The management reporting processes at various companies have significant limitations in meeting key expectations.
Typical shortcomings are across three areas:
* Impactful and timely reporting that forms the basis for proper decision making
* Advanced analysis of the latest business metrics and future trends
* Accurate business forecast to allow for effective planning
This is despite the fact that consolidation, data warehouse and ERP financial systems have made a steady progress. Most large organizations have invested millions of dollars in new technology, created new functions and roles and tried to streamline the delivery techniques. All with limited success.
With business restructuring and cost reductions within Finance, it is more important than ever to provide senior management with relevant and timely information, a requirement which has become essential for organizations to be able to differentiate themselves in the marketplace and grow profitably.
Like any typical process, management reporting has dependencies across people, process and technology. As companies embark on a comprehensive overhaul of their management reporting process, it is essential that the sponsorship and mandate is enforced top down starting with the CFO. In this discussion, we will explore key areas where a CFO can personally act as the change agent and have a direct impact towards improving the management reporting process of the organization.
What should companies do? In order to achieve true change companies must adopt a “transformational” vs. the usual “incremental” approach that companies tend to follow with sustained investment in technology and real process changes. A transformational change can only be successful when it is supported by changes in behavior within the organization. A CFO can personally impact the process by targeting the root causes that drive the proliferation of meaningless reports and establishing a more streamlined top-down protocol, which will influence an organization to achieve true transformation.
The top management should lead by example when resetting the management reporting strategy within their organization through a combination of internal and external stakeholder focused initiatives. The recommendations below address foundational issues that are critical towards achieving success.
* Institute a top-down demand management strategy: A management reporting process typically supports information needs from two types of stakeholders:
* Internal to Finance, i.e. reporting prepared to support needs within the Finance organization
* External to Finance, i.e. reporting generated to meet needs of business partners and other stakeholders outside the core Finance organization
CFOs seldom get involved in setting a comprehensive management reporting strategy but instead often become unknowing drivers of excessive and non-value add reporting across the Finance organization. The line between “good-to-have” vs. “must-have” becomes blurred very easily and often a CFO doesn’t realize the effort and time being spent to generate specific reports or the perception that a simple question can be taken as a mandate for permanent implementation for ongoing reporting. Before adding another request to the reporting queue a CFO should re-affirm its strategic relevance because every ad-hoc request generally translates to a permanent addition to the reports inventory. A systematic and logical management reporting vision with appropriate level of prioritization will allow the Finance team to be more focused on value added reporting and analysis. It is essential for a CFO to first drive positive change within his organization and hence lead by example before initiating a cross-organizational change process.
Subsequent to rationalization within the Finance organization, a CFO should focus on resetting the expectation with the external stakeholders i.e. the Business Partner community. Shifting from a “concierge” service delivery model to a standardized reporting infrastructure with more analytical support to drive critical decision making is the recommended approach. Being part of the executive leadership, a CFO has the ability to drive the agenda for Management reporting across his/her peer group. Trying to streamline management reporting process as an internal Finance initiative is doomed to fail given the diversity of the consumers. Stakeholders for an organization’s management reporting process spans across various functions and excluding them from the dialogue upfront, derails any implementation strategy.
A CFO should drive the discipline across his peer group to enable management reporting to be focused on meeting the true information “need” vs. solving for the individual “wants” of the business leaders. Success will be achieved when management reporting is primarily standardized and repeatable with exceptions driven only by true change in business environment.
Therefore, a well-defined demand management strategy would not only benefit key transaction processing activities and remove layers of confusion but also help achieve the mantra of “one version of the truth” for all management levels within an organization.
