Changing of the Guard

New analytic approaches can help business leaders reach financial goals and objectives

By Mark Smith

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OBJECTIVES FOR SUCCESS

Enable Visibility. Provide a means to measure and monitor the performance of organizations and business processes. Optimize Performance. Help individuals work together electronically to make sound business decisions based on information and historical knowledge. Maximize Assets. Use business and information value chains to maximize profitability of tangible and intangible assets.

Toward Financial Enterprise Management

To streamline business processes and optimize performance, it is critical to integrate the financial operations and financial performance management systems into the enterprise framework to build both business and information value chains. Business value chains are those systems that provide efficiencies across business processes - not organizational boundaries. Information value chains provide a path for information to flow along those business value chains and mature to provide insight and visibility to anyone involved.

Building a continuous set of value chains will help ensure that the business can reap value from its investment in existing applications. But more important, it will ensure optimized performance throughout the organization. To realize this goal, you have to begin by building a process to leverage financial metrics as more than just reference: as part of the enterprise information framework.

Using financial metrics to conduct financial enterprise management ensures that all business processes and organizational units base their decisions on fact rather than fiction. True optimization of business processes will require new levels of collaboration and workflow that bind decisions to organizational strategy. That optimization gives you the financial efficiencies you need for success.

Financial enterprise management, like enterprise performance management (EPM), consists of methodologies and applications that help you optimize results - but is specifically geared to the finance organization.

There are many ways to instantiate financial enterprise management, but one of the most visible is the balanced scorecard application, which uses Norton and Kaplan's methodology. Norton and Kaplan's "financial perspective" advocates use of financial metrics to align business strategy with operational execution. The integration of business metrics from across the enterprise into balanced scorecard or EPM implementations is typically one of the larger technical challenges a company faces.

Many financial performance management and EPM vendors are beginning to offer application-level integration. The major ERP providers (Oracle, PeopleSoft, and SAP) have EPM offerings that now provide integration from their financial operations management systems to inject financial metrics into their EPM offerings. DecisionPoint Applications Inc. and Informatica Corp. are building out information management platforms through their EPM offerings that integrate financial metrics as part of the ability to measure overall enterprise performance. SAS, on the other hand, has made its financial performance management offering, Total Financial Management, directly integrated with its balanced scorecard offering, Strategic Vision, easing the information integration challenges.

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A Group Effort

The finance organization has been too hobbled by insufficient information about organizational activities and business processes to determine the best course of action in time. Yet the CFO has had to move from an operational function to a strategic management function. Therefore, the CFO and finance organization must be able to gain immediate insight into existing business operations and control and coordinate business activities that influence financial performance.

Although finance must participate more actively in the business strategy, it cannot make the necessary changes on its own. All the organizational groups, including IT and the various business units, should be held to benchmarks and financial metrics to optimize performance companywide. Just as customer relationship and supply chain management systems must interact to meet customer and profitability goals, financial management systems are the critical core to overall business performance and ability to deliver shareholder value.

Mark Smith, [mark.smith@fullcirclestrategies.com], is principal and founder of Full Circle Strategies and an expert in the applied use of information and analytics in the areas of business intelligence, portals, and analytic applications.