"We will only grasp the staggering potential of our time if we create on-ramps that empower ALL people to participate."
Robert F. Smith
Founder, Vista Equity Partners
Some finance professionals and organizations are eager, early adopters of new technologies and solutions. Others are not for various reasons, with cost and internal adjustments being the two biggest deterrents. But what is the ultimate cost of waiting to operate more efficiently, and what suffers by resistance to change? The answer to both questions is “a lot.”
In today’s environment, waiting becomes a costly hindrance when modern tools are generating benefits for your competitors. It is especially an issue when performance, internal communication and financial reporting deteriorate due to inadequate technological support. Holding on to outdated software and platforms puts a company, its associates and its shareholders at a competitive disadvantage – and a sustainable one at that.
As financial executives, we know how business works. We closely mind our cash flow, opportunities and risks, and monitor the market and competitors. When competitors gain a sustainable advantage, or when opportunities or market shifts begin to emerge, we know it’s time to deliver financial insight that will guide CEOs and boards to take the right action.
Are you a facilitator or roadblock to performance?
One thing I have seen across numerous companies and industries is overwhelming evidence of the real-time clarity and intelligence that modern technologies can provide. CFOs must shine the light on decision-making information, and this is difficult to do without on-demand data that is quickly analyzed and shared. What modern CFOs need to deliver, as I’ve said in previous writings, is a clear and accurate understanding of their cash positions. The biggest risk for CFOs who continue to operate in the dark is becoming a problem that leadership needs to address. These tools are not a luxury. They have become a necessity – a hard cost of doing business.
For example, new tax laws place even greater importance on effective working capital management because of the limitation of the deductibility of interest expense. For highly leveraged companies or those eyeing acquisitions, directors and shareholders are going to focus on the amount of interest expense that is or may not be tax deductible. They’re going to ask the finance chief for a plan to address this as soon as possible. This is just one challenge driving the need to improve cash flow, and it requires real-time information in a format that enables better execution. The goal is to have the capability to ensure objectives are met along the way – not hindsight through an autopsy.
Facilitating access to meaningful information
"It is no longer sufficient to have one person learning for the organization, a Ford or a Sloan or a Watson. It’s just not possible any longer to ‘figure it out’ from the top and have everyone else following the orders of the ‘grand strategist.’ The organizations that will truly excel in the future will be the organizations that discover how to tap people’s commitment and capacity to learn at all levels in the organization."
The Fifth Discipline
True. There was a time when CFOs were needed to make sense of financial information by going to board and staff meetings with detailed financial packages documenting the where, how much and why (autopsy) of performance, and then discussing a list of action items. This is the ‘grand strategist’ model. Today, in many successful global firms, a different operating model has been implemented, refined and is now the norm. It is the model in which finance teams have access to real-time information – via data visualization, business intelligence and other types of reporting -- and know on a daily basis if they are meeting their metrics.
The real bottom line is this: Your finance organization and company either have these tools and capabilities or you are in the process of implementing them. Otherwise, you are hurting your company’s performance. In order not to be the problem, put together a team of people and build the capability your company needs to effectively compete in today’s environment. The technology and processes already exist. They are tried, true and becoming more robust all the time.
For those of us who know how business works – today – we also know the value and importance of operating as a well-informed team. Time and evolution will continue to change how we operate, but one thing is timeless. As Harry Truman once said, “It’s amazing what you can accomplish if you do not care who gets the credit.” Success will always be a shared accomplishment and getting there is also a shared task. Everything is easier with the right tools.