Part 4 in the CFO Strategy Playbook series
Part 4 in this series looks at the importance of exploring and evaluating the larger trends in business and technology as an essential element of strategic planning.
Strategic thrust areas
By defining strategic thrust areas, the finance strategy team identifies and describes key topics for further developing the details of the finance strategy. Strategic thrust areas summarize and synthesize important elements of the corporate strategy and business requirements with specific finance development areas in a concise and “marketable” way. Strategic thrust areas illustrate, for example, how the finance team plans to deliver excellent processes leveraging digitalization, robotic process automation, or cognitive computing. For instance, a company that has identified the importance of strengthening its CFO team’s business-partner role may state: “We are an active business partner that provides insights to the business and challenges the business for better results.”
Strategy and mission statements
Next up: the finance strategy vision and mission statements. The vision statement, one level up from the strategic thrust areas, summarizes the most important aspects of the future to-be state, and where the organization wants to be in what time frame. The mission statement talks about how the team will get where it wants to be, and defines the purpose of the organization related to customer needs and organizational value. An illustrative example of the creation process is provided by Sarah Evans on “Finance Mission Statement – Our Journey.”
Both vision and mission statements are tools that help align the mindset and activities of all team members involved in the finance strategy definition and implementation. Together they serve as a compass for everyone to measure and validate their actions against the overarching finance strategy.
The finance strategy is expressed by further detailing each strategic thrust area. This also includes links to process and organizational changes as well as project activities. For each strategic thrust area, I suggest defining:
- Success factors
- Activities needed for transformation (for example, process improvements, operating model and organizational improvement areas, system changes)
- KPIs (current status and to-be status, including a target year to reach the KPI status)
- Tools and methods
Working through each strategic thrust area creates a robust action plan, spelling out the actions needed, what context and support exists or is needed, and how to make progress measurable. That will later be summarized in a prioritized portfolio of initiatives and road map.
The “to-be” operating model and organizational structure
The impact of the changes is then summarized in a to-be finance operating model. Andrew Campbell provides a very practical definition of “operating model.” In “The Operating Model Canvas,” he describes the most important elements that comprise an operating model. These include a map of value-chain delivery steps, an organizational chart with reporting lines, a people chart defining responsibilities and other HR aspects, a process model, and a list of functions “done in-house” and those outsourced.
The future state of the finance organization is thus summarized in a number of different views. To generate a set of implementation activities, the next step is to identify the gaps between the current and to-be states.
The finance strategy gap (as-is and to-be states)
Based on the structure outlined above, I recommend reviewing the current and future state for the following:
- Value chain map
- Organizational and people chart
- Process model
- In-/outsourced functions
This gap analysis will provide a list of activities required to reach the to-be state, which are then clustered into initiatives or projects. In the review discussions, some resistance to change can be expected. My recommendation to those facilitating the gap workshops is to define a few rules at the start of the workshops. For example, articulate the focus on learning and brainstorming or that certain agreed-upon design principles can be explored (such as automation, where possible).
Finance strategy implementation road map
As the design activities for the finance strategy are ending, you need to create an action plan for implementing the strategy. One simple way to summarize and explain to stakeholders the resulting initiatives is to create “initiative summaries.” In addition, I recommend drawing up a finance initiative portfolio that evaluates effort and impact and supports prioritization. As a final step, you can visualize the sequence of activities by enumerating the initiatives on a road map.
For the “initiative summary,” a format that includes the following is helpful:
- Problem statement
- Objectives of the initiative
- Value for stakeholder
- Department/process involved
- Approach summary
- Complexity and impact
- Digital enabling technology involved
To assess and prioritize the initiatives, a simple impact/effort matrix can be used to create a portfolio view of all initiatives. This also supports the creation of a road map of the initiatives that will be implemented during the next months or years as part of the finance transformation journey.
Having worked through the elements of the functional finance strategy provides CFOs and their teams with a solid basis for starting finance transformation activities. The finance strategy will be the go-to place to review the reasoning and rationale for decisions made to start the finance transformation. The finance strategy will also become the basis for the “operating manual” and a companion guide during transformation. Typically, functional finance strategies are reviewed and updated regularly to maintain the best possible relevance.
If you are interested in sharing your views or experience on finance strategies or if you require assistance for your finance strategy, please comment below or contact me at firstname.lastname@example.org.