Can analytics make CFOs more effective?

23rd April 2015

The answer is a simple ‘yes’. But as FSN writer Lesley Meall discovers, the reasons why are a more complicated.

 

 

 

Technology is changing the world and the chief finance officer’s (CFO's) views of technology are changing too. “In our discussions with CFOs over the past decade, the significance of technology and analytical tools in transforming the finance function and broader enterprise has continuously risen,” says Bill Fuessler is the Global Financial Strategy and Transformation Leader for IBM Global Business Services.

“Data has always sat in the centre of their job responsibilities,” he adds, but their attitude towards this data appears to have a significant impact on their effectiveness.

IBM analysis revealed some interesting differentiators and a subset of CFOs it calls ‘Value Integrators’: individuals who are more effective in finance efficiency and analytical insight than their peers. It also identified a smaller set of high performers it calls ‘Performance Accelerators’: CFOs whose mastery of their core duties puts them head and shoulders above their peers. Over a three year period Performance Accelerators were a whopping 70 per cent more successful than Value Integrators, based on revenue and profit generation are performance measures.

There are of course myriad factors which could potentially influence this outcome and it is not possible for all of them to be directly attributed to the CFO. However, IBM did find some big differences between those (successful) Value Integrators and their (even more successful) Performance Accelerator peers; who are more effective at continuously improving processes, more effective at developing finance talent, twice as effective at integrating enterprise-wide information and more likely to combine internal and external data to produce insights.

IBM cites their superior use of data as a ‘critical differentiator’. Performance Accelerators are more effective at conducting analysis including: tracking and forecasting supply-chain financial data, planning and predicting resource capacity, conducting industry and competitor analysis, and they are significantly better at using the insights they’ve unearthed to create profitable growth. While some CFOs still rely on a mix of spreadsheets and intuition for much of their work, Performance Accelerators are embracing analytics – and hoping for significant benefits.

NewTech Group recently set off along this path. Until late 2014, the Russian drilling enterprise was managing its finances and operations in spreadsheets, but as more people became involved in these processes the spreadsheets became progressively less efficient. “Demands for better quality, speed and efficiency of business processes were getting higher, and our previous system no longer could satisfy them,” says Dmitry Efimov, CFO, NewTech Group. So the leadership decided on a “risky but necessary” transition to a more specialised cloud-based platform.

Anaplan was selected because its collaborative features and data processing functionality can enable any number of users to work together with the same models and applications without giving up any control over the data, and allow NewTech to  build complex applications and manage its growing data volumes – unlike its previous spreadsheet-based approach. “We hope that Anaplan, known for its flexibility and user friendliness, will allow us to optimise our resources management and stay more agile in the fast-paced world,” says Efimov. Time will tell.

The Pabst Brewing Company has already used analytics to deliver benefits in finance and beyond. “We have transformed our finance function to move away from the proverbial thousand spreadsheet march,” says Cordell Sweeney, Pabst CFO. Analytics have enabled the finance team to focus on higher value activities, support more data-driven discussions across Pabst, and reposition finance. “We have become value-added partners, using business insights to drive decisions that lead to gaining market share, increasing profitability, and creating value for our shareholders.”

iCIMS, a specialist in software for talent acquisition and management, has also experienced significant benefits since it stopped doing most of its financial planning using spreadsheets and started using a more specialised cloud-based planning system: Host Analytics. “We’ve expedited the time frame of our close from a bout four days to about four hours,” says Jim Perry, finance manager, iCIMS. The integrity of the data has helped finance to built tremendous trust among the iCIMS executive. “People are trusting the data coming out of our team and looking to us as the experts.”

At iCIMS, the finance function has gone father than Pabst, down the road towards the enterprise-wide integration of data which helps to turn a Value Integrator into a Performance Accelerator, integrating its cloud analytics with its cloud enterprise resource planning system (NetSuite) and with its customer relationship management (CRM) Salesforce.com. “Aligning sales and finance is critical for any company selling in a dynamic and competitive market,” says Perry, and iCIMS has integrated these with a specialist application Host Analytics Sales Planning.

“By integrating CRM and general ledger data in Host Analytics Sales Planning, we’re able to understand and optimise the productivity of our sales team and make sure that any changes to the sales forecast are immediately accounted for by finance in the corporate plan,” says Perry. But improving collaboration and alignment between the two teams is just the start. Perry explains: “Now the executive team has seen how successful we’ve been with our two integrations, we plan to take every data source in the company and have Host be our central repository for all of our information.”

There is a gap between integrating systems in this way and the achievements that IBM associates with Performance Accelerators. Their attitudes towards and exploitation of analytics and other technology-enabled innovations are not the only things that separate Performance Accelerators (or their successes) from other mere mortals. Their collaboration across the business and their understanding of customers also feature on a fairly long list of other winning characteristics; something interested CFOs can learn more about in a related blog at FSN Elite here.

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