Posts Tagged ‘operations’

From the time the idea of a company was developed, those who control the purse strings (finance) and those who manage the income (sales, operations, and marketing) are often adversaries.

A frequent igniter of these tensions is a situation where an operations or business group wants to quickly move forward with a project (XX optimization, for example) which requires a capital investment.

Before approving funding, however, the finance organization must complete its due diligence by quantifying the benefits outlined in the business case. This timing gap often creates a bottleneck and uncertainty about the projects’ implementation and/or timing.

These bottlenecks can be avoided by all stakeholders working together to build a strong, interactive relationship around the project.   Keys to building this relationship are education, communication, and ultimately, including the finance team in your project.  The capacity to master the first two skills will lead to your finance organization becoming a trusted advisor and consistently being invited to serve as an active participant in your strategic initiatives.

Education

It’s a two way street.  With over a dozen years of providing strategic financial support, I have consistently found that education is the first step in building bridges to a better working relationship.  It is as much a necessity for the financial person to understand what the operations groups do, and vice versa.  While working at a for-profit healthcare organization, I held a weekly course for 10 weeks in order to educate the IT infrastructure group management team on the objectives of the finance group and how a working knowledge of finance objectives can add value to the IT organization and help them – and the company overall – to become more successful.  Once the course was completed, the IT management team understood why and how their involvement in budgeting and financial planning is important to the company’s operations, why their participation in the ‘month-end close’ process is crucial to meeting the goals of the company, and also why the building of business cases for all projects is essential for long-term financial planning and overall success.

I have also found that, from the financial team side, learning what the operations groups do, and how they do it, is vital to the success of a financial analyst.  By fostering an active relationship with my ‘customer’ – the operations team – and understanding how they manage IT facilities, call centers, or manage hardware environments, I was consistently able to develop a better relationship with these supported groups – and we always celebrated our successes together.

Communication

This begins with the education phase and continues to build a foundation of trust.  Once the financial representation and the operations groups understand what the other does, it becomes easier to support the others’ efforts.  The key to effective financial communications is to remain consistent with operational or business partner requirements, and to be cognizant of the execution of new requirements and their execution. Make no mistake – the execution of these objectives can be difficult at times; this means the month-end close process must run the same way each month, and the systems of the budget process are changed as little as possible each year.  The information required to develop a business case is the same, regardless of the project.  In the event any strategic change does occurs,  any corresponding  changes in financial requirements need to be carefully considered and communicated so as to not to compound further disruption to the organization. Once consistency is achieved, the analyst and the group he or she supports can get to real work, the work of optimizing the business and reaching the ultimate goals of the company:  profitability, social goals, etc. This is the trusted advisor stage.

The trusted advisor

This is the ultimate goal of the financial representative, and where the fun begins.  As an analyst, I remember my colleagues consistently stating that the most boring part of their job was the “regular” work.  My experience is, once you have a system in place for achieving positive results in a routine activity such as the month-end close, that task often becomes mundane. For a corporate finance person, the interesting work is that which includes participation leading to realizing corporate goals.  Ways in which the financial analyst can participate in this process include performing lease vs. buy analyses for new equipment and software purchases, finding savings within a project, conduct audits to make sure the company is ‘getting what it pays for’ from each of the many vendors and service providers, and also establishing metrics and key performance indictors (KPIs) to put dollar figures on operational measurements and use this information to make key business decisions, etc.  Serving as a trusted advisor to the operations management team can be exceptionally rewarding; it allows an analyst to be creative and to develop solutions that help to both ensure a successful project and contribute to the company reaching its goals.

Achieving the role of trusted advisor and building that relationship between finance and the operations groups is important to the success of the entire organization.  The more adversarial the relationship, the more difficult it becomes to complete the work – both the monotonous (yet necessary) work and the creative solution work.  Once these barriers are eliminated – from either the operational or financial end (or both) – all jobs become easier, more efficient, and much more rewarding to each employee.  Motivated employees will not get excited about doing the same job every day. To them, variety and professional growth are the spices of life, and job functions in all areas of the company become more efficient when the relations between all groups within the company are high

Deal with Constraints and Walk to your Horizons

by Guy Ralfe on November 12, 2009

horizonI am a member of the Maconomy US management team and this year we have had a very adventurous year growing our organization in this often described tumultuous period. This achievement against the grain has not gone unnoticed  and I was fortunate to participate in a presentation for our chairman of the board of directors, Thomas Hartwig, of our  achievements and our future visions.

Thomas who sits on the board of many companies, was not what I expected in a chairman. I think my expectations have been badly misshapen by TV series like The Apprentice! He was very humble, polite and attentive to what we presented. He often gave reflection, sought clarification and when contributing back to us he spoke from his experiences but always presented his advice in a open crucible type of way, so as to produce more comment, discussion and thought around the topic by the team. I felt very privileged to receive his leadership.

So during the presentation we spent some time discussing our future goals and all the challenges we were facing in our efforts to continue growing the operation to meet these goals. The perception was, that while we were still making progress, it seemed to be taking more effort and there appeared to be more challenges to our growth desires. However tough it has been the mood remains optimistic and determined, whereas when things were contracting at the end of 2008 even the mood felt like it was a challenge – to quote  “when things start contracting – suddenly even the office coffee starts to taste bad!”.

For me this was where the enlightenment came and Thomas’s experience and leadership shone through. While we were achieving good growth in the US office we were becoming focused on the issues right here around us and he pointed this out to us. He offered for us, to stop looking for solutions to our constraints. Just like the sun rises every day, when you clear one constraint another will replace it in endless supply. Rather, he offered, as a management team focus on defining the future situation we envision about 5 years out and build up a strategy to achieve that. By doing this we then focus on delivering the strategy, which ultimately will produce the results we want, and the noise (constraints) remains operational noise.

Looking back, ActiveGarage had a similar situation at its pre-inception stage. A larger group met and when presented with the offer the group focused in on all the constraints to the offer. By the time we realized what we were doing the offer had moved on. Only when the current group of founders got their heads together and envisioned the future were we able to think and act for the future to  produce, what at initial inception, was considered an impossible task.

In order to sustain continued results we must mark out our future point on the horizon and work towards it by walking down a path in its direction.

Just as debris lies on the path to the destination, focus on walking the path and not the debris that we must tread over to get there.

Be sure to keep resetting the point on the horizon recurrently as the horizon moves as you approach it.