Re-engineering the roles and tasks of the Finance Officer

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RE-ENGINEERING THE ROLES AND TASKS OF THE FINANCE OFFICERCase Study, Concepts and Debatable Ideas

Kenny OngCNI Holdings Berhad


Intro: CNI

1. 20 years old2. Core Business: MLM3. Others: Contract Manufacturing, F&B Retail,

Export/Trading, eCommerce, Shared Services4. Malaysia, Singapore, Brunei, Indonesia, India,

China, Hong Kong, Philippines, Italy, Taiwan, Oman, United States, Vietnam

5. Staff force: ± 5006. Distributors: 200,0007. Products: Consumer Goods and Services


Re-engineering the major roles of the Finance Officer

It’s all about expectations


Finance Role?

Finance Officer

SBUs, Divs, Depts

Corporate HQ

Strategy

Results

Request

Service

Policies

Service


Finance Function Objectives?

TransactionalCost reduction, Efficiency, Agility, Fast Copy

AP, General Ledger, B/S analysis, Accounting, Fixed Assets, AR, Facilities

Value-addedBudgeting, Reporting, Financial Analysis, Forecasting, Tax, Legal, Treasury

Consistency, Analysis, Value creation, customization

Systems, Standardize, Benchmarking, ERP, Streamlining, Automation, Governance

Best PracticesProcess improvement, service innovation, secondary KPIs, internal customers

Transformation

Market Leadership, Competitive Differentiation, Business model, M&A

Direct Business Impact, primary KPIs, external customers


Finance Role vs. Measurement


Value-added

Best Practices

Consistency, Analysis, Value

Process improvement, service innovation, secondary KPIs, internal customers

TransformationDirect Business Impact, primary KPIs, external customers

TimeCostQuantityQuality




Value-added

Best Practices

Consistency, Analysis, Value creation, customization




InnovationService




Value-added

Best Practices





InnovationServiceKPI




Value-added

Best Practices





InnovationServiceKPIImpact


Career Guide for Finance Officers

• Go Wide, Dig Deep


Finance’s Role and Business Intent


"The digital watch didn't come from established watch companies, the calculator

didn't come from slide rule or adding machine companies, video games didn't come from board-game manufacturers Parker Bros or Mattel, the ballpoint pen didn't come from

fountain pen manufacturers, and Google didn't come from the Yellow Pages"

Bob Seidensticker, Futurehype


What’s wrong with Business Strategy Today?

Long-term Plans

Objectives

Strategies

Enablers

Resources

Also known as L.O.S.E.R.


What’s wrong with Business Strategy Today?

1. Biggest Threats often come from OUTSIDE your normal industry

2. Planning from the base of an ‘Existing’ organization vs. zero-based

3. Using Sunk Costs for decision making and planning4. Traditional Analysis (e.g. SWOT) based only on known

or existing assumptions or knowledge5. Spending too much time in market research and

analysis6. Defining the company from a Product/Service

perspective vs. Category vs. JTBD (e.g. Coca-cola)7. Wrong Benchmark – already successful vs. what made

them successful8. Implementing BSC and PMS to improve Business

Model and Strategy


Finance Role and the Business Model

How to fail without trying


Funds: What do Investors look for?


Market Value

0

10

•M&A

•P/E

•Investor

•Etc.

Strategic Control

0

10

•I.P.

•Monopoly

•Gov-linked

Business Model

0

10

•USP

•Profit Mod.

•Mkt Disc.

•Growth


What is the Business Model?

USP

Market Discipline

Profit Model

•Google

•Air Asia

•Tata Nano



USP

Market Discipline

Profit Model


Business Model: Profit Model

Revenue

Cost

MarginCash Flow

Assets


RevenueFinancial

Learning & Growth

Internal Process

Customers

Cost Margin

Strategy + BSC

Cash Flow Asset



USP

Market Discipline

Profit Model


Intro: Market Discipline

"They are the most innovative"

"Constantly renewing and creative"

"Always on the leading edge"

"A great deal!"

Excellent/attractive price

Minimal acquisition cost and hassle

Lowest overall cost of ownership

"A no-hassles firm"

Convenience and speed

Reliable product and service

"Exactly what I need"

Customized products

Personalized communications

"They're very responsive"

Preferential service and flexibility

Recommends what I need

"I'm very loyal to them"

Helps us to be a success

Product Leadership

OperationalExcellence

CustomerIntimacy


Operational Excellence(low cost producer)

Ref: The Discipline of Market Leaders, Michael Treacy & Fred Wiersema; 1995

Product Leadership(best product)

Customer Intimacy(best total solution)

Strategy: Value Disciplines

















Operational Excellence

• Competitive price

• Error free, reliable

• Fast (on demand)

• Simple

• Responsive

• Consistent information for all

• Transactional

• 'Once and Done'





• Simple

• Responsive


• Transactional

• 'Once and Done'

Customer Intimacy

• Management by Fact

• Easy to do business with

• Have it your way (customization)

• Market segments of one

• Proactive, flexible

• Relationship and consultative selling

• Cross selling

Customer Intimacy







• Cross selling

Product Leadership

• New, state of the art products or services

• Risk takers

• Meet volatile customer needs

• Fast concept-to- counter

• Never satisfied - obsolete own and competitors' products

• Learning organization

Product Leadership


• Risk takers








The McPlaybook*

Make it easy to eat• 50% drive-thru• Meals held in one

hand

Make it easy to prepare• High Turnover• Tasks simple to learn

& repeat

Make it quick• “Fast Food”• Tests new products

for Cooking Times

Make what customers want• Prowls market for new

products• Monitored field tests

*Adapted from: Businessweek , Februrary 5th 2007







Strategy: Disciplines






Strategy: Disciplines

HP well-balanced portfolio, mass customization

Acer super lean cost structure, aggressive pricing

Apple powerful products, premium

pricing, limited range

Still Doing well in 2009



USP

Market Discipline

Profit Model

•Google

•Air Asia

•Tata Nano


Finance Role and Strategic Planning

‘Hope’ is not a strategy


What is Strategic Planning?

Strategic

Planning

Variables:

Research

Growth

Risks

Stakeholders

Constraints

SWOT

Misc.

Output:

Plans

Priorities

KPIs


What is your Goal?

1. Cost Reduction

2. Growth

3. Both?


Growth Strategy

1. Base Retention

2. Share Gain

3. Positioning4. Adjacent Market

5. New Business

GROWTH

“Double-Digit Growth”, Michael Treacy


•Increase switching cost

•Customize products

•Preempt Defections

•Brand

•Neutralize Competitor advantages

•Superior Value

•Buy market share

•Spot growth opportunities

•Organized search

•Promising Market?

•Make or Buy?


Side Notes on Cost Reduction Strategy

Cost Reduction

Business Model

•USP

•Profit Model

•Market Discipline

•Invest/Divest

Operational

•Finance, HR, IT

•Supply Chain

•R&D

•Sales & Marketing

5% - 30%

30% - 80%


Strategy vs. Focus

Upturn Flat Downturn

Fight Complacency

Sharpen Edge

Keep Momentum

Conquer

NPD Cycle Time

Improve Edge

Extensions

Counter Competitor

Innovation

Acquire

Profits

Build momentum

Sales

Cash Flow

Innovation/R&D

Focus ‘Breakthroughs’

JV, In-source, Out-source

Eliminate bottom 20%

Improve Top 15% revenue-generating products

↓ R&D, ↑Sales



Revenue

Base Retention

Share Gain Positioning Adjacent Market

New Business

Financial

Learning & Growth

Internal Process

Customers

Cost Margin

Strategy + BSC

Cash Flow Asset

Satisfaction






Strategy: Disciplines, Priorities, and KPIs






• Simple

• Responsive


• Transactional

• 'Once and Done'





• Simple

• Responsive


• Transactional

• 'Once and Done'

Customer Intimacy







• Cross selling

Customer Intimacy







• Cross selling

Product Leadership


• Risk takers





Product Leadership


• Risk takers





Strategy: Disciplines, Priorities, and KPIs


• Operational Excellence• Move know-how from top performing

units to others• Benchmark against best in class• Ensure operations training for all

employees• Use disciplines like TQM for continuous

learning to reduce costs and improve quality




• Customer Intimacy• Capture knowledge about customers• Understand customer needs• Empower front line employees• Ensure that everyone knows the

customer• Make company knowledge available to

customers


• Product Leadership• Reduce time to market• Commercialize new products fast• Ensure that ideas flow• Reuse what other parts of the company

have already learned• Ensure there are multiple sources of

funding



Revenue

Base Retention


New Business

Financial

Learning & Growth

Internal Process

Customers

Cost Margin

Strategy + BSC

Cash Flow Asset


Product Leadership

Customer Intimacy

Investment Strategy

Satisfaction


Before we start…

Which comes first?

1. Strategies -> KPI?

2. KPI -> Strategies?


Before we start…

Which comes first?



•already know our priorities, aware of all strategy options available

•creating something UNIQUE, INNOVATIVE and DISRUPTIVE e.g. Air Asia

•conducting a business Turnaround e.g. MAS


Before we start…

Which comes first?



•want to find out possible strategies,

•determine our priorities first thru selection of important KPIs;

•growing through ‘normal’ business, not a Turnaround.


Example: Selection of KPIs for BSC

•Customer satisfactionCustomer loyaltyMarket shareCustomer complaintsComplaints resolved on first contactReturn ratesResponse time per customer requestPrice relative to competitionTotal cost to customerAverage duration of customer relationshipCustomers lostCustomer retentionCustomer acquisition ratesPercentage of revenue form new customersNumber of customersAnnual sales per turnover

•Win rate (sales closed/sales contact)•Customer visits to the companyHours spent with customersMarketing cost as a percentage of salesNumber of ads placedNumber of proposals madeBrand recognitionResponse rateNumber of trade shows attendedSales volumeShare of target customer spendingSales per channelAverage customer sizeCustomers per employeeCustomer service expense per customerCustomer profitabilityFrequency (number of sales transactions)


Wrong KPIs

“What is the moral of the story?”


KPIs and Behavior

Before: “Handle Time” Per Call• Motivated Call Centre staff to transfer callers,

getting rid of complainers, making them someone else’s problem

• Callers at 45% chance of being transferred• 7,000 customers each week suffered transfers 7

times or more


KPIs and Behavior

After: “Minutes Per Resolution” of a problem

• Resolution in ONE CALL become the core goal• Reduced probability of call transfers from 45% to

18%


Sample: Other 1st Level KPIs across industries…

Financial Services Retail Telecommunications

•Maximize ARPU•Minimize Churn•Mutichannel customer service

•Understand customer behavior related to customer conversion, acquisition, and retention•Single view of customer•Multichannel customer experience•Personalized customer experience

•Anticipate and prevent churn despite compensation•Increase number of products per customer•Turn call center information opportunity to up-sell and cross-sell•Increase customer satisfaction and loyalty

Hospitality Travel & Leisure Manufacturing

•Personalized customer experience•Maximize share of wallet•Player/customer loyalty•Multichannel customer service

•Increase customer loyalty and preference•Maximize customer revenue•Improve service quality and efficiency•Capture and close sales opportunities

•Single view of customers across supply chain•Zero-error order capture•Streamline opportunity to cash processes•Leverage investment in ERP and backoffice systems


Sample KPIs for Each Discipline


• Price• Selection• Convenience• Zero Defects• Growth



Customer Intimacy

• Customer Knowledge

• Solutions Offered• Penetration• Customer Data• Customer-success

focus

Customer Intimacy



focus

Product Leadership

• Marketing• Functionality• # of Successes• # of Failures• Learn from key

users• Interdisciplinary

teams• Pipeline

Product Leadership



teams• Pipeline


Finance Role and Resource Allocation and Alignment

Where did our money go?


Budgeting: Some thoughts…

Two major roles of Budgeting:

1. Provide real-life CONSTRAINTS to strategic planning

2. Provide RESOURCES to realize strategic plans

Why Constraints?1. Over aggressive unrealistic planning, usually by

Marketing/Sales need to be grounded to real life2. Creative entrepreneurial thinking when resources are

limited3. Enforce the need for Accountability i.e. ‘ROI’ thinking for

all Managers


E3 – Department BSC

Customer Perspective – Marketing Department

Goals Strategies Targets CAPEX OPEX

Base Retention

Share Gain

Budgeting


Alignment: 4-Wheels Model

Culture

Business

ModelStrategic Planning

StructurePerson

Leadership

Resources


Alignment: Framework

• Focus point• Alignment• Quality• Innovation & Differentiation• Risk taking• Performance Management• Corporate obsession• Decision making

Culture


Alignment: Framework

• Org Structure• Job Design• C&B• Policies & procedures• Decision making• Job fit• Management Systems• BSC and KPIs• Decentralized & Empower

Structure


Strategy: Framework

• Role modeling• Vision/Mission/Philosophy• Leadership Style• Delegation & Empowerment• C&B, Promotions• Sense of Urgency• Speak regularly about Performance

Leadership


Strategy: Framework

• Recognition• Recruitment• Training• Profit sharing• Values• Motivation• Self Efficacy• Awareness• Useful Competencies• Career aspirations• Attribution (control)

Person


Strategy: Framework

Enablers• Technology• Equipment• Materials• Human• Intellectual

Property• Partners• Property

Resources

Funding • CAPEX• OPEX



Culture

Business


StructurePerson

Leadership

Resources




Customer Intimacy

Customer Intimacy

Product Leadership

Product Leadership

Organization, jobs,skills

Management systems

Information and systems

Culture, values,norms

Each Discipline Requires Different Priorities & Resources



•Central authority, low level of empowerment•High skills at the core of the organization

•Disciplined Teamwork•Process, product- driven•Conformance, 'one size fits all' mindset

• Integrated, low cost transaction systems•The system is the process

•Command and control•Quality management


•Central authority, low level of empowerment•High skills at the core of the organization

•Disciplined Teamwork•Process, product- driven•Conformance, 'one size fits all' mindset

• Integrated, low cost transaction systems•The system is the process

•Command and control•Quality management

Organization, jobs, skills

Management systems






Management systems



Product Leadership

•Ad hoc, organic and cellular•High skills abound in loose-knit structures

•Concept, future-driven•Experimentation and 'out of the box' mindset

•Person-to-person communications systems•Technologies enabling cooperation

•Rewarding individuals' innovative capacity•Risk and exposure management•Product Life Cycle profitability

Product Leadership

•Ad hoc, organic and cellular•High skills abound in loose-knit structures

•Concept, future-driven•Experimentation and 'out of the box' mindset

•Person-to-person communications systems•Technologies enabling cooperation

•Rewarding individuals' innovative capacity•Risk and exposure management•Product Life Cycle profitability




Management systems



Customer Intimacy

•Empowerment close to point of customer contact•High skills in the field and front-line

•Customer-driven•Variation and 'have it your way' mindset

•Strong customer databases, linking internal and external information

•Strong analytical tools

•Customer equity measures like life time value•Satisfaction and share management•Focus on ‘Share of Wallet’

Customer Intimacy

•Empowerment close to point of customer contact•High skills in the field and front-line

•Customer-driven•Variation and 'have it your way' mindset

•Strong customer databases, linking internal and external information

•Strong analytical tools

•Customer equity measures like life time value•Satisfaction and share management•Focus on ‘Share of Wallet’



Revenue

Base Retention


New Business

Financial

Learning & Growth

Internal Process

Customers

Cost Margin

Strategy + BSC

Cash Flow Asset


Product Leadership

Customer Intimacy

Investment Strategy

Competencies Information Systems

Motivation, empowerment,

alignment

Satisfaction


Budgeting in a Downturn









1. StratEx

2. CoREx


Linking the Finance Role with Sales & Marketing

Building relationships for the good of the company


Typical Corporate Planning Scenario?

1. Budget ‘top down’ – no questions asked2. Only two budget goals – revenue, expenses3. The only planning we needed to do was “do better than

last year”4. Planning was ‘bottom up’ - compilation of plans within

set budget5. No one knew what the other was planning6. FAC’s role was only to compile budget for approval7. KPIs were not used8. Sales was resource priority, everything else not

important9. Assumed no major changes in market10. R&D was ‘bottom up’



At the Table

Sales and Marketing

Finance and Accounts

1. Field Intelligence

2. CRM

3. Growth (organic)

4. Lagging KPIs

5. Adaptability

6. Channels

7. 1st Level Branding

8. Stakeholder Interest: Customers

9. Gut Feel/Instincts

1. External Intelligence

2. Ratios

3. Leading KPIs

4. Control/ Constraints

5. Resource Mgmt

6. Stability & Systems

7. Pyramid roles

8. Containment

9. Shareholder Interest: Shareholder



Linking the Roles

Sales and Marketing

Finance and Accounts

Four Links:

1.Philosophy

2.Business Model

3.KPIs

4.Resource Allocation



Philosophy

“In business after business, 60% to 80% of lost customers reported on a survey just prior to defecting that they were satisfied or very satisfied.”

HBR March/April 1996



Business Model

USP

Market Discipline

Profit Model


Sample KPIs for Each Discipline





Customer Intimacy



focus

Customer Intimacy



focus

Product Leadership



teams• Pipeline

Product Leadership



teams• Pipeline



Budgeting & Resource

Culture

Business


StructurePerson

Leadership

Resources

Funding • CAPEX• OPEX


End Notes

Tying it all up


Problems, problems and more problems…



Culture

Business


StructurePerson

Leadership

Resources


“…in the past 18 months, we have heard that profit is more important than revenue,

quality is more important that profit, people are more important than profit,

customers are more important than our people, big customers are more important than small customers, and that growth is the key to our success. No wonder our

performance is inconsistent"CEO, Anonymous



Don’t forget…

“The business of business is Business, not Sales, not Marketing, not Finance”


Thank You.

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