A CFO’s Perspective: Integrated Planning & Corporate Performance Transformation

September 15, 2017 |

If you want to evolve from corporate performance management to true performance transformation – where data-driven decisions help organizations make radical changes providing value internally and to their customers – you’ve got to get serious about integrated planning. For me, a great example came one holiday season when I was working for a phone company struggling to get the right devices into the right customers’ hands.

This was the problem in a nutshell: We could have phones in a thousand retail outlets but if we didn’t have the right phones in the right locations at the right time, we would lose sales before Christmas – and after Christmas we’d have an ugly inventory write-off.

Ideally, we would send a mix of phones to match the demand of individual stores, with the aim of selling out at midnight on Christmas Eve across the entire channel. Reality was that some phones would wind up stranded in the wrong retail location, while the same phones would be sold out in other stores despite strong overall demand in the days or even weeks before Christmas. We would often find out only when it was too late to do anything but book a write-off.

How Can Finance Help Sell More Phones?

Our finance department had already gone down the path of hiring our own IT person to build a data warehouse to collect financial and billing system information to analyze and forecast sales and revenue (a step we wouldn’t need to take today thanks to readily available technologies). We used that data warehouse to support a collaborative sales and inventory forecasting process, where our retail partners could enter store-level sales and inventory information electronically or send us PDFs that we would key in ourselves. We then used this information to assess inventory and predict requirements across the channel, and then courier devices between stores to proactively adjust inventory for anticipated demand.

How can finance help sell more phones?

The result? A significantly lower inventory write-off, a happier retail distribution channel and more happy customers.

We coupled a basic finance planning tool with our forecasting knowhow and turned that into a cross-functional, integrated planning process using non-financial data to drive better business decisions – and results. This is where corporate performance transformation really begins.

Before we go any further, let’s step back for a minute to look at why finance is in a great position to lead this approach, and why there’s never been a better time to get started.

Integrated Planning Comes of Age

Integrated planning is “planning with everyone involved.” It’s department leaders, the senior executive team and more – a 100 per cent collaborative approach. On the data side, it means drawing on sources outside of the general ledger and beyond financial data (or what’s presumed to be financial data). Examples include inventory units, unit sales data, customer profiles, product usage and sales funnel data.

Finance teams already track and analyze financial data to help make business decisions. It’s only natural that we should go one step further and present the financial numbers in context with non-financial data. It makes for a richer and more complete story. This kind of data can add real value supporting better business decisions and driving action.

Integrated planning: a 100% collaborative approach

At Vena, we’ve worked with tons of CFOs who have demonstrated they’re all about supporting data-driven decisions and driving action through just such an approach.

This means doing things that might have once seemed way outside the CFO’s purview — like the time I led a finance department that developed a database of marketing funnel metrics such as leads, conversion rates, lead development, win rates, and so on. It wasn’t about controlling spending and costs. It was about collaborating with the marketing team to allocate limited marketing dollars to the most cost-effective lead channels for maximum growth. Rather than just reporting on costs, we used the data to help marketing drive more revenue, and we used the same data to do our own forecasting of revenues, sales customer acquisition costs and cash flow.

Technology has created an over-abundance of data. It’s opened up a great window and provided insights into our businesses that we never had access to before. The sheer quantity of data can seem overwhelming.

There was a time when finance technologies struggled with correlating large amounts of data, and real business insights were difficult and expensive to uncover. Imagine slicing and dicing a year’s worth of Google Analytics data across thousands of keywords data using only sixty-five thousand rows.

The most modern software-as-a-service (SaaS) platforms have eliminated such limitations and enabled us to uncover, learn and inform business decisions with our data and analysis. An integrated planning approach is imperative to maximize the effectiveness of this analysis and its benefits across an organization. It’s up to us as financial leaders to make it happen by getting the senior executive team on board and putting today’s technologies to work using a collaborative approach.

Picking (and Acting Upon) the Right KPIs

Performance transformation can be facilitated and enabled by maximizing collaboration opportunities and combining financial and non-financial data. The challenge is figuring out what data to analyze, and how.

This will vary a lot based on what kind of business you’re in and what’s important to you. For a grocery merchant, the business drivers might be inventory movement and the impact of perishable goods — your entire process could be thrown off by a bad bunch of lettuce. In a mining company, basic financials can tell you how much the company has spent digging a hole, but if there isn’t any gold in that hole, what is it really worth?

Your goal as a transformative finance leader is to identify your most important business levers, how to measure and use them to inform impactful business decisions on a timely basis.

“Your goal as a transformative finance leader is to identify your most important business levers…and use them to inform impactful business decisions.”

It’s also about aligning with the organization’s core objectives. For startups, profitability may not be as important as growth. For Fortune 500 firms who need to return dividends to their shareholders, growth may not be as important as profit. They may share the same metrics, but their KPIs might each have a completely different level of value.

In my current role at Vena, we’re obsessed with coupling financial and non-financial data that comprise our customer unit economics. Our financial statements tell us how much we are spending on sales and marketing. But it’s our unit economics that tell us if we should spend more or less…and tell our investors that they’ve backed the right company.

Looking at unit economics can help turn a bad story into a good one. For example, if we overspent on marketing relative to budget, on its own this might not look so good. But shown in the context of how many leads that marketing spend generated, we might be doing better than plan on a unit basis (and that’s a good thing).

Leading Your Organization to Performance Transformation

Another and arguably the most significant challenge in implementing integrated planning is building collaboration. Teamwork and successful collaboration requires trust and patience.

This is especially hard for finance organizations that historically have not been expected to look forward, support real-time business decisions or really collaborate at all. Many times finance is viewed primarily as a critic, a barrier, a group that is focused entirely on minimizing risk and spend. Some still see finance as a group whose best work gets printed once a month and filed-away in binders never to be seen again.

It can take time to transform the perception of finance into one of being an enabler, a group that is encouraging and proactively seeks to drive positive results. The group that sifts through data like tea leaves looking for insights and making forward looking predictions. When it’s done well, integrated planning can greatly assist in making this perception transformation a reality.

“You will know you’re on the right track when you start to get called on more often for your input into strategic business decisions.”

My advice is to start slowly with a few small wins and remember to:

•    Add value – don’t try to impose or direct adoption
•    Be positive and be patient – it’s an iterative process
•    Don’t start aiming for perfection – aim for something good

You will know you are on the right track when you start to get called on more often for your input into strategic business decisions – when your integrated planning approach gets the buy-in it needs to succeed. Cultivating this buy-in requires time, nurturing, meaningful collaboration and continuous refinement, which is why it needs to involve people from multiple departments and data from multiple sources. And don’t forget that more iterations lead to more accuracy, which leads to more confidence in plans and planning capability.

In my earlier example of building a database of marketing funnel metrics, I knew I was successful when marketing was sitting in the finance department every other day fooling around with their data at our desks. At that point we also saw the accuracy of our own sales and revenue forecasting greatly improved.

The Corporate Performance Transformation Payoff

Like most CFOs, I’m results-oriented, and being transformative involves being alert to all the direct and indirect results that indicate you and your team are on the right path.

In my earlier marketing example, we knew we were on track when we saw finance helping its colleagues in marketing make better decisions to reduce customer acquisition costs (CAC). That meant the company could do more with the same amount of money, and made sure it spent its marketing dollars in the right place – from pay-per-click advertising to public relations.

Integrated planning doesn’t mean finance taking over the marketing function, but recognizing that all of us should share the same goal of driving organizational success.

Uncovering the value of financial & non-financial data

Going from integrated planning to performance transformation is about finding the story in the numbers through analysis. Telling that story includes the descriptive – where you’ve been as a company – and the diagnostic — where you are and why. Making that story transformative happens when you start to get predictive – where you’re going, the levers that control company direction, and how to adjust those levers to get the company to where it needs to be.

Performance transformation can drive a major culture shift in an organization. With strong collaboration and a powerful combination of financial and non-financial data, finance can lead performance transformation by informing and driving results that could be an order of magnitude greater than keeping to a straight line or within a repeating pattern.

Put another way, you can continue to report sales and marketing spend relative to budget. You can aim to cut sales and marketing spend. Or…you could double your sales.

What gets me excited is maximizing my contribution through data and analysis. I don’t want to be the guy cutting down trees and printing financial statements that go straight into well-ordered black binders. I want my numbers to live out loud, to tell an impactful story, one that motivates and drives performance transformation across my organization.

As the CFO, I firmly believe I’m in the best position to do this. And I’m thrilled to see more and more of my peers striving to do the same.

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