Sound Planning And Independent Thinking: Keys To Credibility

Matthias Heiden

Striving high, lofty aspirations – these are essential attributes in business. But they can take on a life of their own when unchecked enthusiasm comes into play. Some cultures are more inclined to combine this enthusiasm with a competitive spirit, and it’s easy to be drawn in. But how deeply should we indulge this impulse?

I wrote previously about changes I’m experiencing in my work and how they affect planning, and I’d like to bridge to the topic of credibility. As leaders begin making bold, ambitious plans for the business, the CFO increasingly needs to play a strong, active role as independent challenger. We need to offer a balance between aspirations and reality, asking questions to help leaders to think twice about when and how fast to implement their ambitions.

Growth opportunities need to be put in perspective with the use of traditional parameters, with macro data considered and validated. For instance, there was a lot of excitement about emerging markets, and many pinned their plans to these to fuel their business plans. And what happened? The unbridled optimism that was placed in the emerging markets was checked with the reality that the market potential didn’t always live up to expectations. The lesson in this is that ambitious goals are certainly essential, but they need to be balanced to remain credible. We, entrusted as CFOs, need to guide our business leaders to balance the greatest potential with P&L, and with credible strategies that address the top- and bottom-line expectations. For instance, if you can’t hit the full top line with the business performance, you need to lower expectations to address the bottom line, and adjust shortcomings with efficiencies.

I think our role in bringing a credible perspective supports my view that CFOs also need to increasingly step out of a back-office role and truly represent their companies’ best interests. There are so many ways we can have impact, ranging from supporting sales efforts to entering the discussion on regulation and corporate citizenship, and communicating the corporate story to capital markets. Planning, which begins as an internal phase, can readily be extended to include an external phase, whereby key elements are shared with external audiences such as financial markets. If a CFO doesn’t offer a credible and balanced view, then the relationship with capital markets may well be impacted, at the risk of enormous damage for a company.

For instance, the digital economy is a story SAP is engaged with now. The discussion is about vision, the fear of being left behind, of missing this important trend, and having an unforeseen competitor emerge and take market share overnight. I’ll be involved in a meeting soon with an official outside of SAP, and I want to take the CFO view into the digitalization discussion. This means to discuss the risks, what’s really happening in the here and now with the digital economy, and what the financial implications are for tomorrow – balancing the opportunity with the real risk. How to monetize the opportunity while keeping sight of the real risks: that’s the perspective we can and must bring to the discussion.

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Matthias Heiden

About Matthias Heiden

Dr. Matthias Heiden, senior vice president, regional CFO, Middle and Eastern Europe (MEE), is responsible for the field finance organization of MEE. In this role, he supports the organization in managing P&L, continuously driving strategic finance transformation initiatives initiated by Corporate Finance together with the other regional CFOs. This team helps improve business-related processes and supports the Market Unit CFOs in their role as business facilitator and transformation agent.