The CFO Guidebook On Business Transformation. The how-to guide to improving decision making, reducing risk and enhancing business performance

Transcription

1 The CFO Guidebook On Business Transformation The how-to guide to improving decision making, reducing risk and enhancing business performance

2 Losing Sight of Performance Every organization eventually gets to a size and scope where gauging the health of the enterprise becomes more complex and difficult. At this inflection point, planning for the future with a reasonable degree of confidence in the forecast can be elusive. Such is the case today for many companies. Not only has the pace of business increased, but the volume of data is now incredibly vast and analytically overwhelming. CFOs entrusted to make decisions have a difficult time gaining insight into how the organization is progressing. Consequently, they fail to know where it is headed, performance-wise, much less where it stands at present. They want to develop and lead a performance-driven business, but cannot make a confident decision to shift resources when and where needed. This Guidebook is designed to assist CFOs in taking charge of the business from an operating standpoint, leveraging mobile, cloud-based technologies, social media and Big Data to improve the status quo. By taking into consideration the types of technology improvements cited in this guidebook solutions that are modern, flexible, agile, actionable, insightful and data driven CFOs can dramatically improve business results. Finance chiefs who fail to grasp the necessity of transforming the business now, and who are waiting for other companies to take the lead, will miss this opportunity to gain a competitive advantage. As planning expert Steve Player, the North American program director at the Beyond Budgeting Round Table, commented to CFO magazine, In the old days, the CFO sat in the back of the ship recording what happened. Now, the CFO stands on the bridge looking forward and adjusting for variables. CFOs inspired to peer into the future and make more knowledgeable decisions can guide an organization to reach intended destinations faster and with less risk, and can also empower employees throughout the organization to help achieve these goals. Get (employees at the edges of the organization) to type in a few operational measures on their smartphones or tablets, and the future becomes clearer for finance, loosening more confident, bolder decisions. CFO Magazine 1 THE CFO GUIDEBOOK ON BUSINESS TRANSFORMATION

3 Invest in Modern Solutions The technology solutions that are enabling visionary CFOs to achieve these outcomes are the cloud, Big Data, social media and mobility. Hosted cloud platforms have the horsepower to provide great reach, easy deployment and wide flexibility. Big Data the enormous amount of structured and unstructured performance data can be accessed in the cloud, obviating the need to build a massive, expensive IT infrastructure internally. Mobility gives employees the information they need on the spot to gauge the health of the business and make actionable decisions that drive better performance. Social media is a platform for employees to communicate and collaborate more efficiently, effectively and satisfyingly. These four technologies alone offer opportunities for business improvement. Tying them together to create an ideal organizational infrastructure that provides truly remarkable performance insight results in modern business analytics solutions. Such tools can assist much greater enterprise agility, transparency, decision-making and collaboration. For the CFO, this integration requires the need to: Empower employees with real time access to data without lag time Make data available anytime, anywhere Set clear goals and assign metrics to established objectives Leverage data, goals and metrics to provide context, not control, i.e., getting buy-in from all members of the organization and showing where they fit in the larger picture Empower lines of business to have a direct impact on the organization by making decisions on business signals they receive (they are the closest to what matters) For some organizations, the business transformation represented by modern solutions may appear daunting, as everyone in the company will experience the impact. Yet, this impact is sure to be positive. By providing employees with tools to constructively execute tasks and participate in the analytics driving actual company performance, they will become more engaged in their work, fostering a strong sense of ownership. Rather than manage static spreadsheets, they interact with the business data, discerning problems and opportunities, initiating decisions that improve the status quo. According to a recent meta-analysis by Gallup of employees in nearly 200 organizations across 49 industries, an engaged workforce positively affects nine performance outcomes, including 10% higher customer metrics, 21% higher productivity and 22% higher profitability. Companies with more engaged employees have better odds of achieving the outcomes their organizations desire, such as revenue, profit, customer engagement, safety, quality work, and employee retention, the study s authors concluded. ii These revolutionary technologies are not for the faint of heart. The CFO must have the determination to relinquish outdated management methods and IT systems, replacing them with performance-driven processes and technologies. As CFO Magazine reported, Get (employees at the edges of the organization) to type in a few operational measures on their smartphones or tablets, and the future becomes clearer for finance, loosening more confident, bolder decisions. iii THE CFO GUIDEBOOK ON BUSINESS TRANSFORMATION 2

4 Require Flexible & Agile Solutions In today s fast-changing business environment, planning and decision-making must be agile and flexible. Technology can assist these goals by making performance data available anytime, anywhere. This agility is increasingly the price of winning in a marketplace. If organizations cannot quickly make changes to plans and tactics because they are tied to outdated management methods or antiquated IT systems, they will lose competitive advantage to companies that can make more informed, skillful decisions. Such companies have challenged their outmoded processes and invested in new systems. Progressive CFOs like David Stack of HubSpot understand this dynamic. At HubSpot, a fastgrowing provider of marketing software to more than 10,000 customers in 56 countries, Stack has led a business and system transformation to drive better performance and decision-making. HubSpot s extraordinary growth was a key factor compelling the effort. When I came on board five years ago, there were 30 employees and we had a $2 million run rate; now we ve got 650 employees and our revenue grew 80-plus percent last year to $52 million, Stack said. iv Consequently, we needed to rethink our infrastructure and systems. Among the changes was the decision to require every department company-wide to use SaaS (Software as a Service) cloud-based apps. They re just easier to deploy and maintain, and better suit our culture, Stack explains. They re flexible, in that they give employees access to do what they need to do when they need to get it done, which sometimes might be on the weekend. Given our fast business growth environment, we can t have them connecting to an on-premise server with a slow performance time. To win, we have to be nimble. To win, we have to be nimble. David Stack, CFO, HubSpot 3 THE CFO GUIDEBOOK ON BUSINESS TRANSFORMATION

5 Provide Actionable, Insightful Solutions To achieve this type of business transformation, strategic goals must be established and communicated throughout the enterprise, not just to line-of-business leads, and tied to action. Each employee must understand he or she will be relied on to make data-driven decisions that ultimately contribute to the company s performance. Rather than merely reporting business insights, they must act upon these insights. By gaining access to business metrics and leveraging analytics to evaluate the implications, employees in the field can make decisions that improve performance, effectively changing the course of the company. As Beyond Budgeting Round Table s Steve Player also noted, These people are your generals at the front lines, the ones who can provide a real-time view of what s actually going on in the business. Arm them with mobile devices to report their findings to cloud-based systems, and then beam it up to FP&A for their analysis and insight. v Such predictive capabilities are possible now, thanks to modern technologies. A vast array of internal and external business insights can be put in the hands of employees who can make decisions at the point of impact. Such is the case at HubSpot. I wanted to empower our employees to make better decisions. SaaS applications that gave us flexibility to change course quickly when needed were the logical solution, Stack said. The CFO had a vision of HubSpot being a game changer in planning and forecasting. We were at the bleeding edge of helping companies market (their products) in profoundly new ways, but were not at the bleeding edge of where we needed to be in planning and forecasting, he explained. Now we are. We have given up on the relational database and installed a central database containing a great volume of accurate information that employees can leverage for planning and modeling. We also have a cloud-based forecasting solution that is far more robust than the on-premise system we previously had. And we have cleared away from the mountain of spreadsheets that defined our processes and systems in past. This business transformation was achieved by Stack s firm belief in the ROI from a modern, flexible and agile technology solution. We now have the information we need to forecast and plan, Stack said. For instance, our key metric is the cost of customer acquisition how much it costs to acquire a new customer and the anticipated lifetime revenue from that customer. These tools give us the ability to run scenarios asking, `What if this sales rep becomes more productive and adds more customers? What impact would this have on our revenue growth and our bottom line? Even better, what if we could achieve an ideal ratio between customer acquisition costs and anticipated revenue? he added. Say it costs us $5,000 to acquire a customer and we want to get a 400 percent return on this, $20,000 over a particular period of time. That s our target zone. We can tweak the assumptions up and down on the revenue model to determine how much to allocate to various marketing programs, how much compensation to assign, and what we should provide financially to ancillary costs like support. We literally move the dials to run these scenarios or stories and do the calculations. THE CFO GUIDEBOOK ON BUSINESS TRANSFORMATION 4

6 Depict Data-Driven Solutions Data should tell a story. Like any good narrative, it should depict opportunities and challenges the tension between success and failure. It should involve people who are active close to the action and thereby empowered to make decisions guiding productive outcomes. Visual depictions are a highly compelling way of showcasing business data. Visuals also provide a more dynamic way to motivate employees than perusing static spreadsheets. How can an organization tell the story of its business visually, in a meaningful, impactful way? It requires implementing a performance-driven solution that everyone in the organization buys into, along with the will to transform the business, courage in the face of embracing change management, and confidence in the knowledge that the end game is worth the effort. These benefits are available to all companies. Why endure the frustrating annual budgeting exercise when finance can instead use an iterative forecasting process driven by an analysis of realtime performance, available to everyone in the organization? Why wait six months to adjust a forecast and budget, when it can literally be accomplished this week, today or this minute? As General Electric s Jack Welch complained in the book Winning, the traditional budgeting exercise, sucks the energy, time, fun and big dreams out of an organization. It brings out the most unproductive behaviors in an organization, from sand bagging to settling for mediocrity. vi Why not have fun and dream big? 5 THE CFO GUIDEBOOK ON BUSINESS TRANSFORMATION

7 i Ibid ii iii Ibid iv Interview with David Stack, October 17, 2013 v vi

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