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Discipline #3: CFO as the Architect of Adaptive Management

June 2nd, 2009

            In the last segment on “Reinventing the CFO”, I covered the CFO role as the Analyst and Advisor, which mainly dealt with the CFO creating a high-performance team that uses the highest level of information available to support the executive team in their decision making efforts. In a slight continuation of this theme we move into the 3rd discipline for the CFO; Architect of Adaptive Management. In Jeremy Hope’s book he discusses the need for the CFO to move away from rigid reporting structures, static sources of information, and to begin adopting new approaches to viewing market information and to try and anticipate negative market forces.

 

            As an “Architect of Adaptive Management” there are 6-key points that Hope believes needs to be in place to effectively master this area. Specifically:

  • Design adaptive systems from the customer’s perspective
  • Manage through continuous planning cycles
  • Make rolling forecasts the primary management tool
  • Report key metrics daily and weekly
  • Enable fast access to resources
  • Focus accountability on the relative improvement of teams

 

            While these might seem pretty remedial in nature, my most recent experience has reminded me how much of a challenge these points can be if the systems in place will not effectively support the generation of these data points. Although the data available has supported basic budgeting and forecasting efforts, the data/systems are not robust enough to support the daily delivery of key metrics or provide fast access to accurate information. The information has to be continually reviewed to ensure consistency with prior reporting. The management of the information is a continual struggle, which is why we’re headed towards a Q4 system upgrade. With the above factors in mind, it makes it difficult to drive accountability when the reporting that is being distributed has an inherent level of doubt that takes 3-times as much work auditing than to actually prep and export.

 

            However, when the systems are trusted and the data has a history of accuracy and integrity, the impact on the team is immeasurable. Towards the end of my tenure with MGE we had a high volume of reporting being requested during our merger with APC. We were operating on an older AS-400 platform while our partners were operating on a new Oracle system. We had years of passing audits with PwC, Mazars, and Moss Adams without a qualified letter. All we heard from the other side were excuses on why data couldn’t be pulled. We were achieving above industry results in Sales and EBIT. Our partners were never quite sure of their results.

 

            Although I was only responsible for the North American operations prior to the merger, we enjoyed a very collaborative approach with our HQ staff in France.  Through an efficient management of data resources, as well as systems that supported our end strategies, we were able to effectively execute on Hope’s 6-points. While not always executed at a perfect level, they were nonetheless strived for and often executed well. Accountability was driven from the Boardroom to the customer’s site through our Field Engineers. It was balance and execution that I look back on and appreciate.  What was achieved at MGE keeps me motivated to achieve at the companies that I now call home and strive to deliver the same excellence.  A single summary page does not do justice to Hope’s view of the CFO as the Architect of Adaptive Management, which is why it’s highly recommended reading.

 

Thanks for reading . . . .

 

Jeffrey Ishmael

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