CFOs benefit from performance management

Looking back on the past 10 years of financial performance management, the role of the office of finance has evolved from what used to be a custodian role to the multilayered responsibilities of transactional gatekeeper and trusted advisor, which includes functions of accountability, accurate reporting, budgeting and risk management.

"Where the CFO used to be the custodian of financial information, the role has now evolved, including responsibilities for improving performance, a much more hands on responsibility," says Desmond Botha of Fios in his presentation at the recent SAS Forum in Johannesburg.

As organisations gain mounting amounts of data, so their opportunities to use that data to make better decisions increase.

"However, with these opportunities come challenges that often fall to the chief financial officer (CFO) to overcome. CFOs struggle with the ever increasing responsibilities of managing performance through financial record keeping, reporting, planning and, of course, risk management," says Botha.

To balance out the load of tasks many CFOs have turned to performance management (PM) for answers. A survey conducted by BusinessWeek Research Services (BWRS) in 2007 revealed that 80% of CFOs are keen to develop and implement a successful PM strategy.

With the daily responsibility of their companies` risk management and agility weighing on their shoulders, they are often confronted with poor adoption of performance management strategies by the rest of the organisation. CFOs are very aware of the benefits of a proper PM strategy and how it could benefit both the top and bottom line.

"One of the biggest reasons for organisations failing to implement an effective PM strategy is because of a disparate approach instead of adopting a holistic solution that focuses on all the key elements of performance management," he adds.

In BusinessWeek`s survey the results proved that CFOs who have mastered PM were more likely to say their business enjoyed improved cross-selling, up-selling, new product development, distribution and workflow. More importantly, they expressed positive feedback about their businesses and emphasised the clarity and transparency that PM had provided them with.

Even though PM is top of mind with CFOs, the survey found that many businesses are struggling to implement an effective PM setting due to challenges faced with disparate environments that focus only on single disciplines of performance management. Of the companies surveyed, they found the following:

* Only 43% use their PM to perform budgets and forecasts
* 40% align operations and budget with strategy
* 45% allocate company resources
* 30% manage risk
* 45% perform financial planning and management (consolidations)
* 50% integrate information from across the business.
* 43% use advanced analytics

"This clearly indicates that we still have a long way to go before most organisations derive true value from their PM strategy by addressing all the key areas and not just focusing on one or two of the PM disciplines."

Botha believes that CFOs are facing more responsibilities often with fewer resources at their disposal. Many businesses have already wrung most of the benefit they can from cost-cutting and efficiency measures - either through centralisation or automation. Streamlined efficient business processes that support best practice principles are required.

"There is no denying that CFOs could do with a little help as their responsibilities grow and their resources and budgets shrink. Research has shown that businesses which have adopted effective performance management strategies have consistently outperformed similar businesses in their industry. Typically, businesses with effective PM strategies have a market capitalisation 2.4 times greater than those who did not have a holistic PM strategy," concludes Botha.

* Survey available online at: http://www.sas.com/events/cm/157329