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Enron Mail |
This is the process of assessing impact and priorities I mentioned
---------------------- Forwarded by Mike Jordan/LON/ECT on 04/10/2000 14:23= =20 --------------------------- Mike Jordan 26/09/2000 19:18 To: Fernley Dyson/LON/ECT@ECT, Mark Pickering/LON/ECT@ECT, Richard=20 Sage/LON/ECT@ECT cc: Steve Whitaker/LON/ECT@ECT, Sandip Joshi/LON/ECT@ECT=20 Subject: Preparation for tomorrow 's meeting at 9 am ( Fernley FYI ) This is a note we should send to John, Richard, Joe and Michael - explainin= g=20 HOW we are going to justify the program beyond our current agreement in=20 principal! We should go back to them with 1 and 2 reasonably quickly ( Joe and Richard= =20 will be big buyers of 1 at least ) Introduction Enron is expanding rapidly and continuing to grow, both in its current=20 business and in acquiring new business lines This has highlighted a number of problems, not least of which is the lack o= f=20 transparency in the underlying cost structure within Enron We need to focus on the root causes of these costs rather than the symptoms= . Objectives CURRENT COSTBASE - We need to establish each business units' End to End=20 Direct Support costs. See spreadsheet below an example - worksheet "E2E= =20 Direct Support Headcount" MODEL OF COSTBASE AS WE MOVE FORWARD - We need to develop a cost model tha= t=20 will provide A qualitative description of the cost drivers within the organisation, whic= h=20 answers What are we doing - What are the key activities/ functions within each=20 business unit and functions across all business units Why are we doing this - what are the main cost/ activity drivers for carryi= ng=20 out these activities/functions What headcount cost is attributable to each activity/function - Establish = a=20 quantitative cost measure We need to be able to report on current Operational Leverage and Efficiency= =20 ratios=20 Efficiency ratio - what is the percentage of rework for each=20 activity/function - implies an estimate of how far we are from STP process Operational Leverage - Ratio of headcount increase to activity increase USE COSTBASE MODEL TO PREDICT QUANTIFIABLE BENEFITS - using headcount cost= =20 data and ratios We need to understand how many quick hits will accrue from business process= =20 changes to current environment - impact on efficiency ratio We need to understand how functionality developments will change required= =20 headcount cost - impact on operational leverage ratio INVESTMENT COST - the specific costs associated with changing the operating= =20 platform Development costs - people [and hardware] Business analysts=01, time Line management time User time (including time for UAT) Consulting costs [Opportunity cost] PREPARE COST BENEFIT ANALYSIS - use 3 and 4 IDENTIFY QUALITATIVE BENEFITS reduction in operating risk - process will be exception based with up front= =20 controls reduction in number of operational errors Trading errors that should be charged to the Middle Office Client costs Funding errors MO and IT support base focused on value adding tasks More effective management. Better management information. Quicker identification of exceptions should leader to quicker resolution. People benefits - increased job satisfaction as processes are now more=20 investigative Improved control standards as standard processes will stretch across all=20 businesses. Eliminates costs and difficulty of maintaining various systems, e.g.=20 spreadsheets. Easier to cross train staff and provide cover. UTILISE ALL INFORMATION ABOVE TO CALCULATE AN ACTUAL AND TARGET UNIT COST P= ER=20 TRANSACTION ( VANILLA AND COMPLEX ) AND MONITOR AS KEY SUCCESS FACTOR FROM= =20 PROGAM The spreadsheet below shows what we should be looking to complete - workshe= et=20 "Costs Model Input". We need to do this by product - ONE SPREADSHEET PER= =20 PRODUCT EXAMPLE!! - Sally, this is updated now Next steps -=20 Confirm Scope E2E direct support costs - Enron Europe Limited Cost model Middle office Products Gas Power Credit Structured Commodities IT Not in scope - although could be expanded EGM Metals EES EBS EIM Steps and responsibilities - for 1and 2 E2E direct support costs - FinOps Establish and agree scope - Mike Jordan/ Steve Whitaker Define departmental activities - Initial draft - Steve Whitaker/ Sandip Jos= hi Confirm Departmental activities - Department heads - James New, Ian Sloman,= =20 Gail Hill etc. Determine key drivers for each activity for each product - departmental hea= ds Add weightings to each driver - Departmental Heads Collate information - Sandip Joshi Consolidate spreadsheets and send back for comments - Sandip Joshi Plan for steps 3+ Steve and Mike
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