Fun. Quirky. Weird. These are just some of the core values at Zappos. Words like these are probably not the first that come to mind when you think about restructuring corporate hierarchy to overhaul processes. Nonetheless, the challenge of finding the right solution for workstreams and processes made for an interesting story at the annual Planful Perform conference, told by Jeremy Mann, Director of Finance & Technology at Zappos.
As owner of planning and reporting across the full P&L, Mann’s role transitioned over to the technology team last September. Mann isn’t new to technology. In his prior role at NASDAQ, he developed a platform that shifted away from reliance on internal tools dependent on Excel dashboards.
Zappos was the first online shoe specialist retailer, founded in 1999, before expanding to clothing and home goods. Acquired by Amazon ten years later, Mann noted that the company has retained the ability to operate completely autonomously from Amazon.
Experimenting with holacracy
Zappos’ first CEO, Tony Shea, introduced a decentralized structure of holacracy in 2014, with each team responsible for its own work and decision-making. Holacracy is based on the idea that people are more motivated and productive when they are given the freedom to make their own decisions and take ownership of their work. However, it brought its own set of challenges. As Mann observed:
Each individual team would act as their own business, with your little mini-CEOs of every single department. In a utopian society it could be perfect. The biggest difficulty with holacracy was trying to consolidate all of those financials, all that planning - all the 600 different ‘circles’: little businesses that we had to consolidate up and translate into Amazon financials as well. On top of that, there were no tools or platforms out there that can handle the holacracy budget planning process, with 600 circles spending whatever they really want.
In order to manage this, a team of engineers and contractors built out a CFO tool for operation expenditure (Opex) forecasting and reporting, for which Mann subsequently became product owner. This still made for a complex (and costly) experience for the finance team. Mann elaborated:
We had to separate salaries and wages out of it, because we had this whole concept called ‘people points’. Back in the day, there was no other platform that could allocate costs based on a percentage, for example if you were working on seven different teams and you wanted to allocate 10% of your time to this one and 5% of your time to another, to those costs. So we had a lot of offline Excel processes while still pulling from this tool, our ERP system and our Workday system. So that created a lot of overhead in time for our finance team.
By 2021, Zappos decided as a company not to continue down the path of holacracy, and planned the move to a more traditional financial and organizational hierarchy. This was also an opportunity to decide whether to continue investing in the current CFO tool, or look for a platform that would be able to support a more structured organization.
Outlining the criteria for the Request for Proposal (RFP) process, Mann listed several important priorities:
We really wanted to utilize an out-of the box solution to support our needs as an organization, while also creating operational efficiencies that would help with our month-end close process, our NBRs, our QBRs, business partner reviews, top line planning, [and] workforce planning.
The decision came down to three major platforms. Mann elaborated that an important factor was the need for seamless integration with other systems, given the scale of investment. Part of the decision making process was to understand whether a fully customizable system would cost more from ongoing maintenance, ongoing support and a knowledge team to be able to provide that support, describing it as “a double-edged sword”. Planful, however, proved to be intriguing:
What intrigued us was that Planful, as you all know, has structured planning as well as dynamic planning. They have standardized templates, you can really tie into what's really standard across industry, what's easy to be able to be templatized, but if you really want to get into more difficult planning processes or anything more sophisticated, you can really lean into dynamic planning. That's really what led to the decision for us personally, to go with Planful.
Implementation began in October 2022, with a launch on January 1, 2023 to start the budget season - by moving away from the existing Opex tool to doing top-line planning to day-to-day expenditure in Planful. This was followed by workforce planning. Mann identified some quick wins immediately in Planful’s metadata repository:
We at Zappos have never had a single database that serves as a source of truth for company hierarchies between General Ledger accounts, cost centers, channels and vendors… So the metadata repository - having that single source of truth is the most important gain that we're going to get and we are already realizing it.
Not only does it help you quickly build reporting that can be sliced in many different ways as desired, it speeds up your ad-hoc reporting, saves about 10 to 15% of our analyst time, over 1000 hours annually, that could lead to anywhere about $65-70,000 a year on, just pulling data from different systems. Because the data is drillable.”
Getting planning right - data lessons learned
Mann stressed at this point that cost savings or reducing headcount was not the goal. Rather, the time saved was able to be repurposed into “more value add” so that analysts could spend more time with partners, understand their business better, and drive those partnerships forward. Zappos has gone from needing a full business day every quarter for top-down planning, with manual inputs and unreliable data, to an hour for a consolidated quick view.
Additional benefits have been seen by Zappos leadership team. Every time a report was produced before the Planful implementation, a question from the leadership team would mean going back to the drawing board for another day’s work on a report. Now?
They don't have to ask those questions. They can go and drill down themselves. That's what they want to do. They're very self-service. And that's what they're really bagging out of this.
The revenue and cost of goods planning system has also been transformed - going from three different forecasts for merchandise, portfolio and finance, to one cloud-based system with a one-stop shop. Mann’s anecdote of searching through offline Excel files and frantically checking date timestamps raised a knowing laugh from the audience.
In hindsight, Mann reflected that workforce planning would have been the first task for implementation as this turned out to be one of the easy quick wins. The second lesson was change management. Mann stressed that strong communication from the leadership team to emphasize the change imperative helped to get staff on board. Additionally, there was a lot of value from the finance team using their voice to share quick wins:
There's a lot of challenges there that you're going to have with the organization internally talking about competing priorities. I would stress more about really devoting the time and effort into your finance team to be the subject matter experts so that when you do take it to your business leaders, your finance team can help them through their change management. Not just from a change of a tool, but from a change of a process as well.
The last point? Choose the right partner.
One of the biggest things is the implementation partners that you have for it . That's probably the most important part that I can heavily stress throughout this process, not just from ongoing implementation, or just from getting all set up - but ongoing; anytime you want to continue down that path for it. You have the experts that know exactly what they did to be able to implement that - and we found wonderful partners.