Finance people see something happening in the numbers every day. Items in the P&L and balance sheet are constantly on the move, and non-financial metrics are all over the place. It’s not that you lack information, but rather you need to structure it in a way that you can both understand and use it to facilitate a dialogue with your stakeholders. The structure should help you with the what. Once identified, you need to drill down into the numbers to understand exactly where unexpected changes happened. Without knowing the where, you will be asking questions to business stakeholders like you’re looking at a map without knowing where you’re going. Your questioning will be very ineffective, and you’ll never get to the why.
Add curiosity to the finance function
To get further to the why, you need to start asking questions. “So, based on what we see, can we explain what happened with the non-financial metrics?” You also need feedback from the front line. Without asking questions or having an in-depth business understanding, you will never get to the why. You need to add inquiry and curiosity to your finance function to get to the next level.
Remember, when we say questions, we’re not talking about the typical finance questions of: “Why didn’t you hit your targets?” or “Can you please explain this negative budget variance.” These questions typically lead to defensive answers, so you need to ask in a way that encourages the business stakeholders to talk about what happened during the period you’re discussing. The data will lead you in the right direction in terms of what questions to ask.
Also, you need to make sure the questions are open-ended like: “Let’s talk about how business is doing in segment A or geographical area B.” Don’t just ask about performance in underperforming parts of the business. Ask about places where the business is doing well, as opportunities can be found all over the place. Uncovering the why is also what will help you deliver insights to your business stakeholders. Piecing together information from the numbers and your stakeholders will enable you to share with them things they don’t know.
Don’t stop there
Now comes the big challenge, though! Wait, what!?! I thought I had already stepped way out of my comfort zone getting to the why! That might be true, but you cannot stop there. To truly build a culture of analytics, you need to be able to make predictions about what might happen if you take certain actions and make recommendations about how to improve performance.
It has to do not only with gathering insights about what, where, and why, but also about creating foresight into what will happen if we do XYZ. Once you can start to have an opinion about what could happen in the future, you’re much better situated to make recommendations as to how to improve business performance. Otherwise, you will likely take many wrong actions because you took for granted that history will repeat itself. Sometimes it does. Sometimes it doesn’t.
How to build an analytics culture
In this article, we’ve explained the end goal of the analytics culture. But how can you build such a culture? It’s all about mindset, people, process, and systems, which we will examine in Part 3 of this series.
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