Beyond Transparency

One of the many fall outs of the corporate accounting scandals (Enron, WorldCom, etc..) in early 2000, was the concept of financial transparency.   As Sarbanes-Oxley regulations were implemented, the CFO function of organizations began to evolve beyond the corporate persona as number crunchers and budget cops, and was invited to the strategy table.  Not just as integrity champion or implementer of corporate controls and governance, but it was finally understood that Finance is the universal language of business.   Since that time Finance departments globally became actively involved in corporate initiatives, large projects, and strategic decision making.   The role of the CFO became the Chief ‘go to’ officer for everything from Information Technology transformation to back office operations, taking on roles traditionally occupied by CIO’s and COO’s, even becoming heir apparent for replacing CEO’s in many major corporations.
However, there are seasons in life both personally and professionally and while the spotlight has shined on Finance professionals for several years a backlash is beginning.  At the core of this backlash is the same concept that brought the focus to Finance as a strategic partner, Financial Transparency.  In the wake of the implementation of controls, reporting, and systems to ensure transparency, the perception of Finance is slowly reverting back to the number crunching budget cop persona of the past.   Almost as though someone finally had the time to look up the definition of the now corporate buzzword of Transparency, which is “The full, accurate, and timely disclosure of information”.   Business managers are now asking Finance for needed information, or to clarify the credibility of the information, but choosing to interpret, analyze and make business decisions independent of Finance support.  Too often now, presentations and proposals to executive management lack independent review from Finance, while the presenter still emphasizes that ‘Finance provided the numbers’, giving them a Teflon covering in case the proposed action fails.
In order to avoid slipping back in to the corporate dark ages, Finance needs to proactively restore relevance to their craft.  Moving beyond transparency and the simple disclosure of information, Finance must drive performance improvements and empower themselves to be the corporate steward before the next crisis arises.  The following factors can determine your readiness to move beyond transparency:

• Kevlar over Teflon – True leaders are those who would rather challenge what needs to change and face the firing squad than to remain silent and slowly die inside.    Corporate America needs more professionals willing to put on Kevlar to champion change, and less professionals managing with a ‘no stick’ policy in an effort to keep their jobs.

• Insight over Information – The amount of information available electronically is doubling every 12 months, so the adage of information is power no longer applies.  Information is a commodity; the ability to transform information into insight is what makes Finance professionals powerful.

• Performance over Politics – 
It no longer matters ‘who you know’, or even ‘what you know’ in your climb up the corporate ladder.  Success today is defined simply by what you can make happen.  Performance pays; and your ability to execute strategic initiatives that have a positive financial impact will move Finance professionals beyond transparency.

Scott Wise  President, CEO  Armada Consulting

The value of information

I attended a CFO Technology conference in Chicago where the focus was leveraging technology for improving performance.  The most impressive statistic was from a professor from MIT, who stated that the digital storage of information across the United States doubles every 13 months.  Companies spend billions of dollars collecting and storing data with every intent of leveraging that asset to gain insight into performance and innovate processes and products or competitive advantage.  However, the question must be asked; “Where are the resources to transform that information into insight?

The fact remains that the real constrained resource is analysts with the right skills to successfully analyze the data and interpret the results.  Information is only as valuable as the action it initiates. Technology is simply a tool, it cannot replace the ingenuity of a true problem solver armed with the right skills and challenged with a complex problem.  But these information mercenaries are difficult to find and harder to keep.  This issue is not going away and soon we will see a real shortage of true knowledge workers, while companies scramble to find the right people to mine, measure and model their data looking for innovation and competitive advantage.

People say that information is power, but today the ability to transform information into actions that have a strategic impact on a company is the real power.  Here are a few recommendations for building your capabilities in becoming an business intelligence mercenary.

Dynamic Modeling - The first requirement is the ability to understand that that businesses today are very complex and comprised on many difference and sometimes counterproductive systems.   Systems Thinking and Modeling provides us the ability to simplify these complexities and break problems down into a series of related models and variables.  Once mastered an individual can not only model the problem, but identify the required information to mine for proving a recommended solution.

Data Mining - Data mining has become so much more than just understanding SQL, which is still a must.  The most valuable analytical professionals can not only measure and model information, but also retrieve it either through a variety of business intelligence tools, or directly from the source.  Visualizing data relationally, narrowing data sets, and recognizing statistical patterns, provides the analyst a huge advantage in research and analysis.

Predictive Analytics – Few executives can take action on information or analysis without some assurances of success.  Predictive analytics models the data to identify risks and opportunities given a set of sample scenarios, guiding the decision making process and actions taken.

Scott Wise  President, CEO  Armada Consulting

Thawing ‘hiring freezes’ as cost control

A number of companies are reporting cost reduction strategies in the face of a challenging economy.  Many of these so called ’strategies’ to reduce cost include hiring freezes, basically a strategy to limit new hires and realize cost reduction through workforce attrition.  Hiring freezes as a cost reduction strategy is simply a knee jerk reactionary move that flies in the face of strategic cost management.  The looming retirement of baby boomer workforce has employers struggling to keep pace with hiring needs.  During this war for talent companies can not afford to sit on the sidelines for a couple of years as a method to control costs.  Profits are a function of people and process, the right strategy executed by the right people.  A hiring freeze simply is a short cut easy answer based on archaic practices, and could prove to be disastrous for companies in the long term.

To have a positive impact corporate finance should carefullly look at corporate spending and the alignment of that spending to strategic objectives.  When times get tough, the tough do 3 things:

1. Protect the Core - ensure that spending that directly supports current revenue streams is not adversely affected by cost reductions.  In fact these areas may need additional funding to protect revenues, market share and customer value in a weak economy.
2. Invest in top strategic initiatives – only approve funding on projects or positioning efforts where it is clearly aligned to the company’s top strategic objectives, focusing on those that should provide the highest return on investment.
3. Mitigate ‘real’ risks – too often the ’sky is falling’ approach is used to secure funding for initiatives.  Fear should not drive stakeholder spending decisions.  Finance has to make sure that spending to mitigate risk is effective and protecting the company against a real and reasonable threat.

However, if these cost reduction strategies prove to be to challenging to implement.  A better alternative to hiring freezes would be to eliminate corporate ego spending such as corporate jets and other unnecessary luxury purchases.

Scott Wise  President, CEO  Armada Consulting

Sacred Cows of Corporate Costs

After 15 years of finance and cost management experience, it amazes me that there are still the sacred cows of costing that are off limits from any expense reduction discussions.   I was working with a client on implementing a pretty sophisticated cost management program and identified the low hanging fruit as being the company’s multiple corporate jets, crews, and hangars.  The company had no remote operations, and commercial schedules covered the other facilities well.  The discussion was quickly put to rest when it was declared that the corporate jets were off limits and not to be discussed.  This isn’t the first time I have encountered the jet set sacred cow, and I am sure it won’t be the last, but for some reason this time it got to me.  The ironic part of the story was on my flight home.  I was flying Southwest and I recognized a businessman boarding (in the B group no less), he happened to be on the Forbes Top 25 richest Americans list.  Amazing, I can’t talk about the Corporate jets and one of the richest men in the US is flying on Southwest.

For those who are unfamiliar with organization’s ’sacred cows’, here is the definition:  A sacred cow is something in your organization that you do not question or challenge, even if you ought to. These are practices that are unreasonably immune to criticism.

Leadership is the one thing that will always kill the ’sacred cow’.  It is simply the decision in which you trade your Teflon business suit for one made of Kevlar, and decide that challenging the status quo and facing the firing squad is a better alternative to dying slowly on the inside and doing nothing to improve the business.

Scott Wise  President, CEO  Armada Consulting