Continuing my four-part series on Jeremy Hope’s Re-inventing the CFO, let us look at a step-by-step approach on how the CFO can be a Master of Measurement, and move from the back-office to front-line strategy.
The CFO’s role in measuring things is not just about getting the numbers right. It’s rather about guiding and monitoring business improvement toward the agreed goals. And, in this light, CFOs need to involve themselves in the following activities:
- Workflows and existing processes for enterprise data governance need to be tested for efficiency and effectiveness. Efficiency refers to the level of manual workflows / hand-offs and standardization of business rules. Effectiveness, on the other hand, refers to the review and approval of new master data, such as customers / suppliers; data redundancies and turnaround times.
- Help develop common key business metrics across the organization. The CFO has to work with key stakeholders in the organization to define corporate goals ─ the measures that help drive business outcomes, including customer satisfaction, revenue growth, cost reduction, asset turnover, cash flow and operating profit ─ and spread them across the organization. Often, the core business metrics are not aligned in terms of priorities across business functions. For instance, during the recession, companies looking at retaining cash flow rather than increasing sales may not have been able to permeate the strategy across all functions.
- Standardize business rules and measurement procedures. One needs to look at the finer nuances. For instance, does an organization track aging of debtors by calendar month or actual days outstanding? Often, different components in a business look at things differently and as organizations grow, measurement processes get varied. The CFO needs to drive the usage of a common metric across the board.
- Garner appropriate sponsorship and active participation of all business stakeholders. The CFO has to help the champion for business intelligence in winning the support of the management team in an organization. One cannot expect an accounting clerk to drive metrics!
- Processes must be optimized. Consolidation, standardization and automation of master data workflows will provide the quick wins needed to get the buy-in from various business units.
- Upgrade technology as necessary. Instead of the traditional ‘rip and replace’ approach CFOs can champion the cause for using Service Oriented Architecture (SOA) integration technologies that provide opportunities to extend the life and value of existing data stores. IT can enable the infrastructure, capacity and scalability once the businesses own the technology.
In my view, the CFO’s role does not come at the end of the year to substantiate and analyze what has already been done through the year. It’s about getting involved in the nuances ofwhat is being measured; how it is being measured; and ensuring that it is being measured accurately using the right tools. And that’s why I believe, a CFO is the Master of Measurement.