Financial Management to Support Strategy
In the post-recession world, the new norm for many companies is cost control and cash flow management. But it is important not to lose the big picture.
Business success is about growth. There are still growth opportunities in emerging markets, and in the changing demographics of the western world. Identifying and taking advantage of these opportunities is a key goal of the whole management team, including — most importantly – the Financial Managers and their teams.
The Financial Management group is a critical part of the management team of any company. They are even more important when financial resources are tight and capital allocations are difficult. That is why your finance team needs to be fully engaged and involved in the decision-making process of the business, its long-term strategy and the implementation of the strategy.
The Role of Financial Managers in Strategy and Implementation
Financial Management plays an important role in the strategic issues of any company or organization.
- Understanding economic trends and what it means for the business
- Implementation of Strategy
- Leadership for the implementation of strategy and change management
- Resource and capital allocation decision making
- Directions on sustainability, innovation and business expansion
- Customer positioning, loyalty programs and the bottom line
- Merger, Acquisition and disinvestment programs
Ensuring that your management and finance teams are up-to-speed with these issues and are in a position to support the business is a critical aspect of successful implementation of strategy for most business. It is also of great importance in today’s dynamic and difficult trading environment.
Capital Resource Management Remains Critical
Securing capital resources, managing cash flow, and controlling long-term capital allocation is fundamental in the post-recession business environment. Many businesses around the world face challenges in securing capital resources as banks and shareholders remain cautious in investing funds in new ventures or projects. But, opportunities for renewed growth are appearing in local and international sectors. And businesses need to be in a position to develop these opportunities quickly and effectively. Securing sufficient capital resources from both internal and external sources will be a key success factor in future expansion. It is also something that requires the time and attention of the management team.
To do its job properly, Finance needs the cooperation of all other functions in the business. Line managers in every department need to be familiar with basic financial concepts.
Profitable Customer Centricity
Companies realize that to generate long-term growth, they should focus more on their customers. Loyal customers are more likely to be profitable customers, and deliver profits over a long time frame. But how much do you have to spend to create loyal customers? Which initiatives are most profitable?
Finance and money vs. Marketing and customers
There is an apparent conflict between happy customers and profits. The root of this conflict can be found in the metrics a company uses to measure its progress. Customer satisfaction data is often based on impressions and feelings, not on hard numbers. Financial data is too rigid to be useful in building long-term relationships with customers.
Financial, strategic and operational teams identify opportunities to make more money. Yet they often ignore valuable customer insights in the process. Marketing and customer teams come up with all sorts of initiatives to make customers happy. But they lack the money metrics, rhetoric and credibility to get any real attention.
What is the Net Present Value of a loyal customer?
A customer-centric finance department considers the total net present value (NPV) of the customer. This means that reporting formats go beyond the traditional quarterly overview. Instead, Finance provides decision-makers with management accounts that consider customer attitudes along with other factors, and correlate them to financial metrics. With the right data, this significantly enhances the quality of decision-making:
- Forecasting and financial risk analysis become more accurate: Customers with a low likelihood to repurchase are separated from those who are highly likely to repurchase.
- Managing profit margins becomes more refined. Pricing can be tailored to customer attitudes rather than using a one size fits all approach.
- Customer portfolio decisions can be based on future customer behaviour, rather than past.
- Cost reduction measures can be implemented with a full understanding of what matters to customers and what they could do without.
The technical skills required to achieve this are fairly straightforward. But working in a customer-centric way requires a new mind-set. The finance teams must work hand-in-hand with their colleagues in marketing, sales, customer service and other departments. Not only to report on the numbers, but to actively understand what they mean.
Mergers and Acquisitions: Use your Capital Resources to drive growth
Different parts of the world are experiencing the global recession in different ways. Europe and America felt the hardest impacts, while much of Asia continued to expand and grow. Emerging markets suffered less and recovered quickly. As a result, there are many opportunities to expand operations and secure new markets through effective Merger and Acquisition programs.
However M&A transactions remain risky and dangerous for many companies. Studies show that 60% of all M&A transactions fail to achieve their stated goals and expectations. Companies with limited experience in the area of Due Diligence and Integration planning are at particular risk. It is critical to develop this capability on your finance team if your company is planning M&A activity as part of its growth strategy.
Strategic Alliances: Why and how to build them
Strategic alliances make sense when you need to offer more value to the customer, but you cannot completely do it on your own. An alliance or partnership offers you a competitive advantage through access to a partner’s resources and capabilities. Alliances are used more and more often for innovation, and research and development.
Even the best alliances can be difficult to manage. They work best when all parties agree on and work together to implement a common strategy to achieve business objectives. Hidden expectations about operational issues can lead to conflicts. How do you know you have the right partner? How do you plan for success? Your finance team needs to have the capability to structure an alliance deal, and to be able to evaluate the performance of the alliance to be sure value is being created.
Developing Talent in the Finance Department
The controller is the business partner and right hand of line management. Increasingly, controllers are not only in charge of planning, analyzing and presenting figures, but also act as coach, consultant, or project manager. They are expected to understand the business context as well as the financial figures and drive financial performance.
Controlling is a cross-over function. You find controllers at the headquarters and in all divisions and departments of a company. Typically, controllers are in charge of planning, analyzing and presenting figures. Controlling is an excellent career path, as demonstrated by the increasing number of CEOs with a controlling background.
The ideal controller is a good communicator, fully familiar with the IT tools the company is using, and able to prepare and/or deliver effective presentations. Such individuals are difficult to find.
Building financial skills, technical areas
To keep you and your managers up-to-date—and to prepare the next generation of managers to take on roles of greater responsibility—developing members of the finance team is an ongoing necessity. Whether your need is to develop groups of managers, or to follow a more individualized approach, MCE can help you.
Talk to MCE About Financial Management to Support Strategy
MCE's Senior Associates
Our Senior Associates can work with management teams or individual managers to address all of the people and change management challenges facing industries, businesses and organizations today. They draw on their years of experience in top managerial and leadership roles to help you solve problems and identify "what works" in different circumstances, countries and cultures. Above all, they have led their people through the challenges of developing new capabilities and working in a different way. They apply their expertise in a wide variety of services, including:
Open Enrolment Workshops for Individual Managers
Every business professional—and every business—is dealing with constant change and long-term uncertainty. Having robust skills in multiple areas reduces uncertainty and opens up a whole new world of possibilities for success. That’s why thousands of people have turned to MCE for professional development that moves their skills to a higher level—fast. MCE’s development programs focus on personal relevance—how YOU benefit. Guided by expert course leaders, you will learn new skills with a small group of peers from various industries and a diversity of cultures. You will be ready to integrate new knowledge and ideas the very next day.
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Finance in Strategy Implementation
Mergers and Acquisitions
Alliances and Partnerships
Developing Talent in the Finance Department
Help Non-Financial Managers to Increase their Financial Skills
Develop your ability to meet tomorrow’s challenges and adapt successfully to changing conditions.
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In-Company Leadership and Management Development Workshops
Customized to Your Specific Needs. Talented managers and leaders in key roles make all the difference in taking smart decisions and leading strategy implementation to success. Identifying talent potential and developing that talent to take on greater responsibilities is crucial for ensuring leadership succession as the older generation retires. MCE can help you with talent assessment, pipeline planning, and tailoring career path plans to achieve your future senior management needs.
Your future leaders need to understand your business, the broader business environment, how to make strategic business decisions, and how to lead and manage people in complex organizations. They need a cross-functional understanding of how the organization works together to get things done. We can customize a programme to run exclusively in your company for your future senior managers.
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Business Coaching and Mentoring
MCE senior associates provide flexible one-on-one mentoring and coaching to key people in your organization at middle or senior levels. MCE associates mentor and guide based on their own business experience. This can be on a particular business issue or project, or for general career development. It could be about filling a knowledge gap in a specific area in preparation for taking on a more senior role.
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Advice on Organizational Development and Talent Management
Your people are your most expensive asset. Success depends on making sure this asset is productive. An important part of this is developing your people in the competencies related your your strategy. MCE can work with you flexibly and in a variety of formats. Management Centre Europe can help you custom-design a development curriculum for the individual managers in your leadership pipeline.
For management learning and management academies, MCE can help you lay the foundation and get started. We can help you decide what your curriculum should be in support of your strategy and learning and development needs. We can also supply content for your curriculum. For corporate universities and management academies that are commercializing their programmes for an external market, MCE can help you with strategy, business model, curriculum planning, content and launch.
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