Whitepaper Agile Finances
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The document discusses how traditional hierarchical organizational structures are no longer effective in today's constantly changing business environment. It advocates for more agile organizations that can quickly adapt and react to changes. An agile organization delegates responsibility, experiments with new ideas, and reorganizes project teams flexibly. The finance function also needs to be agile by providing interactive tools to help managers monitor performance, identify issues, and make decisions to adapt to changes. It concludes that finance needs to empower managers by allowing them to create and modify their own reports in order to make timely business decisions.
Whitepaper Agile Finances
- 1. Agile finance – part 1 New methodologies for delivering value to your organisation Agile 1
- 2. How it works New methodologies for delivering value to your organisation Traditional hierarchical organisations were designed to impose a central ‘command and control’ management style. They developed strong central finance functions that implemented the essential financial controls and developed company-wide reporting regimes. This worked well for many decades whilst organisations experienced a relatively stable business environment. However, the modern business world is is subject to constant changes. These are driven by customers, fashions, social trends, economics, governments, regulators, mergers, supply chain disruptions, technological change and so on. There is very little that organisations can actually now control. The key to success these days is to react quickly to each unforeseen change as it emerges, requiring considerable organisational agility. An agile business has a clear overall vision, but delegates responsibility, not just tasks. It constantly experiments with new ideas and tolerates errors. It regularly re- organises itself, working through informal self-organising project teams that collaborate closely with its supply chain. Detailed central planning has been replaced by a set of overall long-term objectives. These are met through a constant process of tactical planning and forecasting, driven by mid-managers who are given contributory targets and incentives. The agile organisation must be supported by an agile finance function. Instead of imposing a reporting regime, it provides managers with powerful interactive tools that monitor the progress of the business in achieving its objectives, help identify causes of poor performance, support decision- making to bring it back on track and monitor the effectiveness. Business as usual is out, adapting to change is in Finance departments that view “business as usual” as their primary goal could be putting their company at risk. They could overlook changing market conditions or be unable to adapt to them quickly enough. While finance teams still need to stay on top of cash management and internal control, their effectiveness in the current climate now depends more on understanding how the business really works and collaborating and with other departments to drive efficiency and improve performance in order to meet the overall strategic objectives. Managers must be able to create and change their reports themselves. They must be able to identify areas of poor performance and investigate the detail in order to seek causes. They must also be able to create new reports to monitor new problems as they emerge. They must also be able to share reports with others, as they work together to ensure that performance in each area will meet the overall objectives. Financial reporting systems must be able to cope with constant tensions and interactions. A good core Agility is inconsistent with the traditional protracted IT procurement model based on detailed users needs, which will have changed by the time the contract has been signed and again before it is live. Organisations should use new procurement practices that seek identify what potential systems need to do to deliver business value as quickly as possible. The chosen system must be capable of rapid change. The core business software must be capable of tight integration with key business processes, such as customer relationship management and procurement. This ensures that all revenue opportunities are maximised and customers are given a good experience throughout every interaction with every part of the organisation. It also allows staff to quickly and easily enter information or transactions directly into the system themselves, to reduce time and errors that act as a brake on the business. Collaboration An agile business requires flexible business systems that can respond quickly to both external changes to the business environment and internal organisational changes that are required to meet them, without one negatively impacting the other. The systems must also support collaboration between ad hoc internal and external work groups. They must work with teleconference, web conference and social network systems. The finance function must ensure that constantly changing organisations and teams can work together, both internally and with external suppliers and customers. This will create a fluid and frequently changing processes and reports that can match the constantly changing business environment. Measuring performance Agility is the only way to maintain competitive advantage in a constantly changing world. However, many organisations are focusing on traditional financial measures of performance, such as profit and share price. Agile, innovative and high performing organisations focus on non-financial and qualitative aspects of their business, such as staff morale, customer satisfaction or idea generation. Achievement of these will result in improvement in quantitative measures. Agile finance In some organisations the finance function is burdened by its traditional role as the guardian of organisational behaviour and data gatekeeper. Both in the role they play and their attitude to colleagues, some finance managers have prioritised the demands of centralised systems over the information needs of line managers. This is now changing, as constant flux in the business environment drives the organisation to react. Web, mobile and Cloud technology are now supplementing a new generation of highly flexible core business systems. Whilst they provide the necessary internal controls to ensure good governance and compliance, they also provide the flexibility to quickly adapt to changing conditions. Empowering managers to monitor and analyse their own area’s performance, create and modify their own reports, removes a major burden from the finance function. This gives managers the insight to make informed business decisions and serve their customers more effectively. In the finance department, it allows staff to be more efficient and productive, giving them more time to concentrate on contributing to the organisation’s overall strategic objectives. Part 2 - Tools In the second part of this white paper we look at rapid application development techniques aimed at keeping systems in line with changes that happen as new systems are being developed. We also look at reporting in more detail, along with data analysis and appropriate key performance indicators. Sage Agile finance – part 1 Sage Agile finance – part 1
- 3. An agile manifesto • It is critically important to have a clear long-term vision for the organisation, supported by broad key performance indicators. Managers must have their own contributory indicators. • The organisational culture must be based on trust and transparency. People must be aligned to the common vision and values; be good at spotting emerging trends; open to new ideas; and sensitive to customer needs. • Delegate responsibility and let people know how far they can go in taking risks with agile actions that can be carried out without waiting for all the details to be fully worked out. • Leaders must create the conditions for faster decision-making. For example, allowing customer-facing staff to determine how customer issues are resolved, within overall guidance. • Knowledge workers must not be tied to corporate hierarchy; must be intrinsically motivated; highly mobile; and be treated as associates, rather than as subordinates. • People must work in teams with a diverse mixture of people, skills and backgrounds. Isolated work should be discouraged, whilst encouraging full and frank debate; strong opinions; and diversity of thought, ethnicity and background. People with different views and perspectives generate alternatives, from which good new ideas emerge. • Be unreasonable with timescales and don’t relent. If something takes a ‘regular’ business six months, an agile one should do it in two. • Don’t suppress potentially innovative ideas by telling people to come back when they have built a business case. Your role is to encourage them by helping them to prepare a sound one. • Put systems in place to capture and prioritise business development and innovation ideas. • The strategic plan is a living, evolving process throughout the organisation. Top management encourages each manager to use forecasts to drive a constant process of tactical planning for their own areas of responsibility, to help the organisation to achieve its overall objectives. • An endless cycle of cross- functional, cross-regional strategy collaboration generates a continuous flow of improvement initiatives that are energetically delivered and resourced. Sage Agile finance – part 1 Sage Agile finance – part 1
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