Base Currency
It Begins1 2
When you work as a consultant to mid sized and large brains by the hour firms, you are going to travel. And not regional travel within the southwest or southeast of the US of A ... no .. serious travel all over the globe. It's a small market, and you have to go where the clients are .. so have ticket and will travel far.
One morning I was "abroad" at a 2,000 to 3,000 man global firm during an ERP implementation. I had some project management sausage™ to make and had escaped the workshop conference room to a quiet little cubicle in an upper floor. About mid morning one of my favorite senior consultants came by and said "we need you in the conference room". Ruh Roh. That's never good. I asked what's up and "you have to hear it yourself" was the reply. Lovely.
So off we go to the conference room. The client's ERP implementation project manager, controller and some senior accountants were in the room. The client had many companies throughout North America and the world, and on this particular morning they were discussing the configuration of a subsidiary based in .. let's say India.
The consultant asked the controller "please tell me again, what currency do you want to use for the base currency for this company"? "USD" said the controller.
I almost spit out my coffee. "Pardon me" I said, "I am not sure I heard that correctly". "USD" she said.
Well, this was going to be an interesting morning. What time was my project management report due back at HQ? Hmmm ....
Pouring Concrete
If you are not familiar with ERP software, setting the base currency for a company is like pouring concrete. It's going to drive all of the multi-currency calculations for transactions going through the company. Changing it downstream will be extremely painful and costly. You are not going to want to do it. And if you have to do it, the hunt for the innocent will be the first step in the process.
Surely You Jest
So, the questions came quick and heavy from the consultant. What currency does this company use for statutory reporting? "Rupees". What currency do they use to pay their employees? "Rupees". What currency do they use to pay vendors? "Rupees". It was Rupees all the way down.
"And what currency do you want to use as the company's base currency"? "USD".
My mind went to the the scope change I would be soon submitting for the project.
We Have Seen This Movie Before
Why the controller and her staff were requesting USD as the base currency for their Indian subsidiary, and the eventual resolution are stories for later posts. Just note, from my perspective, There Was No One to Blame™.
If you have worked enough ERP implementations, you have seen this movie before in thousands of different variations. At any given organization, business processes3 are .. shall we say ... less than mature. Or, to be more blunt, badly broken. It is par for the course.
Yes, at the firm you founded, or where you are a partner, or where you are employed, you have materially broken processes. Oh, they are not discussed, they are hidden away, and staff put their fingers in the dike to keep the water at bay. But when you need to adapt to the market, implement a business system, etc., they fall out by the dozens. And it hurts. It hurts in $. Costs, constraints on making $. You name it. The pain is real and strategically limiting for the firm.
And it is not limited to professional service firms. But there are unique aspects of brains by the hours firms that put a different flavor on the business process challenge.
The raison d'être of this blog is to explore the "why" of the current state of affairs of professional service firm business processes, the material constraints this imposes upon firms margins, growth and scalability, and what, maybe, can be done about it.
Peace
TUC