Insatiable

Harnessing the power of curiosity

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When hiring an analyst, how important is “curiosity”?
Is it even on your list of desirable attributes?
If not, ADD IT!

Quid Pro Quo

A few weeks back I wrote about Peter Kellogg’s program at Merck. Peter equips everyone across the organization in basic financial literacy (see Lost In Translation). His goal is to improve collaboration between his finance folks and the rest of the business.

The reverse is also true: finance folks need to be equally familiar with the other disciplines in their organization (operations, marketing, etc.). Yes, we want to be understood, but we also need to take the initiative to understand others. But Finance’s record on this dimension is mediocre at best. EPM Channel’s 360° Feedback research identified “a lack of business understanding” as a key barrier to providing effective decision support.

Some suggest training programs but in my mind a formal training program should be wholly unnecessary – daily business is your classroom. An analyst not itching to thoroughly understand the business they are supporting is the wrong person for the job.
Efforts to provide training or push them out to work more closely with operations, marketing or other departments will be met with at best reluctant obedience and at worst resistance.

Getting The Right People On The Bus
The solution? Build a team with a natural, insatiable curiosity. Sixteen hundred years ago, Saint Augustine observed:

“Free curiosity has greater power to stimulate learning than rigorous coercion.”

Whether you already have insanely curious analysts, or once you have them on board, set the stage to harness that power of  curiosity:

  • Announce expectations. Let folks know you value those who learn the dynamics of your business beyond the traditional finance perspective.
  • Allow time for exploration. Be patient with analysts who linger with cross-functional team members and other departments if they are learning what makes those roles challenging and fulfilling.
  • Reward learning. Put it into their performance reviews and recognize those who are following their curiosity (even though they will think it’s ridiculous to be rewarded for doing what they wanted to do anyway).

Riding the wave of curiosity, you will quickly enjoy not only the benefits of more insightful decision support, but also stronger relationships driving more effective decision support.

What’s been your experience?  If you have a team of insatiably curious analysts, let me know how you developed that culture.

© 2013 Verax Point

Posted in Team Effectiveness

Don’t Try This At Home

The hidden profession of Decision Support

Myth BustersI’m a fan of the television series, Mythbusters… getting paid to blow things up is one of my dream jobs.

Sitting comfortably in my sofa, it’s temping to think, “Hey, I could do that!” Whether dynamiting a cement truck or creating a massive fireball from non-dairy creamer (really!), I’m tempted to dismiss their “Don’t try this at home – we’re professionals” warning as mere hype.

The source of this over-confidence is simply that I don’t know what I don’t know. One thing I’ve learned over the years is that the less I know about someone else’s job, the easier it looks.

This is true of evaluating strategic investments. Analyzing capital expenditures seems straightforward – just model the costs and benefits and plug in an NPV or IRR formula. As a result, this task is often bundled into the job descriptions of accountants or budget analysts. It’s all just numbers in Excel, right?

Even worse, I’ve had folks from a variety of non-financial disciplines (marketing, engineering and IT) request a model they can just “plug the costs and benefits” into and generate the valuation themselves.

A Distinct Profession
I’ve been holding conversations with dozens of CFOs and CEO focusing on the quality of information and insights they receive in business proposals. One CFO commented:
“We need to treat strategic decision support as a profession in its own right, not just tacked onto the job description of anyone with a CPA or finance degree.”

He went on to rattle off a long list of skills and practices he demands from his team. These included valuation techniques to catch subtle distortions, insights into risks, and effective communication tools so everyone around the table has a clear understanding of the critical decision elements.

No Place For Amateurs
If an amateur like me played Mythbuster, it’s only a matter of time before my lack of competence was evident to all (singed eyebrows are a dead giveaway). Short of a glaring mathematical flaw in the Excel formulas, similar failure is rarely as obvious in amateur evaluations.

Look around your organization and ask: Is the decision-support performed by people trained in decision support… or was this tacked on to other accounting or budgeting duties?

If tacked on, then the information you rely on for your most important strategic decisions is being prepared by, well, amateurs.

© 2013 Verax Point

Posted in Big Picture

Traction

Launching & Sustaining A Strategic Skills Initiative

TractionSummary: The overwhelming majority of CEOs and CFOs want the finance function to rise… rise beyond mere analytical support and become a full partner in strategy development and execution. Despite this lofty aspiration, very few finance teams are succeeding in this transformation. Progress is either intermittent or has yet to truly get underway. For a wide variety of reasons, CFOs feel stuck.

Applying the same business case disciplines we use for our other long-term investments can provide the critical traction. Armed with a clear vision of the prize and a roadmap for the journey, we can carve out the needed resources to launch a strategic skills initiative and see it through to successful completion.

You can read the entire article here.

© 2013 Verax Point

Posted in Team Effectiveness

AWOL

Putting “Business” back in the “Business Case”

Tucked near the back of CFO Magazine’s April, 2013 edition is a research report titled “Many Unhappy Returns.” Of the 153 companies represented, almost two thirds spend seventy percent or more of their IT budgets on merely maintaining current IT capabilities.

According to many CFOs, the firm really needs to set aside more of this money for investments that will move the business forward in growth and profits. This frustration is a reasonable sentiment. Diverting scarce capital into projects that merely “keep it running” are hardly awe-inspiring.

But what jumped out at me was one culprit, or should I say scapegoat, that many CFOs blamed. One respondent was quoted saying that the “basic foundational structure of IT is inadequate to take the company forward, but no one can build the business case to tackle it.” (emphasis added)

Really? The current infrastructure is holding the company back but no one can demonstrate the value of improving it?

This was mind-boggling… until I read further where one suggested fix is to develop “a more active role for sponsors from business or functional units in assessing the costs and benefits of improve-the-business IT projects.”

Well… There’s Your Problem
Reading between the lines, the business folks are barely, if at all, active in building the business case for IT projects. The work is left to IT folks because, well, it’s an IT initiative. Right?

Wrong. As I wrote in “When Is An IT Project Not An IT Project?” ALL projects should start as BUSINESS initiatives trying to solve a BUSINESS problem or exploit a BUSINESS opportunity. After all, we call it a BUSINESS case, right?

Front & Center
So if we are building a business case, where should the business people be?

Not only should they be active “in assessing the costs and benefits of improve-the-business IT projects,” people from the business should also lead the initiative from the outset.

This change in team composition produces multiple benefits:

  • Technology investment are better aligned with business strategy
  • Costs are reduced as business folks identify and remove low-value functions
  • Sometimes  non-IT solutions are discovered in what was initially assumed to be an IT problem.

So when the next IT project launches, dump the “IT” label and replace it with “Business” …then staff the team accordingly.

© 2013 Verax Point

Posted in Framing the Question, IT, Team Effectiveness

Lost In Translation

The power of rampant financial literacy.

HieroglyphicsCollisions between the Finance Department and… well, everyone, are the stuff of legends. In most companies, business teams are as likely to voluntarily ask Finance for help as a Russian citizen would ask the KGB for help. Instead, teams develop strategies to keep finance at arms length as long as possible.

This aversion stems from finance’s seemingly random opposition to great ideas; great ideas projecting strong improvements to income or other performance metrics are inexplicably crushed when finance gets involved. Both sides are trying to create value, so why the frequent clashes?

At the root of these clashes are the conflicting measures used to determine when value is genuinely being created. We have dozens of accounting and other performance measures. However, real value creation is measured in the timing and risks of when dollars actually flow in and out of the bank account. In a word, “Finance.”

Why, then, do so few companies ensure that everyone across the company has a basic grasp of financial concepts – the language of value creation?

Rampant Illiteracy
Harvard Business Review developed a basic financial literacy test that any CEO or junior finance person should easily ace. The results: “managers from C-level executives to supervisors scored an average of only 38%” and “a majority were unable to distinguish profit from cash.”

These folks are smart and successful. Yet for some, those basic finance classes are now only a distant (often unpleasant) memory. Many others have never been given any decent orientation to relevant finance concepts.

CFO Magazine’s March issue provides a wonderful example of implementing widespread financial literacy. Peter Kellogg, Merck’s CFO, made it his mission to equip non-financial groups with a practical understanding of value creation – not turning them into finance geeks, just providing basic principles and their implications.

Now sharing a common perspective on real value, Merck’s people (e.g. researchers, manufacturing, marketing, IT) collaborate much more effectively with finance and each other on their most promising opportunities.

Spreading The Word
CFOs, CEOs… all senior leaders for that matter, have a stake in widespread value creation fluency to improve financial performance.

Get a truly superb financial communicator who can share the key financial concepts and implications clearly and persuasively. Done well, people walk away with a renewed sense of enthusiasm for creating genuine value.

It’s an investment of time and money, but it’s a sound investment. Just recall the words of Derek Bok:

If you think education is expensive, try ignorance.

© 2013 Verax Point

Posted in Big Picture, Team Effectiveness | 1 Comment