Getting Back to the Top of the Bottom Line
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results of the IBM Chief Finance Officers Study, which I would like to report on here. But first, some background about the study.
It was conducted via online survey with 889 CFOs and senior finance professionals across the communications, distribution, financial, industrial and public sectors in 72 countries, and included interviews with 267 CFOs based in Asia Pacific, Europe, North America, and Latin America. Organizations in the study ranged in size from less than $1 billion to over $10 billion in annual revenue, and more than half had annual revenues of $5 billion or more. Nearly half of the respondents had ente
So, in summary, we spoke to expert bean counters who eat, live and breathe in this flat-earth globalized economy of ours. Now, for the drum roll as we learn what they had to say.
You Can't Manage What You Can't Effectively Measure
First headline: Only a third of respondents rate themselves as "highly effective" in supporting the CEO's efforts to grow the company. Doh!
Second headline: Although profitable growth is at the top of the CEO's agenda and is what counts most with shareholders and financial analysts, CFOs are struggling to deliver predictive insight out of the colossal amount of data they collect.
Did I say "Doh!" yet?
Now, before we get to more bad news, let's talk about some of the good news that came out of the survey. The study also correlated a financial benefit that may be linked to the effective analysis of financial information to drive growth actvities. Analysis of publicly available financial data from nearly 300 of the study respondents reveals companies with highly effective delivery of performance, risk and growth information have increased revenue growth and are driving more value creation compared to their industry peers with less effective insight delivery.
So what did the respondents say that they did well? For starters, they indicated they're very good at reporting historical financial results and meeting compliance requirements. But despite the fact that 69 percent of them state that "providing insight to grow the company" was a top 3 in terms of aspects of their role, only 13 percent rated themselves as "highly effective" in this or other key areas relevant to performance insight.
In short, they were management challenged when it came to being unable to unlock and find those "hidden gems of information" that could help them uncover future business opportunities and foresee trends or costly problems ahead of time. This "performance gap" is directly linked to fragmented business processes and time consuming transactional activities, which prevent efficient information integration and analysis of the business.
But don't take my word for it. Listen to what some of the participants said (the names have been changed to protect both the innocent and the guilty):
"Our number one challenge is to improve the integration and sharing of critical business information between businesses, operations, and technical divisions." -- Finance Operations Executive, Large North American Bank
"We need to break down barriers to sharing key data across and between the other major departments." CFO, Large North American Governmental Agency
In short, what we heard many of them say was: "Mr. CEO, tear down these walls!"
Why Can't We All Just Get Along...Or At Least Get a Better View Into Our Business???"
If you feel lost and alone in your inability to connect all the dots, don't be. Almost 40 percent of companies indicated in the study that they still have separate manual processes and controls to collect compliance data that deliver backward looking "after the fact" reaction to risk events and growth opportunities.
As a result of fragmented systems, 70 percent said they have not yet implemented process and data standards, pursued process simplification, reduced the number of disparate platforms, rationalized budget and forecasting tools, or reduced the number of ERP systems enterprise-wide.
And the struggle was not just limited to the systems. Nearly two-thirds of the respondents indicated that finding and developing people with the appropriate finance and business skills to drive growth also a challenge (Hey, I've got my MBA. Hire me, hire me!)
And finally, and probably most depressingly, over half of the respondents indicated that they struggle to deliver analytics to plan, forecast, and measure business opportunities for profitable revenue growth.
But know this...and I'm only going to say it this once...help is on the way.
Brother, Can You Spare a Real-Time Performance Dashboard?
Here at Big Blue, we believe in actionable intelligence. So as a predicate to the study, our Business Consulting Services (The "Other" IBM, if you have good advertising recall from their TV spots) group suggested a general direction that CFOs and other financial and/or reporting specialists can take to get their businesses closer to the target of those areas previously listed that help them bring more value to their organizations:
1) Enable insight standardize, simplify, then optimize. Financial executives must take the lead in standardizing, simplifying and establishing common processes that rationalize the myriad of finance technologies and tools used today to improve the integration of informationand delivery of insight. Information must also be turned from a passive, closed state into an active "service" that can be leveraged by the organization.
2) Enhance insight -- Financial executives need to consider business intelligence strategies such as performance dashboards to enable financial information to be used to help drive innovation. In mature markets where business model innovation is required to drive growth in new ways against a tide of nimble market entrants, predictive analysis and information is critical to create breakthrough business designs. A dashboard environment, fed by real time data sources, facilitates proactive decision-making and idea sharing by allowing representatives across the company to see the same up to date financial information as the chief executive officer -- in real time. This enables the collaborative, fact-based decision making that is needed to enhance business performance.
I'm NOT a CFO, nor do I play one on TV. But as someone who does have to help regularly report back to our own management on the returns we're getting from our Web site, I would absolutely agree with the direction our friends in BCS are recommending.
Moving forward, being able to obtain and monitor a real-time pulse of the performance of global organizations is going to distinguish the winners from the losers -- markets are moving too quickly, transactions are increasingly constant, and the movers are increasingly going to know what their current position is at any given moment, and, more importantly, also be able to better forecast where it needs to be at X interval.
And the shakers...well, they're going to just...shake.