What management systems are required?

What management systems are required?

The fifth and final viewpoint in the series on business finance framework and strategy unearths the last piece of the puzzle on how to establish a solid business finance framework.

The final step to consider when building a business finance framework is how to anchor the winning aspiration, the playing field, the allocation of time between business finance activities and key capabilities in daily business operations through a management operating system (MOS).

MOS is the specification of how an organisation translates corporate goals into actions and results. It ensures that the strategy (in the long/medium/short term) is consist-ently converted into more specific and actionable targets and actions for front-line workers. It is an approach to bring infor-mation into meetings, conversa-tions and work practices to support effective decision-making and imple-mentation in an aligned, visible and responsive way.

In our experience, many finance organisations fail to achieve their goals for business finance as they believe these can be achieved by simply changing the organisational design. However, we believe that defining organisational ties through full or dotted lines between business units and the finance department does little to translate business finance aspirations into actual behavioural change. So how do you define an approach that ensures finance business partners bring relevant information into meetings, conversations and work practices, and thereby support effective decision-making?

Organisational structure

A recipe for strong finance business partnering has more important ingredients for success than organisational design, improved processes or new systems. Although proper organisational structure is important, establishing an effective business finance community depends on so much more than merely a well-designed organisational chart. The development of MOS for business finance should, therefore, focus on establishing close physical proximity between business finance and the business, as well as nurturing the right kind of behaviour, actions and culture amongst finance business partners. Hence, an organisational structure where finance business partners enjoy physical immediacy to the business and are included in management teams is essential for successful finance business partnering. Furthermore, taking finance business partners’ personal characteristics (i.e. educational background, experience outside finance and interpersonal capabilities) into account has also proven to be a crucial part of the organisational structure.

Performance management systems

A streamlined performance management process across organisational hierarchies is another important factor in designing MOS for business finance. Designing key performance indicators linked to the first four elements of the framework is only part of this process. Performance management and business intelligence must be supported by a standardised drumbeat of meetings to ensure that the right people meet at the right time with the right tools in order to make the right decisions based on the right data, thereby fulling setting the business finance community up for success. On paper, this sounds fairly simple, but in practice the process proves to be a significant cultural challenge for many organisations.

SUMMARY

Building a business finance framework is about making strategic choices and answering five integrated key questions.

  • The first question one should ask as a CFO is, what is the winning aspiration of business finance? The answer is value creation. This question is a crucial first step in building a framework because business finance as a function is only sustainable if it creates more value than its upkeep costs.
  • Defining the playing field of business finance is the second vital step in this process. There are two approaches to prioritising business finance and maximising value creation: we can look at the current value chain or we can take a future-oriented perspective by focusing on the company’s must-win battles.
  • The next essential questions that CFOs should ask when setting up a business finance framework is, how will business finance drive value creation? And where should we focus business finance efforts in the business in order to create the most impact? We recommend a structured approach to this step by breaking down business finance activities and grouping them by characteristics and interconnections. Finding the right balance between the activities – and particularly having enough time to spend on decision support – is the key to the success of business finance.
  • The fourth step in the business finance framework is defining and cultivating the behaviour and capabilities of finance business partners. As business finance requires employees who possess a broad spectrum of hard and soft skills and can transition between varying behaviour, even outside of their comfort zones.
  • Finally, an efficient management operating system is needed to bring the business finance framework to life and ensure that finance business partners can thrive and have the necessary tools and environment to support effective decision-making.

As a CFO creating a busi-ness finance framework, you should ask yourself the key questions in the figure below:

They form an integrated approach to understanding business finance that may prove invaluable when building and establishing a successful business finance framework. These questions should be answered as a nested set of choices that are internally consistent and reinforcing, e.g. if we want to create trusted partnerships with the business as part of our winning aspirations, then our key capabilities should focus on how to create strong relationships and trust with the business. The aim is to simplify and create a shared language of strategy across our business finance organisation. We should ideally be able to communicate strategy in one page.


What do you think are the right questions to ask?

This is the last of a 5-part viewpoint and I hope you found it relevant and interesting. If you haven't read the first four, you can find them here What is our winning aspiration?, Where will we play?, How will we win? and What key capabilities must be in place?

If you would like the full 5-part version of the viewpoint, please drop me a message in the comments below and I will send it to you.

Authors

Claus is a partner at Implement Consulting Group and has more than 25 years of experience working in finance and advising CFOs on their transformation journeys.

This article has been written I collaboration with Christian Frantz Hansen and Nicolai Worziger.

At Implement Consulting Group, we welcome any opportunity to further discuss the topic of business finance. 

Serge Musquin

Consultant en Organisation et AMOA | Finance & Business Performance

6 年

Hello Claus, nice job ! I really appreciate the part on?standardized drumbeat of meetings fulled with the right data. This is crucial to implement strategy and swith the power button for action in the whole organization

Hashim Abdusheikh

Industrial Finance Manager at Unilever

6 年

Great insights Claus. Thanks for sharing this.

Christian Salling

Results-Driven Finance Professional | Business Transformation Specialist | Creating sustainable impact through collaborative consulting

6 年

Great job

Hans L?ss?e

Take chances - intelligently

6 年

Claus, I agree with Bryan … nice job. One cannot help but wonder, why everybody is not simply doing this - but there it is. Even the simpest and most logical and value creating business process is blatantly ignored by some.

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