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Back to basics

The second step is to go back to basics. While “back to basics” for some of us is associated with John Major’s Conservative government, for finance teams looking forward to 2024, it should be associated with ensuring that the core functions of the organization are covered efficiently. Over the past 20 years, “mission creep” has been an almost universal side effect of the internal politics of large organizations. A simple example of this would be that for many businesses, multiple plans for the business are owned by multiple parts of the business: a sales/revenue plan owned by Sales, a budget owned by finance, a headcount plan owned by HR/People, a marketing spend plan owned by Marketing, etc. Duplicate information, managed by duplicate resources, for reasons lost in the murkiness of internal politics and power wrestling among teams. Retrenchment is often viewed negatively but offers the opportunity to remove the buildup of non-core activities supported by finance and gently remove activities already covered within finance from other departments. Doing less but doing it right should be seen as a greater contribution to the organization’s strength, as opposed to stretching out into areas owned by others. Again, do you have your processes mapped? Do you know where your resources are spread and what your technology supports? If not, then there is work to be done before moving onto step 3.

The lies of ROI

This leads to the third step, a ruthless and pragmatic approach to “Return on Investment.” The internal investment equivalent of externally adjusted (fudged) EBITDA, for years now, ROI calculations have been lifted from the sales materials of consultancies and software vendors. They should be treated with the utmost skepticism, for rarely are they thoroughly audited for accuracy. Even those that are accurate are likely assembled from multiple implementations and projects, the vast majority in situations quite removed from your business’s own. If nothing else, the exercise to establish an internal technology ROI calculation to use in weighing investments allows you to use a consistent measure across all the possible investments to be considered. However, if used correctly, creating your own ROI calculation will help standardize the prioritization process emerging from steps 2 & 3. A level playing field, geared around your business. Undoubtedly, this is missing from your finance organization; creating it should be a priority before moving to step 4.

Dynamic, achievable, and immediate

The final step needed is to set clear short-, medium-, and long-term objectives for finance projects. Far too much time and effort are wasted by organizations worrying about the latter, and far too little energy is invested in the former. Take a leaf from the book of private equity: what would the 100-day plan look like for finance projects? Can you articulate the value that will be driven by them in that period, and crucially, is this understood by other senior stakeholders in the business? In recent years, “OKR” has arisen as a fashionable term in this space. By all means, embrace this, but remember that creating a dynamic organization necessitates a focus on change and embedding change as a fundamental operating principle of the business. As a result, your long-term OKR descriptions should reflect the fact that your short- and medium-term plans to get there will be subject to change. This is the final step, but one that needs the greatest external communication and alignment with the remainder of the business—i.e., return to Step 1 and cross-check!

Ideally, the above steps are consolidated into a moderately simple framework within which you operate your decision-making process. Creating this for finance, by finance, is important; outside entities within your own business and beyond may offer this service, but the reality is that nobody understands your needs better than you. Giving up control of the decision-making framework isolates you from being able to weigh the steps in the process according to your understanding of the need.

The bottom line

Why does this protect your case for investment in finance? Quite simply, this is the process that all areas of the business should follow but likely don’t. Traditionally in challenging times, businesses have focused on spending in revenue-generating areas, taking the approach that functions missing out on spend can be prioritized once headwinds turn to tailwinds. This is undoubtedly never achieved, for when the good times roll, the clamour to further prioritize direct revenue generation increases to allow the business to cash in. Therefore, you should be more prepared than the rest of the business, covering the above and demonstrating the value the investment of resources will bring.

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