The concept of corporate performance management (CPM), also known as enterprise performance management (EPM), has been around for over 20 years. The focus has historically been on achieving financial goals by linking goal setting to planning, execution and monitoring of the business in a continuous management cycle. Most organizations have typically set their goals and plans on an annual basis, then reported and analyzed their financial results monthly and quarterly.
However, the pace of business has accelerated over time, with increasing volatility and even major disruptions occurring – such as the financial crisis of 2008 and the COVID-19 pandemic of 2020. Because of this, it may be time to redefine the concept of performance management both in terms of the frequency of business reviews and type of data that’s in focus.
The Times They Are a Changing
This reboot of CPM was the focus of a recent FSN webinar titled “Is it Time to Change our Performance Management Practices?” The webinar was hosted and moderated by Gary Simon, Chief Executive of FSN The Modern Finance Forum and his guest speaker was Bill Koefoed, CFO of OneStream Software.
Bill has more than 25 years of finance and technology industry experience. Before joining OneStream in November 2019, Bill served as Chief Financial Officer for online retailer, Blue Nile and prior to that was a partner and CFO for BCG Digital Ventures, part of The Boston Consulting Group. He was the CFO of Microsoft’s Skype Division and before that, the general manager for investor relations at Microsoft.
If you are interested in listening to the 30-minute conversation, here’s a link to the replay of the webinar. But if you are too busy for that, here’s a quick recap of their discussion:
How Has the COVID-19 Crisis has Impacted Finance Teams and Processes?
- This crisis has forced finance teams to execute the month and quarter-end close and reporting remotely from home, with workflows and approvals handled remotely.
- We were more prepared this time vs. the financial crisis of 2008. Cloud applications are helping finance teams stay connected and collaborating effectively.
- Internal and external audits have also had to be performed remotely.
- This crisis has also forced finance teams to be more agile, collecting and analyzing more metrics, faster than ever before.
How are Performance Management Processes being Adapted to the Crisis?
- This crisis has highlighted the need for finance functions to step up, move beyond the reporting and periodic forecasting role, to forecasting and modeling, literally on a daily basis.
- Finance teams have stepped up, cloud applications have helped them collaborate, plan, iterative models and do real-time performance management
- Finance teams have to get better at simplifying their approach and focusing on material drivers of the business at a summary level – with the ability to drill into the details as needed.
- There’s always a trade-off between speed and accuracy, in this environment speed has become a bigger factor.
How has Reporting and Forecasting Changed in Recent weeks?
- While financial results are still important, operational data has come more into focus, allowing finance executives to understand the key inputs or drivers of financial results.
- CFOs need a dashboard that includes operational telemetry from the business, as well as financial metrics, with visualizations that help them spot key trends, investigate, and allow them to act.
- Finance teams have traditionally relied on Excel for scenario modeling, but this approach breaks down as data volumes increase.
- Today’s modeling software provides the ability to model a large number of variables, faster and easier – with the ability to link everything to cash flow, which matters more than ever.
Should Supplier and Customer Data be More Central to Performance Management?
- The recent FSN survey highlighted how neglected procure to pay (P2P) and quote to cash (Q2C) processes and data have been in performance management.
- This operational telemetry regarding the activities of customers and suppliers can be a key source of trends and signals that can impact financial decisions.
- Modern CPM solutions that can integrate data from a wide variety of sources provide the CFO and finance teams a single lens view across the business, so they can spot opportunities and trends.
Some CFOs and Finance Teams Are More Prepared Than Others – What Distinguishes Them?
- Finance teams that have good risk management processes, contingency planning and those that can iterate and learn quickly are able to be more agile.
- CFOs need to challenge the status quo, welcome different views and embrace them.
- Be a good learner, test assumptions, build a strong team.
- Be a good explainer and persuader of others.
- Stay calm under pressure!
The conversation between Mr. Simon and Mr. Koefoed was engaging, covering a broad range of topics that are top of mind for CFOs and finance teams, and highlighted several best practices that can be adopted to help organizations prepare for the next disruption. To learn more, watch and listen to the replay of the webinar.