Argentina and the truthiness of government statistics

Argentina was recently in the news for being in trouble with the International Monetary Fund (IMF).  It seems that the IMF, and many others, have an issue with the truthfulness of Argentina's government issued statistics, particularly with the stated inflation rate.  In 2012, the official inflation rate as determined by the government was 10%.  However, many private economists, both in Argentina and elsewhere, think the actual inflation rate is around 25% per year.

For the multinational looking at countries to locate operations, including Shared Services, the actual and expected inflation rate for a country is a critical factor in determining labor costs.  To that end, it's critical to have an understanding of the true economic factors of a country and city before committing to a long-term presence there.  So if you can't completely trust a country's published economic information, how can a company be sure that the data, particularly labor costs, it incorporates into its business case are reliable?  Here are three ways to corroborate, or refute, labor cost information published by a government:

1. For a first cut look at salaries, there are free resources such as Glassdoor that can give you some sense of the salaries in a particular country or city.  This data is unlikely to meet all of your data requirements, but it can give you a sense if the government published numbers are reasonable.
2. For a more comprehensive survey of global salaries, you can purchase information from companies that specialize in this type of information.  One example is Mercer, and their global salary survey.
3. A third option, if you have access to a consulting firm, is to get their take on particular countries and cities.  As an added bonus, they may be able to set up a call with one or more of their clients in that country or city to get a first hand assessment of life on the ground.

These options are by no means mutually exclusive, and it's likely that you'll incorporate one or more of them into your analysis.  It's important not to take government statistics at face value, even for more industrialized countries.  It's important to trust but verify.

Aligning IT investments with Finance priorities

It's no secret that technology plays a key role in the achievement of high performance in the Finance organization.  Technology is a strong tool in creating standard and efficient processes, and in driving cost out of those processes.  What may be a secret, at least to some people, is how technology investments in the Finance organization are prioritized, funded and monitored. 

I'm currently reading IT Savvyby Peter Weill and Jeanne Ross.  (By the way, it's an excellent read and I highly recommend it.)  In the book they discuss the BT Group, a global telecommunications company and how BT approaches IT funding.  According to the authors there are three areas of focus:

1. Establish clear priorities and criteria for IT investments,
2. Develop a transparent process for assessing potential projects and allocating resources, and
3. Monitor the impact of prior investment decisions

This is a useful framework for a company's Finance organization to use when evaluating IT investments.  Unfortunately, while most of my clients would agree with the framework, my experience tells me that many organizations find the execution of this model difficult.

Nothing happens in a vacuum, and Finance must be part of a broader governance structure that evaluates potential IT investments.  However, Finance must develop a position on its strategy and the technology required to implement that strategy.  Finance should be bringing their investment priorities to the IT governance committee(s).  In order to do that, Finance needs a clear vision of their IT priorities, and that can only come about if Finance has a strong and clear vision about its role in the organization and how it delivers value to the operating units.

Developing transparency in an organization is usually difficult.  However, it's important for all stakeholders of Finance to understand how decisions are made.  That means understanding the vision and how technology supports that vision, but it also means establishing criteria that objectively analyzes the advantages and disadvantages of a particular technology investment.  Every proposed initiative should have a business case that clear details the reason for the initiative, the anticipated investments and future cash flows, as well as the risks and assumptions of the initiative.  The criteria should be openly communicated so that everyone is approaching IT investments from the same perspective.

Perhaps more than the other two areas, the ability to monitor and accurately assess the value of IT investments is an area that companies struggle with.  In large part it's because these companies haven't made it a priority to formally assess returns on IT investments.  The smart companies have put a governance structure in place to monitor these investments and determine to what extent they have fulfilled the promises of the business case.  Learnings from this analysis create a feedback loop for future IT investments and the business cases that support them.

Every Finance organization should take the lead on developing a perspective around the technology investments required to execute on its strategy.  Working in a partnership with the IT group, Finance can ensure that its perspective on IT investments is properly represented, funded and monitored.