PMCC Interactive

Category: Discuss: Effective Financial Management

  • Embracing Great/Strategic Finance in Middle Market Companies: The Need, the Challenge, and the Payoff

    The concept of strategic finance has been in the discourse for over 25 years, yet the phrase “Becoming more strategic” remains pertinent, especially for middle market companies. The sector often faces unique challenges, balancing between the agility of small enterprises and the resource availability of large corporations. This balance makes the need for great or strategic finance both critical and complex.

    Defining the Ambiguous: What is Great/Strategic Finance?

    Strategic finance is elusive to define, often reduced to a “you know it when you see it” kind of standard. But let’s not get lost in semantics. Instead, let’s focus on its function—to aid leadership teams in creating and sustaining value. Strategic finance doesn’t inherently create value; rather, it serves as the intersection of critical data flows within the organization. It can collate this data into actionable insights, helping to understand the company’s economic engine and enhance financial, strategic, and operational literacy.

    The Endgame: Creating a Sustainable Competitive Edge

    The primary aim of great or strategic finance is to equip leadership with the tools and knowledge required to make better decisions, thereby creating a sustainable competitive advantage. Building this capability is easier said than done, evidenced by the businesses that fail to accomplish it. However, it is precisely the challenge that makes it worth pursuing.

    Pragmatic Steps Toward Realization

    Based on extensive experience working with middle market companies, the following steps are suggested for those aiming to realize the benefits of strategic finance:

    1. Prepare the Field

    Before you sow the seeds of strategic finance, your organizational soil needs to be fertile. Alignment across departments, clarity in objectives, and commitment from top leadership are prerequisites.

    2. Define Your Strategy

    Knowing what you aim to achieve is crucial. Outline the strategy that will guide your business activities and the key metrics that will measure progress through the execution phase.

    3. Understand the Interplay

    Recognize the symbiotic relationship between strategy, operations, and finance. Each affects the others, and understanding this dynamic helps in creating a well-rounded view of the business.

    4. Information is Power

    Determine the types of information that will empower your team to “Know More Now.” This could involve real-time dashboards, automated reports, or deep-dive analyses that intersect strategy, operations, and finance.

    5. Data Processing

    Agree on robust methods and processes to capture data and transform it into meaningful insights. Whether it’s through advanced analytics, machine learning, or good old Excel, the key is to make the data digestible and actionable.

    6. Integrate Insights

    Don’t let your newfound knowledge gather dust. Integrate these insights into planning cycles, accountability metrics, and reward systems, ensuring that the language of value creation becomes a cornerstone in organizational decision-making.

    Beyond the Basics

    While these steps lay the foundation, the journey toward great or strategic finance demands more. It involves honing various other capabilities and strengths that the finance team must develop. And it starts with helping the organization “Know More Now.” This not only aids in quick decision-making but also creates a foundation upon which other disciplines can be effectively built.

    Conclusion

    Strategic finance is not merely a concept but a necessity, especially for middle market companies looking to edge out the competition in today’s complex business environment. It involves an iterative process of gathering data, generating insights, and implementing them into action—all aimed at the ultimate goal of value creation. Therefore, the time to become ‘more strategic’ is not in some distant future; it is now.

    Intrigued? Download our presentation for a deeper dive into how you can implement these concepts in your organization.

    In the meantime, if you would like to connect- here is my email: pjm@pmccventures.com

  • The conversation about the role of the CFO- and where she adds the most value continues- but the bottom line is that Finance counts!

    Thirty some years ago, we began research on the role of the CFO and the impact of financial leadership on the performance of the enterprise.  After interviewing and reviewing more than 50 organizations and engaging thousands of CFO/Financial leaders in workshops around the world, we found that there were several determinants of success.

    Moreover, we found great frustration on the part of CFO’s wanting a seat at the “business management/Strategy table” and the rest of leadership questioning why they needed/should have that seat.  While that conversation continues, the accompanying link to the Visual Capitalist shows that significant progress has been made and that the conversation continues and that is a good thing.

    Enjoy the link:  https://www.visualcapitalist.com/future-of-the-cfo/

    Meanwhile, each day, we continue to prompt the conversation and help Clients create value by  improving the business of their business

  • To be more effective, Financial Management has to become more offensive

    Despite being decades old, the debate about the role capability and performance of financial management  continues whenever financial leaders gather.  Our view is that no matter the side of the debate you take, your impressions of the barriers to effectiveness or your perception about your organization’s capabilities, most every organization needs more effective financial management capabilities to successfully compete in this hyper-competitive business and economic climate.

    Financial leaders need to set the tone and engage in the dialog that will produce positive and generative results for their business.

    Read more….20110425 EFM Offensive Financial Management

  • Further Thoughts on Effective Financial Management

    The topic and concern for enhancing the effectiveness of financial management has been around for decades.  Despite the length of time this matter has been on the stage, many leaders still are concerned and frustrated with assessing and enhancing their organization’s Financial Management Effectiveness.  PMCC Ventures has been dealing with this issue for 30+ years and offers some insights on why the issue is still front and center- and what practical things a business can do to enhance its financial management capabilities.

    To us, the fact that the issue is still front and center is a good thing.  We believe that the role of finance and hence its actual effectiveness will always be in a state of change.  The challenge for many companies is that in this constant state of flux and change- they are seeking insights for solutions in many of the wrong places.  Insights for meaningful change don’t likely exist within the organization- they are sourced by changes the business undertakes, changes in competitive situations, government or regulatory changes and the economic climate and its impacts.

    In many companies, the finance organization is buffered from dealing with shifts in strategy, changes in market conditions, and emerging issues.  This is particularly true where the traditional role of finance has primarily been to efficiently process transactions and accurately prepare compliant financial reports.  Plenty of new survey material suggests that the role of finance is changing and expanding, and the most recent economic situation has caused the overall organization to be more dependent on the effectiveness of finance- throughout the company- not just in the “finance department”.

    In today’s environment the source of enhanced effectiveness will likely be developing new capabilities- or dramatically enhancing existing capabilities- not just doing the same things incrementally better.

    To gain more insight on the subject, review PMMC Ventures’ brief presentation on Enhancing Financial Management Effectiveness- Seeing what is missing.