Jonathan Marcer continues his CFO blog series.
How good would it be if, from a business and finance perspective, you were able plan with greater confidence?
I sometimes hear the view that you can’t plan for the future, it’s always wrong, you can’t predict tomorrow! Let’s take the fall in the oil price, or the impact of a warranty issue with withdrawing a product from the market, the takeover of a competitor, etc. Are these events too leftfield? Budgets and forecasts? Bahh!
While I agree there is a variety of triggers and events too diverse to try and guess, I would argue you should have a valid plan. It is not good enough to go by the seat of your pants and what’s more, not enough to decide on your future direction based on what you believe you know about the past and present.
To make smarter decisions you need insights into your business to plan and model for different future scenarios. CFOs, as decision makers and influencers, need to scan the horizons and make informed decisions in this volatile world.
So what does a valid plan look like? What should good decision making be based on? In order to bring all this together, as if in a perfect storm, I have summarised this in terms of four critical components:
To respond effectively to changing circumstances you need rapid relevant decision support, short cycle times and minimal latency. To achieve this optimum speed, you need efficiency, no bottle necks or gatekeepers, minimal administration and strong robust repeatable processes.
Health check: Think of a key decision you make frequently and then look back at the number of non-value added touch points, the number of application hoops you needed to jump through to give you the information you were seeking.
Your decision making should have a strong basis or rationale. You ideally want context, integrated financial and operational perspectives, relevant internal and external information sources and to include associative, covariant and affirmation indicators. This should enable you to model drivers and connect decisions to the underlying constraints and look back at past decisions and forecasts and check reality.
Health check: Do some context analysis on a key planning process you are involved in. Tack a hardcopy to a whiteboard. Brainstorm the things that materially influence it, drive it and then ask yourself if the relationship is clear and transparent.
You need all relevant stakeholders to get involved. Firstly you want to draw on all relevant experience and expertise, from the front line, the business, right the way through the value stream. You want to receive and ensure direction, get and provide input, ensure ownership, accountability, and to organise and clearly communicate with the correct levels of governance.
Health check: D some stakeholder analysis. Who would add value to the process? What’s their level of involvement and their personal return for participation? Do they see planning as supportive not disruptive? When we think about budgeting, in many organisations colleagues outside of finance roll their eyes, thinking of long nights of frustration, disconnected outcomes for which they feel very little ownership of. This will need to be addressed.
As a decision maker you need confidence in your systems, people and processes. You need data quality, transparency, and integrity in the information supply chain, to look forward not in the rear-view mirror.
You also need first and foremost to focus of the right things, to be on the pulse, have context, analysis, insight, lead indicators, and to have information at the right level to answer your cascading questions.
Health check: Consider the ratio of your time between administering and managing the information process vs time spent genuinely analysing and determining value added outcomes. Look back at the last year and ask how many times your systems offered that moment of genuine business insight.
Ultimately success will be determined by the extent to which all four factors are balanced and working for you. From my experience, every organisation finds themselves in a different space across the speed/ basis/ participation/ confidence spectrum at any one point and many organisations are being held back in at least one of those areas.
In my next blog, I will discuss how you use these factors to profile your organisation and describe some of the typical profiles we find. I will also discuss the role technology can in providing balance and a seamless transformative approach to all critical factors required for today’s decision makers.
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