As I tabled in my post from last week, one of the hardest disciplines to work into the day-to-day activities is to continually find ways to challenge myself and grow as a professional. As a part of a 7-part series, I discussed my continue reference and affirmation of Jeremy Hope’s book, Reinventing the CFO. Jeremy discusses 7 primary disciplines that he believes apply to the current CFO. The first discipline mentioned in his book is the CFO as Freedom Fighter.

 

            The primary belief behind this discipline lies behind the overwhelming levels of information and reporting that are available to the CFO, and expected to be reviewed as part of the decision-making process. Hope’s book specifically discusses how senior executives use “powerful IT systems to drill down to increasing levels of detail and demand instant answers to irrelevant questions”. Essentially, this comes back to the concept of analysis paralysis. This is ultimately a constant and increasing flow of information, which ultimately results in a significantly delayed or non-existent decision.  Hope also believes that it’s the responsibility of the CFO to “call a halt to this insane data-induced micromanagement”.  Hope further believes that the “CFO has to overcome the resistance of a number of people with vested interests in preserving the status quo”. He further comments that “These are often people whose skill is in spinning, fudging, and manipulating the information so that higher-level managers see and hear only a customized version of the truth”. Hope suggests that the CFO should:

-         Rescue Managers from information overload

-         Simplify systems and reports

-         Focus on truth and transparency

-         Avoid unnecessary tools and systems

 

With respect to my own approach, I have always tried to deliver reporting to my internal customers in a manner that will give them the necessary data to make well informed decision, but letting them know that further details are available if absolutely necessary for further supporting key decisions. Depending on the situation I am in, I will usually run a bit of a “diagnostic” to determine if the current level of reporting is really adding value to the existing management team. What I don’t want to do is put my team in a position where we are simply being kept busy generating a volume of reports that are not being used in any meaningful manner by management. My view is that Finance is present to drive results in the organization and the only way that we will be successful with that is providing reporting that will result in decisions that will improve productivity, justify elimination or expansion of product lines, or support longer-term strategic initiatives.

 

At my current company, I started my engagement at a time that I would have considered late for most Budget calendars. However, it was also a small enough company that I knew we would be able to respond quickly to changes and could still finalize a Budget before the end of the year. Coming into the company, I found a GL that was entirely too detailed for the type of business that was being operated, had been only mildly enforced during prior budgeting efforts, but not in any serious level of internal accountability. While I would normally choose to have as much detailed info as possible, I felt that we needed to take a number of steps back, budget at the 40k foot level, implement that Budget, and ultimately, perform to that Budget with the requisite levels of accountability.  I would then expand the level of detail and expectations going into 2010 once we had reestablished a solid foundation.  I also wanted a Budget that was not so complex that it couldn’t be easily followed by all employees.

 

Once the Budget was finalized, I took the step of providing a much higher degree of transparency than had previously been present in monthly reporting. In fact, much of the financial information had not been shared with the wider employee base. The view I adopt is that unless all parties in the game know what the ultimate goal is, then how can you expect that those goals will be achieved? To further clarify, I certainly don’t provide the same level of transparency to general staff that I do with the Board or key Executives. Nonetheless, all employees know what our key goals are.

 

I’ve had too many experiences at prior companies to know that having a high degree of information overload will virtually paralyze the decision process, and depending on the availability of the information, can serious cloud the accuracy of the data. I’ve also had enough experiences to know that increased levels of transparency, tempered for the specific audience, will result in a higher degree of involvement and belief in the end goals. Although I have also found that shared information can also result in undesirable situations, this is more the rare exception than a norm.  No question, the CFO is in place as a Freedom Fighter for management to execute at the highest level.

 

Thanks for reading . . . .

 

Jeffrey Ishmael