Enhancing Financial Performance Management
To help their companies compete successfully, finance executives must improve their
own abilities to execute and manage to corporate strategy. More than ever, they
need to focus on improving the effectiveness of the whole finance organization rather
than trying to eke out small improvements in efficiency. Our benchmark research
shows there is important information that people could receive – or already do
receive – that would improve their performance and help align their actions to
strategy. Information deficits combined with poorly designed processes can limit
severely how well all departments, including Finance, do their jobs.
If there was a single “silver bullet” that would address the issues listed above,
companies probably would have used it by now. Lacking that, we recommend CFOs
and senior finance department executives focus on these three areas:
• Push the envelope when it comes to management reporting. To improve
performance, companies must link more operational and financial data, make
information available sooner and provide a richer set of data including leading
indicators for the business unit and relevant information about competitors,
suppliers and factors that drive demand for the company’s products or
services.
• Have a disciplined, sustained process in place to address information
technology barriers, especially infrastructure complexity, and to enhance the
use of ERP systems. Typically these are the root causes of issues preventing
Finance organizations from improving process execution and preventing the
disconnects that obstruct better alignment of strategy and execution.
• Assess where there are shortfalls in the people, process, information and
technology dimensions of key financial functions, then define a plan with
specific objectives and timetables that addresses these shortfalls.
Solutions to challenges confronting businesses almost always require addressing a
combination of people, process, information and technology issues. We often find,
however, that people who have financial or line-of-business responsibilities are not
as aware of the impacts of shortfalls in the last two of these areas. Moreover, we find
that all too often they are not sufficiently knowledgeable about the range of
technology and information system offerings available to them.
Of course, the best information is never a complete substitute for good judgment.
Thus, one key purpose of ensuring that decision-makers have what they need is to
help those with good judgment make better decisions more consistently. Having the
right information infrastructure is critical to providing executives and managers with
the right information at the right time and in the right context.
The results of the research we conducted confirmed that complexity is a barrier to
the proper flow of information to decision-makers. One important approach to
dealing with the almost inevitable complexity in any large company’s IT environment
is establishing a data warehouse that makes a wide range of information available to
finance and business users from one centralized, consistent, and automatically
validated source.
To determine if there are gaps between your company’s existing IT environment and
what it needs to address its 21st century information requirements, you should ask
the following questions about your information systems:
• Do users have a ready-to-use full view of the business? Is it one that
eliminates the impact of information silos (such as ERP, CRM and distribution
systems) and integrates accounting, customer and operational data in a
consistent and accessible fashion?
• Is it possible to create direct links between business drivers and financial
results? Are these links that will give executives and managers insight into
the key performance levers or provide leading indicators that will enable them
to anticipate changes? Are they ones that will promote agility and the ability
to plan ahead of the competition?
• How much would performance improve if managers had their information one
day sooner? Three days sooner?
• If your IT department sent an email message to all executives and managers
asking them if there was information they could use that they are not getting
now, would it have the flexibility to be able to act on all of the responses? Or
does a heavy reliance on using the ERP and other transaction processing
systems as a reporting platform get in the way of providing them with needed
data?
• How much of an issue is information quality? Information may not be
“wrong,” but may well be inconsistent, reflecting data assembled haphazardly
for each report or analysis, leaving managers wondering what the right
number really is.
• In the same vein, are people spending too much time making sure the
numbers are correct and consistent? These, we find, often are invisible time
sinks preventing productive and well-trained individuals from using their time
more effectively.
Addressing these gaps – that is, addressing the information management
requirements of an organization – ought not be thought of as a single “big-bang”
effort. Rather, it should involve a disciplined series of steps, each building on the
previous one. We advise developing and then executing a plan consisting of the
steps needed to develop the right information and technology infrastructure. What’s
the right one? It’s one that when combined with people and process changes will
elevate your organization to the next level of effectiveness.
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