Organisations that strive to stay fiscally flexible have historically responded better to changing market dynamics. These companies tend to complete more of their strategic initiatives successfully than their slower, less agile counterparts. However, these agile organisations are increasingly rare.
With organisations often reporting that many projects are not aligned to strategy, this may be a result of a lack of involvement by C-suite executives in the planning and execution processes. Rather than micromanaging, or alternatively, going missing, executives should identify and focus on the key initiatives and projects that are strategically relevant to their vertical. A number of companies either lack the skills or fail to deploy the personnel needed for strategy implementation.
The void caused by lack of agility and strategic alignment leaves organisations unable to take advantage of expected economic growth, to react to strategic shifts in customer expectations and demands, and to mitigate project dollars lost.
In a research conducted by the Project Management Institute, high-performing organisations successfully completed 89 percent of their projects, while low performers completed only 36 percent successfully. This difference in success results in high-performing organisations wasting nearly 12 times less than low performers.
The CFO-CIO integration
CFOs have traditionally dedicated the majority of their time to complex financial systems, processing transactions and budgets. This has left CFOs essentially ‘keeping the lights on’ with little time to invest in value-added activities. Conversely, CIOs are consistently evaluated on IT project management skills or the monetary results of their implementations. These days, C-level IT staff are moving from the IT department and into the boardroom to lead enterprise-wide projects.
The inevitable march from the shelter of the department out into the boardroom may seem intimidating for the CFO or CIO. However, success can be found in collaborative efforts between these two roles. The CFO and CIO are best suited to tackle corporate performance improvement and performance management projects and implementations as a duo. A finance background paired with tech-savvy know-how will lead the next generation of corporations. Both roles will thrive from such collaborative efforts and will turn their functions from simply reactive to strategic and forward thinking.
Budgeting, reporting and consolidation
Muhammad Salahuddin, Chief Financial Officer, Giga Communications, presents a candid overview of the main aspects used to determine finance performance. “During the budgeting process CFOs must be effective communicators,” he says. “If employees are still thinking of the CFO as a bean counter, they are doing something fundamentally wrong in the performance of their duties. With the help of ERPs or good budgeting and planning software, the figure work of budgeting exercise is taken care of, however, the ability to see the unseen and a good skill to collate and present the data are not there.
“Reporting is a critical part of any business and this data needs to be accurate and timely in order to understand their company’s financial performance. In some businesses, the CFO may be responsible for compiling these statements,” Salahuddin continues. “In other companies, they oversee accounting personnel to insure timely and accurate monthly financial statements. But the CFO is not simply responsible for handing over spreadsheets. The data should include metrics like variance against budget, percentage and dollar changes against historical averages, changes against prior period numbers, and so on. Aside from monthly reporting, they should be responsible for implementing and updating dashboards to monitor key performance indicators or metrics. They should conduct monthly review meetings with business owners, CEOs and managers which include a review of the financials to identify trends and discuss areas for improvement.”
Salahuddin goes on to highlight the importance of the impact that these shifts have on a company’s internal processes. “Research shows that the consolidation and close process is still time consuming and error-prone, with many companies taking 11 to 20 days to close the books each month. This is a huge time drain, especially on finance and accounting departments with limited budgets. The manual gathering and validation of spreadsheets leads to quality issues and late submissions.”
In most cases, a company perceives a process as a recursive ‘series of actions’ or tasks executed in a closed loop fashion – as opposed to a linear process which is a ‘one shot deal’. The cycle time of a recursive process may vary greatly depending on the application. In terms of financial and economic application, process management is long and taxing.
The performance of industrial control loops directly affects company profitability and operability in several ways including stability, robustness and safety as well as cost, efficiency and the maximum rate of production. Optimising the performance of regulatory controls requires knowledge of the process and control systems, the right tools for the job, and most importantly, a systematic approach to follow.
Regular investigation into processes and performance status should be done to determine if improvement is needed. Resulting metrics should be compared to past investigations to see if improvement projects are warranted.
It is important, particularly in the finance industry, that the metrics upon which process health is judged are chosen with consideration, based on the product, consumers and geographic location of the business. Metrics used can include quality, error count, time, cost and revenue, but should be limited due to task crossover between metrics.
Areas of improvement
Automating processes helps to minimise potential errors and the amount of manual work. Companies should administer a better backup process and get built-in security features, which is a huge turnaround from spreadsheets. Automation in areas such as allocation, intercompany eliminations, data import and reclassifications can save time, and ultimately, money. Automated performance tracking in particular is key. Automating these processes can give real-time information and reporting, rather than waiting to ‘massage’ the information out of a traditional spreadsheet.
Data visualisation generates relevant information. When data is put into an easily consumable format, trends that may not be obvious when viewing a spreadsheet become apparent. Generally, managers are more likely to provide information needed to impact critical decisions when visual analytic tools are provided. Ultimately, this adds strategic value to the organisation.
The only way to run a business is by donning an optimistic economic outlook. But the shifts in customer landscape and the global market environment remain complex. As a result, organisations must consider a multitude of factors to stay competitive and improve their bottom line. Focusing on the successful execution of strategic initiatives via projects and programmes mitigates lost profit and allows for effective responses to the forecasted shifts in today’s tricky environment.