test. As Kazakhova explained, we're talking about a billion balances in the subledger, and 250 million journal entries a month, which must be closed monthly:

To be able to process this volume of transactions, we worked closely with Workday to make it happen - to optimize the batch size and to run in parallel. We have a robust presence, and  orchestration framework.

One interesting note: Fannie Mae is using Prism Analytics to do their financial reporting.

We use Prism Analytics to not only do our monthly reporting, we also use Prism Analytics to do external disclosures. Those external disclosures are fed into our external reporting system; they are automatically integrated. And in my opinion, being one of the bigger beneficiaries of this infrastructure today, it's a huge win, because it saves us a lot of time, and a lot of manual efforts that were very taxing on the team - and it expedites the delivery of our quarterly reporting.

As always with such a massive operation, there were complexities to overcome. Kazakhova spoke to the problem of not having an automated tax ledger, "dissecting and cobbling together GAAP records," and business line reporting segments as offline processes. Downstream users couldn't get as much value out of their accounting system; analysis was difficult.

With Workday, and with a GL transformation, we're able to solve many of those problems. We significantly reduced the number of accounts; our naming conventions were insane. You had to have intimate knowledge of that area to be able to pull information from the General Ledger. Our [now] CFO had a mantra: 'Take accounting out of the General Ledger; make it usable for non-accountants.'

So we changed the structure to reduce the number of accounts by 80%...  I love Worktags. That was one of the biggest selling points for me. But we were able to do all that. And now, we have a very integrated close among all the teams. We have over 300 people in our controlling organization, and month-end close is an event. Today, it's very well orchestrated.

My take - collaboration is the true test

So what about Michael Lee's classic "seat at the table" quote? That was provoked by one of the big themes of the Workday AI/ML Innovation Summit: how do you foster collaboration across stakeholder groups, such as IT and finance? As Lee told us:

I'm sure everyone's heard the saying that 'If you don't have a seat at the table, you're most likely on the menu.'.. We were going to have maximum transparency; we were going to have over-communication. We were going to invest in psychological safety. And when we reached an impasse, do it with an agile mindset. Whenever we had an impasse, and we had a lot of them, we stayed and figured it out - and we didn't leave the room until we did.

Executive buy-in was crucial:

Sometimes the conversations went late, but we solved it ultimately. Secondly, we had incredible support from our CIO and our CFO. The importance of having the executive leadership team backing you up - I can't say it enough. Every engineer - I'm one of them. Their dream is to be on a program or a product that delivers on time, on budget, and with a high degree of quality. That's the iron triangle. We achieved all of that on our General Ledger transformation program.

If it wasn't for Workday as a force multiplier, I don't think we would have achieved it. My CIO said afterwards, 'In all the years I've been at Fannie Mae, I've never seen a better executed program.'

During the customer Q&A, Accenture weighed in on the collaboration problem - in particular, how do finance and HR overcome their silos? Colin Anderson, Managing Director at Accenture and Accenture's Digital HR, Planning and People Analytics lead, shared their breakthroughs:

If you were to talk to KC, our CFO, she would tell you that having Workday has totally changed how we run... The easiest example to point to: we use Adaptive [Workday Adaptive Planning] as well; we are huge users of Adaptive. It has singlehandedly been the thing that has brought HR and finance together. Now that we're on calls every two weeks, our CHRO, our CFO, and a couple of us talk about everything that we're seeing in the business, constantly re-forecasting and re-planning, using Adaptive. Whether you're finance or HR, we're opening up the same dashboard. [Author's note: see more on Accenture's project in my prior writeup, Workday AI/ML Innovation Summit - how Accenture shifted to a skills-based organization with Skills Cloud].

As for the inevitable AI question, yes, Fannie Mae is looking hard at the application of AI across many processes. But Lee's take on AI was not a techno sales pitch, or tech for tech's sake. He is clearly thinking about AI in the context of Fannie Mae's data strategy and architecture. Lately, the buzz about AI wizardry on social channels obscures the enterprise reality: your AI will only be as good as your data practices. Lee:

We have formed an AI/ML Leadership Council that is looking at these emergent tools. But we're also looking at how to assess the risk of these tools. Companies are now seeing their production, their crown jewel code, showing up in ChatGPT. That kind of risk is not acceptable at Fannie Mae.

Large enterprises need cloud applications that can handle scale - and provoke/support an entirely different level of collaboration. Markets are moving too fast for annualized reviews and planning. That's why transformations are essential, despite their perils.  But again and again, I take a human element from these stories. The best tech you can buy is nothing without a well-tested partnership: not just with the vendor, but across your own internal teams.

Kazakhova's comments on collaboration echoed this sentiment: build a strong IT-business team, and don't shy away from the tough conversations.

What Michael mentioned about collaboration across the business: our CIO and CFO are very close. And yes, we did have healthy debate... It's not easy. But at the end of the day, we came out much better; we are much closer. We have a very strong relationship, and we know that we are aligned.

Kick tires on other successful projects - I'll bet you'll hear something very similar.

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