It’s that time of year for folks that rely upon and expect great finance…Still a lot of traffic on 2023 yearend analyses and a plethora of here are the X things you need to do for 2024 to achieve great finance.….Of course, some of the 2023 items nailed the target, and others missed. 

But Funny thing about the next X things….

• Regrettably many of the items have been on the agenda for a really long time…
  • CFO’s still need to be more strategic—and their organizations need to be able to back them up…
  • The role is always changing—and the skills and experiences need to constantly match the changing roles
  • New technology is the great promise for success
  • People are always the hurdle
• Usually presented as “ just this one thing will do it” beside the fact that we all know we live and work in a systemic world.
• Many of the X things are long term in nature but we need results now!

And the need to build great financial management capabilities is too great to just ignore them!

Disturbingly, more important considerations emerged toward the end of 2023, based upon surveys and analyses but did not seem to catch the news cycle right- and came and went quickly.  Perhaps they were “boring” or dealt with an elephant in the room, that made many uncomfortable.

But the underlying concepts and concerns are worth thinking about and assessing how they might be impacting your organization.

1. CFO’s [and their organizations] feel overwhelmed
   1. Only 40% say their “transformation initiatives are on track”
   2. New items are added to the agenda before old ones are completed and take root
2. Skill sets are tough to develop or buy- and are struggling to keep up with current initiatives- much less exhortations about the future
3. Business leaders are suggesting that the CFO role is evolving faster than their CFO is developing
   1. Cost cutting is theoretically behind most organizations- which is an area in which man CFO’s Excelled.
   2. They want talent that can figure out how to grow profitably and help to holistically transform the business.
   3. CFO’s have to morph from operators Strategists Transformational leaders
4. CFO’s have to dig deeper into the finance organization and help lead transformation across the whole company
5. In a Private Equity based survey, more than 90% of CFO’s indicated concern about their career [longevity with current employer]- and the investors seemed to have similar levels of concern- even while there was a lot of congruence of performance and expectation in many of the survey categories.
6. The areas of concern that stood out all involved the CFO’s ability to create,  deliver and explain what was really going on in the business, and to help the leadership team embrace the information in a way to spread insight and foresight. 
   1. The CFO’s think they have the data and structures to make this happen, under control- owners and investors are skeptical and it is a source of friction
7. CFO’s think they have relevant much more so than investors.  BUT Investors cite issues like:
   • Insufficient Granularity
   • Depth of data (LOB, Products, Markets etc.) is not adequate
   • Breadth of data- scope
   • Frequency and timing of reporting ( and data availability)
   • Alignment and agreement on data definitions and  interpretation
   • Is it the measurement/definition of the measurement or just a lack of understanding?

So now what?

In Brief:  Yikes!  Organizations are overwhelmed and they have yet to address the matters that appear most important to their owners.  The continued dialogue and disappointment has caused CFOs to start to hear footsteps and their owners think they should.  What can be so daunting that Financial Leaders are so concerned with their careers, but have not acted effectively?

What’s the hold up in your organization that gets in the way of CFO’s plying their trade to help business leaders really understand the business of their business?

As owners, board members, business leaders, finance leaders ( who think their careers are on the line  and people just plain interested in good business, how long are we willing to let these conditions persist?

How do you get a handle on the situation quickly?  We all have short-hand method and litmus tests to quickly understand what’s going on or not going on in a situation we encounter:

• As a caddie, I always looked at the arrangement of golf clubs before I looked at a swing- it was a reliable indicator as to how the day was going to play out
• As chef’s you can tell in an instant what’s going on, by just looking in the kitchen
• As teachers, a few second scan lets you know how the class is behaving and how its being managed.
• As a finance guy doing diligence or trying to understand what a company’s capabilities and performance might be- I ask two things:  Can I see your management reporting package- and what day of the month is it delivered.

What are tried and true ways to get a handle on things and what are they telling you about your organization?

Creating the capacity and capability do deliver insight to the results of the business and foresight to help ensure that future performance is better than current performance is central  to the role of financial leaders.

Why would so many finance leaders imperil their careers?  If you, like 90+% of PE owners agree it is critical, what is your role in helping to develop a solution?  How can you help?

• What’s in the way?
  • Internal factors
    • Is it finance capability and capacity?
    • Is it the fact that others might want to come to grips with the realities they are charged to manage?
    • Has it just been on the agenda so long that people are reticent or embarrassed to bring it up?
    • Do the key players really understand the situation?
  • External factors
    • Has anyone successfully dealt with this before- or is the solution just too novel?
    • Is it impossible to understand the real components of your business- and the economic and operational engines that propel them?
    • Do analytical frames, protocols and software not exist?
  • Is it resources?
    • What is it costing to wander on as is?
    • What would it be worth to you to know more about the business?

No matter what- you conclude, do you think it is worth it just one more time to dig in and start to experiment to build perspectives, capabilities and tools to help businesses KNOW MORE.?

Good news is that this can all be started before spring- and the pathway to success determined before summer.

If you start with the simple questions (and perhaps complex answers):

• What are the driving components of our business- how we make money and returns
  • Markets/Segments
  • Customers and their behaviors
  • Unique operating capabilities and Intellectual Property
  • Products
  • Other parts of the value chain
• What do you need to know about them to better understand?
  • Actual Performance
    • Operational
    • Economic
    • Strategic
    • Holistically- pulling it all together?
  • Performance against
    • Budgets/Forecasts on same basis as performance measures
    • Over time
  • Reasons for
    • Performance
    • Deviations from planned outcomes
    • Early warnings that may have been missed
  • Prescriptive changes necessary to have actual results meet or exceed expectations
  • What additional matters the organization needs to consider to better run the business?
• To start the process of getting that information and reporting on a timely and consistent basis, what would have to
  • Happen
    • How long should it take?
    • How much should it cost?
    • If you decided to only spend half as much time or cost at the outset, would you incrementally know and understand a lot more than you know now?
  • Be done for you as leaders to initiate the process?
    • Remember starting the process and getting answers to key questions doesn’t take very long, or cost much and you will be in a much better position to decide whether a greater investment is worth it for your organization.

We believe that it would take less than 2-3 well informed days to draw this matter into focus for most all but the most complex organizations. And then you can act with mutual confidence and resolve

If you are interested in your organization knowing more and performing better, click here to set up a time to talk.

Or drop us an email