Decisions, decisions, decisions. That’s all a company is made up of. But wait—what happens after the decision is made? More decisions? No, after a decision comes execution. It’s in the execution stage that value is either created or destroyed, although the decision that preceded execution is a large factor in determining the outcome. What’s finance’s role in execution? Years back, I would have said “none.” Today I look at it from a more refined perspective by saying we might not be out there turning the nuts and bolts that make the business run, but we sure need to be following them very closely.
Are you leading or driving execution?
We must look at leading indicators to see if the decision we made and the execution that follows is expected to lead to the desired results. If early on it doesn’t appear to be, then we discuss if a course correction is needed rather than waiting the full decision period and only reporting on the outcome. It could even be that for certain initiatives, it’s finance that leads the execution. For instance, on a cost-saving program that involves advising department heads on how to cut costs and the trade-offs needed, finance might take the lead.
No matter what though, finance must always be driving the agreed-upon initiatives and following them closely from end to end to ensure they deliver the expected results. Here are some of the steps this involves:
- Create the business case or decision base that documents the assumptions on which the decision was made and the outcomes that are expected to be achieved
- Design a measurement system of leading and lagging indicators that enables frequent follow-up on the progress of the initiatives
- Facilitate ongoing status meetings to discuss if the achieved progress is sufficient or additional actions must be taken
- Upon conclusion of the initiative, document the outcomes against the original business case and explain why things turned out differently, if that was the case
All of these steps typically reside with finance, however most often we miss out on some or all of them. That means that often we don’t know how we performed against expectations or the reasons things didn’t go as planned. We lose a lot of learnings that could help us make better decisions in the future. That’s not driving value creation!
Driving impact across the standard workweek
So what does impact look like in the standard workweek?
It starts at the end of Wednesday, when you’ve reached a decision on what to do to improve performance. Here you design the measurement system that’ll be used to track the initiative (if not already available). On Thursday the initiative is running, and you check the leading indicators and talk with people on the ground to see how things are going. On Friday you report the progress to the project or management team, and in this condensed way of looking at things you collect the benefits.
That’s finance driving impact in the company starting with moving from being a producer to a user of numbers that can quickly assess how a company is performing, present it to management, brainstorm on what actions to take to improve performance, and then ensure that the expected results are delivered.
How does this compare with the work you do today in your finance function? If all finance functions were working in this way, companies would be creating a lot more value than they are today. So I challenge you to disrupt your own finance value chain and then tell me the results. Are you ready to get started?