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Finance’s Changing Mandate Moving Beyond Cost Control to True Performance Management

A report prepared by CFO Research Services in collaboration with Longview Solutions

Finance’s Changing Mandate Moving Beyond Cost Control to True Performance Management

A report prepared by CFO Research Services in collaboration with Longview Solutions

© 2010 cfo publishing llc September 2010 1

Contents

About this report 2

A renewed focus on performance 2 management discipline A path to growth marked by fierce 4 competition

A gradual shift from cost control to 5 performance management

Plans for technology improvement 10

Getting from here to there: What finance 13 executives say

Sponsor’s perspective 14

2 September 2010 © 2010 cfo publishing llc

About this report

In March and April 2010, CFO Research Services (a unit of CFO Publishing LLC) conducted a survey among senior finance executives at midsize and large companies in the United States to examine their views on performance management in the emerging recovery.

We gathered a total of 162 complete survey responses from senior finance executives. Respondents work for companies in a broad range of company segments:

Annual revenue $100 million to $500 million 40%$500 million to $1 billion 32%$1 billion to $5 billion 18%More than $5 billion 10%

Titles Chief financial officer 35%Controller 22%VP, EVP, or SVP of finance 18%Director of finance 15%Treasurer 4%CEO, president, or managing director 1%

Respondents work for companies in nearly every industry. The manufacturing, financial services, business and professional services, wholesale/ retail trade, and health-care sectors are particu-larly well represented.

Note: Percentages may not total 100%, due to rounding.

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A renewed focus on performance management disciplineIt appeared, in the mid-2000s, as if the moment had finally come: finance was once again ready to focus on partnering with the business. After a long period of concentrated atten-tion—and heavy investment—in processes and systems to meet heightened reporting and verification requirements, a series of CFO Research Services studies documented that CFOs and their teams were hitting a new stride as partners to business decision makers across their organizations. Performance management, in particular, gained traction in the middle of the last decade as the rubric of a renewed part-nership between finance teams and management decision makers.

Defined formally as the set of processes, metrics, method-ologies, and technology systems and infrastructure that allow organizations to forecast, measure, and react to busi-ness drivers and performance indicators in the service of business strategy, performance management was and is an established set of business activities. Companies have been managing their performance through activities like plan-ning, budgeting, forecasting, reporting, and variance analysis since they’ve had performance to manage; companies have been making decisions about how to deploy their resources in service of business strategy since they’ve had resources to deploy and strategies to serve. And finance departments have long brought their analytical skill to bear in business modeling, scenario analysis, and decision support as part of their companies’ broader performance management efforts.

Now that economic and business conditions are beginning to moderate, the time seems right to open a new inquiry into performance management.

The difference between the historical practice of managing performance and the formal discipline of “performance management” that gained such currency in the mid-2000s lay partly in the analytical rigor companies sought to bring to bear in their decision making, and partly in the IT systems and hardware they were able to apply to their performance management efforts. It would be unwise indeed to discount the value of the human factor—of knowledge, experience, and practiced intuition—in management decision making. At the same time, highly sophisticated technology systems and infrastructure helped many companies improve not just the reliability and transparency of the data underpin-ning decisions, but also managers’ ability to develop busi-ness insight from the increasingly vast quantities of financial and operating data at their disposal—ultimately improving their ability to direct resources toward the most fruitful initiatives, even under swiftly changing business conditions. The combination of technologies, analyses, reports, and deci-sion making methods that came to be grouped loosely under the umbrella of formal performance management efforts were aimed at helping companies anticipate and respond to a business environment that seemed to grow in complexity and variability by the day.

But when a deep economic downturn took hold in September 2008, the business environment became, ironically, less complicated in many ways. With few growth prospects of any kind on the horizon, and faced with a grave credit crisis, many finance departments found that the best way to act as business partners was in fact to devote their effort and attention to finance fundamentals: funding the company, managing cash and working capital, reducing costs, and improving efficiency. CFO Research studies throughout the downturn documented finance executives’ unwavering focus on those fundamentals. Few companies could spare resources for performance management improvement efforts under such extreme conditions.

Now that economic and business conditions are beginning to moderate, the time seems right to open a new inquiry into performance management. This spring, CFO Research surveyed senior finance executives across the United States about their expectations, plans, and aspirations for perfor-mance management. We found that finance executives finally seem to be able to spare some attention from their cost reduction, cash and working capital management, and funding efforts.

In an exceptionally challenging environment, companies that are able to articulate the business benefits of performance management technology investment—and to realize those benefits in practice—may gain a substantial advantage over their peers.

But even as they begin to prepare for the next wave of growth through the recovery, finance executives seem to be bracing for a highly competitive business environment, with fewer bright prospects for growth than their companies have enjoyed in the past. On the one hand, finance executives recognize the value that performance management discipline can provide to companies forced to make their way along complex and competitive pathways to growth. On the other hand, many finance executives also acknowledge that their companies are not well equipped to document the business case for the technology that is often integral to performance management improvement efforts. In an exceptionally chal-lenging environment characterized by scarce resources and an abundance of competing priorities, companies that are able to articulate the business benefits (particularly the qualitative, or “soft,” benefits) of performance management technology investment—and to realize those benefits in practice—may gain a substantial advantage over their peers.



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A path to growth marked by fierce competitionAlthough the National Bureau of Economic Research had yet to declare a formal end to the U.S. recession when this report went to press, much ink has already been spilled in the past several months about the coming recovery. When, how, and where will companies find growth? The results of this survey suggest that finance executives are bracing for competitive challenges in the months ahead, as they strive to make the most of relatively limited growth opportunities.

The path to growth as the recovery takes hold is likely to call for greater attention to identifying new growth opportunities, competitive maneuvers, and cost control alike.

When asked to consider the competitive pressures they expect to face, 82% of all respondents to our survey say their companies are likely to face a more competitive business environment in the coming recovery, compared with the last period of expansion. Forty-four percent of respondents say they expect their companies’ business environment to be only “somewhat more competitive” in the coming recovery, but nearly as many (38%) say their business environment is likely to be “much more competitive.” (See Figure 1.)

Finance executives’ relatively moderate expectations for growth opportunities in the recovery may help to explain their grim outlook on competition. Although about half (52%) of all respondents say their companies are likely to find “somewhat more” new opportunities for growth in the coming recovery compared to the last period of economic expansion, few respondents—only 7%—are willing to say their companies are likely to find “many more” growth opportunities. Indeed, one-third of respondents say they expect their companies will find fewer new opportunities for growth in the coming recovery compared with the last expansion (27% of respondents say “somewhat fewer”; 6% say “far fewer”). (See Figure 2.)

In response to these conditions, many companies appear to be planning to pursue a multipronged strategy over the next two years. Most respondents (84%) expect their companies will devote more attention to identifying new growth oppor-tunities—such as developing new products or services, or entering new markets—over the next two years (compared to the last period of expansion). Seventy percent of respon-dents expect to pursue growth by capturing current market share from competitors. And finance executives expect to continue to keep a close eye on costs, with three-quarters (76%) of respondents saying their companies will devote more attention to controlling costs to maintain profitability over the next two years, compared to the last expansion. The path to growth as the recovery takes hold is likely to call for greater attention to identifying new growth opportunities, competitive maneuvering, and controlling costs alike.

Figure 1. Finance executives anticipate a more competitive business environment as the recovery unfolds.

In the coming recovery, my company is likely to face a ___________ business environment, compared to the last period of economic expansion.

Figure 6. Finance executives are particularly interested in improving their companies’ ability to produce information for managing performance. In your opinion, how important will it be for your company to improve its ability to produce the following types of business information over the next two years?

Figure 7. Finance executives anticipate that technology will play a vital role in improving performance management at their companies over the next two years. In your opinion, how much of a role will technology improvement play in improving performance management at your company over the next two years?

Figure 8. Finance executives seem to recognize the value of technology focused on managing business performance—in particular, best-of-breed performance-management technology.

To what extent have your company’s technology capabilities helped it to manage and report its business performance effectively?

Figure 9. Although finance executives recognize the importance of documenting the business case for performance management technology investment, many are not confident that their companies are well equipped to do so. In your opinion, is your company well equipped to document the following dimensions of the business case for performance management technology investment?

Figure 2. Survey results suggest a subdued outlook for new growth opportunities.

My company is likely to find __________ new opportunities for growth in the coming recovery, compared to the last period of economic expansion.

Figure 3. Survey results suggest that the finance function’s mandate will shift from cost reduction to performance management as the economic recovery takes hold.

Figure 4. Performance management activities are likely to gain priority at many companies over the next two years.

In your opinion, to what extent is your company’s interest in improving the following finance activities likely to change over the next two years, compared to today?

Figure 5. Many companies will seek to meet renewed performance-management priorities by pursuing initiatives tied to forecasting, performance metrics, and performance reporting.

In the next two years, how likely is your finance function to pursue the following improvement initiatives in order to manage business performance more effectively?

2%

10%

7%

44%

38%

0% 20% 40% 60%

Not sure

None of these—the competitiveenvironment hasn’t changed

Much less competitive

Somewhat less competitive

Somewhat more competitive

Much more competitive

0%

Percentage of respondentsNote: Percentages may not total 100%, due to rounding.





4%

4%

6%

27%

52%

7%

0% 20% 40% 60%

Not sure

None of these—new growthprospects haven’t changed

Far fewer

Somewhat fewer

Somewhat more

Many more

5%

21%

43%

5%

27%

3%

13%

15%

20%

49%

0% 20% 40% 60%

Other activities

Ensuring that the company remains/remained funded and adequately

capitalized

Reducing costs to helpmaintain profitability

Identifying and allocating resourcesto business opportunities

Managing performance againstfinancial and operating targets

■ Focus during the downturn■ Expected focus in the recovery

+22% pts

-28% pts

3%

4%

5%11%

12%

14%

18%

15%

17%

18%

23%

21%

33%

43%

44%

40%

45%

53%

74%

62%

69%

53%

43%

40%

42%

36%

28%

4%10%

4%

3%

3%

3%1%

3%

3%

1%

1%

1%

1%

1%

1%

0% 20% 40% 60% 80% 100%

External financial reporting

Transaction processing

Regulatory compliance

Internal management reporting

Risk management

Cost management

Working capital management/Cash management

Planning, budgeting, and forecasting

Decision support/Business analysis

■ Will become a much higher priority ■ Will become a somewhat higher priority ■ No change expected ■ Will become a somewhat lower priority ■ Will become a much lower priority

26%

33%

35%

38%

39%

39%

42%

47%

49%

51%

37%

33%

41%

39%

43%

47%

40%

37%

38%

39%

24%

15%

15%

14%

13%

8%

13%

8%

9%

7%

5%8%

6%

5%

2%

1%

1%

6%

1%

1%2%

3%

3%

4%

4%

9%

12%

3%

4%

4%

0% 20% 40% 60% 80% 100%

Accessing competitive intelligence

Linking performance metricsto variable compensation

Budgeting

Long-range planning

Identifying and tracking leadingperformance indicators

Supporting business decisions

Business modeling

Timely, accurate, reliable performancereporting across the company

Identifying and tracking performance metrics tomeasure progress against business objectives

Forecasting

■ Very likely to pursue ■ Somewhat likely to pursue ■ Not sure■ Somewhat unlikely to pursue ■ Very unlikely to pursue

8%

14%

36%

38%

47%

49%

53%

54%

43%

50%

51%

40%

44%

37% 10%

36%

42%

14%

11%

13%

7%

1%

2%

1%

1%

1%

0% 20% 40% 60% 80% 100%

External reporting (including financial statements,tax reporting, and operational performance reporting)

Complying with regulations (including regulationsgoverning financial reporting, operating activities)


Identifying and managing risk

Planning, budgeting,and forecasting

Supporting business decisions(e.g., capital-investment

decisions, resource allocation)

Monitoring performance against targetsand business indicators

■ Very important to improve ■ Somewhat important to improve

■ Not important to improve ■ Not sure





Performanceinformation

4%

28%

36%

32%

0% 20% 40% 60%

A minimal role—we’re unlikely to pursuetechnology improvement connected to

performance management

A contributing role—technology improvementwill likely support our performance-management

improvement efforts

An important role—technology improvement willbe central to our performance-management

improvement plans

A critical role—we won't be able to achieveour goals without technology improvement

7%

29%

46%

75%

61%

52%

46%

10%

13%

7%

5%

15%

15%

12%

5%

4%

0% 20% 40% 60% 80% 100%

Point solutions withgaps (n=20)

Spreadsheets and manual processes (n=54)

Financial applicationmodule (n=58)

Dedicated application forperformance management (n=22)

■ Substantially contributed to its ability to manage and report business performance■ Somewhat contributed to its ability to manage and report business performance■ Had little effect on its ability to manage and report business performance■ Somewhat detracted from its ability to manage and report business performance■ Substantially detracted from its ability to manage and report business performance

42%

43%

44%

46%

43%

33%

34%

39%

3%

9%

6%

6%

8%

11%

7%

13%

4%

4%

3%

4%

0% 20% 40% 60% 80% 100%

Assessing the full cost of new technology systemsover the long term (e.g., assessing maintenance

and support costs)

Determining the time horizon for return on performancemanagement technology investments

Quantifying the return on technology improvements (e.g.,quantifying and attributing cost savings realized through

improvement; quantifying the value of better decisionmaking; greater certainty and/or reduced risk)

Comparing the qualitative benefits of technology improvement(e.g., better view into companywide performance, improved

decision making) to its quantified costs

■ No, but it's important ■ Yes, and it's important ■ No, but it's not important■ Yes, but it's not important ■ Not sure

A gradual shift from costcontrol to performance managementDuring the downturn, companies’ top lines shrank as demand for goods and services collapsed. With key economic indi-cators plunging rapidly, the outlook for business growth became more and more uncertain. Forecasting time hori-zons contracted, with few business planners willing or able to look far beyond their most immediate cash needs. In the face of dramatic changes in their external environment, finance functions naturally devoted most of their resources to managing the elements of performance that were still within their companies’ control: namely, their costs. Compa-nies scaled back production and slashed costs in response to slowing sales. In many cases, they were forced to scramble to revise financial and operating targets downward—and to race to adjust their operations in tandem—in an attempt to catch up with economic realities.

With the economy showing some signs of improvement, the results of this study suggest that companies are working to anticipate recovery in their respective sectors, in order to optimize production (and its attendant costs), inventories, and the demand for their goods and services. Rather than making corrective downward adjustments to operating and financial targets in order to preserve resources, managers are once again beginning to set aspirational targets, in order to promote growth. Corporate, business unit, and finance leaders have their management sights on new targets, rather than simply managing cash positions to survive from week to week.

Managers are once again beginning to set aspirational targets in order to promote growth.
















2%

10%

7%

44%

38%

0% 20% 40% 60%

Not sure






0%






4%

4%

6%

27%

52%

7%

0% 20% 40% 60%

Not sure


Far fewer

Somewhat fewer

Somewhat more

Many more

5%

21%

43%

5%

27%

3%

13%

15%

20%

49%

0% 20% 40% 60%

Other activities


capitalized





+22% pts

-28% pts

3%

4%

5%11%

12%

14%

18%

15%

17%

18%

23%

21%

33%

43%

44%

40%

45%

53%

74%

62%

69%

53%

43%

40%

42%

36%

28%

4%10%

4%

3%

3%

3%1%

3%

3%

1%

1%

1%

1%

1%

1%

0% 20% 40% 60% 80% 100%





Risk management

Cost management





26%

33%

35%

38%

39%

39%

42%

47%

49%

51%

37%

33%

41%

39%

43%

47%

40%

37%

38%

39%

24%

15%

15%

14%

13%

8%

13%

8%

9%

7%

5%8%

6%

5%

2%

1%

1%

6%

1%

1%2%

3%

3%

4%

4%

9%

12%

3%

4%

4%

0% 20% 40% 60% 80% 100%



Budgeting

Long-range planning



Business modeling



Forecasting


8%

14%

36%

38%

47%

49%

53%

54%

43%

50%

51%

40%

44%

37% 10%

36%

42%

14%

11%

13%

7%

1%

2%

1%

1%

1%

0% 20% 40% 60% 80% 100%
















4%

28%

36%

32%

0% 20% 40% 60%




improvement efforts


improvement plans


7%

29%

46%

75%

61%

52%

46%

10%

13%

7%

5%

15%

15%

12%

5%

4%

0% 20% 40% 60% 80% 100%






42%

43%

44%

46%

43%

33%

34%

39%

3%

9%

6%

6%

8%

11%

7%

13%

4%

4%

3%

4%

0% 20% 40% 60% 80% 100%


and support costs)








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Survey results confirm that the finance function’s mandate is beginning to shift from the fundamentals of cost control and company funding to activities associated with performance management. When queried on their finance function’s mandate during the downturn, respondents most often say the finance function at their companies focused primarily on reducing costs to help maintain profitability (43%). But when asked to look forward to the recovery, fewer respondents—only 15%—say they expect to focus on cost reduction. Similarly, when we ask respondents to look forward to the recovery, respondents most frequently predict their finance functions will focus on managing performance against finan-cial and operating targets (49%), but only 27% of respondents say their companies focused on managing performance against these targets during the downturn. (See Figure 3.)

Other survey results confirm that finance’s priorities are beginning to change. When we asked finance executives to assess their priorities for the next two years, respon-dents most frequently say they expect activities associated with performance management will be a higher priority than they are today. Seventy percent of respondents say they expect decision support and business analysis will be a higher priority over the next two years than they are today (53% say decision support/business analysis will be a somewhat higher priority; 17% say it will be a much higher priority). Sixty percent say they expect planning, budgeting, and forecasting will be a higher priority (45% say it will be a somewhat higher priority; 15% say it will be a much higher priority). (See Figure 4.)















2%

10%

7%

44%

38%

0% 20% 40% 60%

Not sure






0%






4%

4%

6%

27%

52%

7%

0% 20% 40% 60%

Not sure


Far fewer

Somewhat fewer

Somewhat more

Many more

5%

21%

43%

5%

27%

3%

13%

15%

20%

49%

0% 20% 40% 60%

Other activities


capitalized





+22% pts

-28% pts

3%

4%

5%11%

12%

14%

18%

15%

17%

18%

23%

21%

33%

43%

44%

40%

45%

53%

74%

62%

69%

53%

43%

40%

42%

36%

28%

4%10%

4%

3%

3%

3%1%

3%

3%

1%

1%

1%

1%

1%

1%

0% 20% 40% 60% 80% 100%





Risk management

Cost management





26%

33%

35%

38%

39%

39%

42%

47%

49%

51%

37%

33%

41%

39%

43%

47%

40%

37%

38%

39%

24%

15%

15%

14%

13%

8%

13%

8%

9%

7%

5%8%

6%

5%

2%

1%

1%

6%

1%

1%2%

3%

3%

4%

4%

9%

12%

3%

4%

4%

0% 20% 40% 60% 80% 100%



Budgeting

Long-range planning



Business modeling



Forecasting


8%

14%

36%

38%

47%

49%

53%

54%

43%

50%

51%

40%

44%

37% 10%

36%

42%

14%

11%

13%

7%

1%

2%

1%

1%

1%

0% 20% 40% 60% 80% 100%
















4%

28%

36%

32%

0% 20% 40% 60%




improvement efforts


improvement plans


7%

29%

46%

75%

61%

52%

46%

10%

13%

7%

5%

15%

15%

12%

5%

4%

0% 20% 40% 60% 80% 100%






42%

43%

44%

46%

43%

33%

34%

39%

3%

9%

6%

6%

8%

11%

7%

13%

4%

4%

3%

4%

0% 20% 40% 60% 80% 100%


and support costs)







The finance function’s mandate is beginning to shift from the fundamentals of cost control and company funding to activities associated with performance management.

Finance executives also appear to be maintaining their interest, it should be noted, in working capital management, cost management, and risk management. Although survey results suggest that the pressure to attend to costs, cash and working capital, and funding is beginning to ease to some degree, it would probably be more accurate to say that finance teams are planning to add performance management efforts to their already lengthy agenda than to suggest that they’re giving up one set of activities in favor of another. After years of heavy investment in regulatory compliance and financial reporting, however, finance executives, in general, seem fairly confident that they’ll be able to devote their attention to other matters over the next two years.

After years of heavy investment in regulatory compliance and financial reporting, finance executives seem fairly confident that they’ll be able to devote their attention to other matters over the next two years.

When we asked respondents to focus closely on the improve-ments their companies aspire to make in the performance management arena, in particular, survey results suggest that finance executives will focus on improving their compa-nies’ forecasting capabilities (51% say “very likely” to pursue improvement); their ability to identify and track performance metrics in order to measure progress against business objec-tives (49% say “very likely” to pursue improvement); and their ability to access high-quality performance reporting across their companies (47% say “very likely” to pursue improve-ment). (See Figure 5.)

That half of all respondents say their companies are very likely to pursue improvements in forecasting is a result well in line with other CFO Research studies, which have documented an increasingly sharp interest in forecasting over the past several years, tied first to the pre-downturn increase in price volatility for energy, raw materials, and production inputs, and later to widespread uncertainty regarding consumer demand and other economic and business indicators.
















2%

10%

7%

44%

38%

0% 20% 40% 60%

Not sure






0%






4%

4%

6%

27%

52%

7%

0% 20% 40% 60%

Not sure


Far fewer

Somewhat fewer

Somewhat more

Many more

5%

21%

43%

5%

27%

3%

13%

15%

20%

49%

0% 20% 40% 60%

Other activities


capitalized





+22% pts

-28% pts

3%

4%

5%11%

12%

14%

18%

15%

17%

18%

23%

21%

33%

43%

44%

40%

45%

53%

74%

62%

69%

53%

43%

40%

42%

36%

28%

4%10%

4%

3%

3%

3%1%

3%

3%

1%

1%

1%

1%

1%

1%

0% 20% 40% 60% 80% 100%





Risk management

Cost management





26%

33%

35%

38%

39%

39%

42%

47%

49%

51%

37%

33%

41%

39%

43%

47%

40%

37%

38%

39%

24%

15%

15%

14%

13%

8%

13%

8%

9%

7%

5%8%

6%

5%

2%

1%

1%

6%

1%

1%2%

3%

3%

4%

4%

9%

12%

3%

4%

4%

0% 20% 40% 60% 80% 100%



Budgeting

Long-range planning



Business modeling



Forecasting


8%

14%

36%

38%

47%

49%

53%

54%

43%

50%

51%

40%

44%

37% 10%

36%

42%

14%

11%

13%

7%

1%

2%

1%

1%

1%

0% 20% 40% 60% 80% 100%
















4%

28%

36%

32%

0% 20% 40% 60%




improvement efforts


improvement plans


7%

29%

46%

75%

61%

52%

46%

10%

13%

7%

5%

15%

15%

12%

5%

4%

0% 20% 40% 60% 80% 100%






42%

43%

44%

46%

43%

33%

34%

39%

3%

9%

6%

6%

8%

11%

7%

13%

4%

4%

3%

4%

0% 20% 40% 60% 80% 100%


and support costs)








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Companies are eager to tie performance measurement more closely to business plans.

But survey results also suggest that companies are just as eager to tie performance measurement more closely to business plans—and to gain access to better information about their performance. Indeed, when asked to consider how a variety of performance management improvements would contribute to their companies’ ability to execute their strategies, respon-dents most often said that “improved ability to forecast busi-ness performance/predict business and economic changes” would make a substantial contribution to strategy execution (48%), followed by “greater use of performance manage-ment technology/greater automation of reporting” (39%). Survey responses to a question seeking to gauge interest in improving access to information tend to confirm finance

executives’ interest in improving information used for performance management activities, in particular. When asked how important it will be for their companies to improve their ability to produce information for a range of business purposes over the next two years, a majority of respondents (53%) say it will be very important to improve their ability to produce information for “monitoring perfor-mance against targets and business indicators.” Nearly half of all respondents (49%) say it will be “very important” for their companies to improve their ability to produce information for supporting business decisions (including capital-invest-ment and resource-allocation decisions).















2%

10%

7%

44%

38%

0% 20% 40% 60%

Not sure






0%






4%

4%

6%

27%

52%

7%

0% 20% 40% 60%

Not sure


Far fewer

Somewhat fewer

Somewhat more

Many more

5%

21%

43%

5%

27%

3%

13%

15%

20%

49%

0% 20% 40% 60%

Other activities


capitalized





+22% pts

-28% pts

3%

4%

5%11%

12%

14%

18%

15%

17%

18%

23%

21%

33%

43%

44%

40%

45%

53%

74%

62%

69%

53%

43%

40%

42%

36%

28%

4%10%

4%

3%

3%

3%1%

3%

3%

1%

1%

1%

1%

1%

1%

0% 20% 40% 60% 80% 100%





Risk management

Cost management





26%

33%

35%

38%

39%

39%

42%

47%

49%

51%

37%

33%

41%

39%

43%

47%

40%

37%

38%

39%

24%

15%

15%

14%

13%

8%

13%

8%

9%

7%

5%8%

6%

5%

2%

1%

1%

6%

1%

1%2%

3%

3%

4%

4%

9%

12%

3%

4%

4%

0% 20% 40% 60% 80% 100%



Budgeting

Long-range planning



Business modeling



Forecasting


8%

14%

36%

38%

47%

49%

53%

54%

43%

50%

51%

40%

44%

37% 10%

36%

42%

14%

11%

13%

7%

1%

2%

1%

1%

1%

0% 20% 40% 60% 80% 100%
















4%

28%

36%

32%

0% 20% 40% 60%




improvement efforts


improvement plans


7%

29%

46%

75%

61%

52%

46%

10%

13%

7%

5%

15%

15%

12%

5%

4%

0% 20% 40% 60% 80% 100%






42%

43%

44%

46%

43%

33%

34%

39%

3%

9%

6%

6%

8%

11%

7%

13%

4%

4%

3%

4%

0% 20% 40% 60% 80% 100%


and support costs)







Similarly, 47% of respondents say it will be very important for their companies to improve their ability to produce information used for planning, budgeting, and forecasting. But after several years of heavy investment in response to Sarbanes-Oxley and other heightened financial reporting requirements, finance executives are far less likely to say it will be very important to improve information for regulatory compliance (14%) or external reporting (8%). (See Figure 6.)

Nearly half of respondents say it will be very important for their companies to improve their ability to produce information used for planning, budgeting, and forecasting.
















2%

10%

7%

44%

38%

0% 20% 40% 60%

Not sure






0%






4%

4%

6%

27%

52%

7%

0% 20% 40% 60%

Not sure


Far fewer

Somewhat fewer

Somewhat more

Many more

5%

21%

43%

5%

27%

3%

13%

15%

20%

49%

0% 20% 40% 60%

Other activities


capitalized





+22% pts

-28% pts

3%

4%

5%11%

12%

14%

18%

15%

17%

18%

23%

21%

33%

43%

44%

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45%

53%

74%

62%

69%

53%

43%

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36%

28%

4%10%

4%

3%

3%

3%1%

3%

3%

1%

1%

1%

1%

1%

1%

0% 20% 40% 60% 80% 100%





Risk management

Cost management





26%

33%

35%

38%

39%

39%

42%

47%

49%

51%

37%

33%

41%

39%

43%

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37%

38%

39%

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3%

3%

4%

4%

9%

12%

3%

4%

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0% 20% 40% 60% 80% 100%



Budgeting

Long-range planning



Business modeling



Forecasting


8%

14%

36%

38%

47%

49%

53%

54%

43%

50%

51%

40%

44%

37% 10%

36%

42%

14%

11%

13%

7%

1%

2%

1%

1%

1%

0% 20% 40% 60% 80% 100%
















4%

28%

36%

32%

0% 20% 40% 60%




improvement efforts


improvement plans


7%

29%

46%

75%

61%

52%

46%

10%

13%

7%

5%

15%

15%

12%

5%

4%

0% 20% 40% 60% 80% 100%






42%

43%

44%

46%

43%

33%

34%

39%

3%

9%

6%

6%

8%

11%

7%

13%

4%

4%

3%

4%

0% 20% 40% 60% 80% 100%


and support costs)








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Plans for technology improvementAlthough both process and organizational improvements have a substantial role to play in improving access to infor-mation for performance management purposes, few would dispute that performance management improvement is a technology-intensive effort. So it isn’t surprising, given the level of interest among respondents in performance management, that respondents recognize the role that technology is likely to play in their performance manage-ment improvement efforts. Nearly one-third of respondents (32%) say that technology improvement will play a critical role in improving performance management at their compa-nies over the next two years; 36% confirm that technology improvement will play an important role. Only 4% of respon-dents, however, are willing to say that technology will play a minimal role in their companies’ efforts to improve perfor-mance management over the next two years. (See Figure 7.) To gain some insight into the contribution that technology investments have already made to companies’ efforts to manage their performance, first we asked survey respondents to tell us about the technology systems they’re currently using. Responses are fairly evenly split between those who characterize their current technology capabilities as a finan-cial application module, such as a module of an ERP system (36%), and those who say their companies still rely on spread-

sheets and manual processes (34%). Fewer respondents say they use a dedicated application for performance manage-ment (14%) or point solutions (12%).

Then we asked respondents to consider the extent to which their companies’ technology capabilities have helped them to manage and report their business performance. Although variations in sample sizes for this segmentation make it difficult to draw conclusive findings, survey results tend to confirm that finance executives recognize the contribution of technology focused on performance management—in particular, dedicated (or “best of breed”) applications for performance management. Survey respondents who say their companies use a dedicated application for perfor-mance management are particularly likely to say that their companies’ technology capabilities have made a substantial contribution to its ability to manage and report business performance (46%, n=22). (See Figure 8.)

Respondents recognize the role that technology is likely to play in their performance management improvement efforts.















2%

10%

7%

44%

38%

0% 20% 40% 60%

Not sure






0%






4%

4%

6%

27%

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7%

0% 20% 40% 60%

Not sure


Far fewer

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5%

21%

43%

5%

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3%

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20%

49%

0% 20% 40% 60%

Other activities


capitalized





+22% pts

-28% pts

3%

4%

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14%

18%

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44%

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3%

3%

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1%

1%

1%

1%

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0% 20% 40% 60% 80% 100%





Risk management

Cost management





26%

33%

35%

38%

39%

39%

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47%

49%

51%

37%

33%

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4%

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9%

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0% 20% 40% 60% 80% 100%



Budgeting

Long-range planning



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Forecasting


8%

14%

36%

38%

47%

49%

53%

54%

43%

50%

51%

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37% 10%

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7%

1%

2%

1%

1%

1%

0% 20% 40% 60% 80% 100%
















4%

28%

36%

32%

0% 20% 40% 60%




improvement efforts


improvement plans


7%

29%

46%

75%

61%

52%

46%

10%

13%

7%

5%

15%

15%

12%

5%

4%

0% 20% 40% 60% 80% 100%






42%

43%

44%

46%

43%

33%

34%

39%

3%

9%

6%

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8%

11%

7%

13%

4%

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3%

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0% 20% 40% 60% 80% 100%


and support costs)







Among respondents who say their companies use other technologies to manage performance, proportionally fewer say their companies’ technology capabilities have made a substantial contribution to performance management. For example, 29% of the 58 respondents who say their companies have a financial application module focused on performance management confirm that their companies’ technology capa-bilities have made a substantial contribution to their ability to manage and report on performance.

Only 7% of the 54 respondents who say their companies rely on spreadsheets say their technology has made a substantial contribution to their performance management efforts—and no respondents at all who use point solutions believe the contribution from technology has been substantial. It seems clear from these results that respondents using systems focused on the full range of performance management activ-ities are reaping the greatest benefits from their technology.

It seems clear from these results that respondents using systems focused on the full range of performance management activities are reaping the greatest benefits from their technology.
















2%

10%

7%

44%

38%

0% 20% 40% 60%

Not sure






0%






4%

4%

6%

27%

52%

7%

0% 20% 40% 60%

Not sure


Far fewer

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5%

21%

43%

5%

27%

3%

13%

15%

20%

49%

0% 20% 40% 60%

Other activities


capitalized





+22% pts

-28% pts

3%

4%

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14%

18%

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44%

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3%

3%

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1%

1%

1%

1%

1%

0% 20% 40% 60% 80% 100%





Risk management

Cost management





26%

33%

35%

38%

39%

39%

42%

47%

49%

51%

37%

33%

41%

39%

43%

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4%

4%

9%

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4%

0% 20% 40% 60% 80% 100%



Budgeting

Long-range planning



Business modeling



Forecasting


8%

14%

36%

38%

47%

49%

53%

54%

43%

50%

51%

40%

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37% 10%

36%

42%

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11%

13%

7%

1%

2%

1%

1%

1%

0% 20% 40% 60% 80% 100%
















4%

28%

36%

32%

0% 20% 40% 60%




improvement efforts


improvement plans


7%

29%

46%

75%

61%

52%

46%

10%

13%

7%

5%

15%

15%

12%

5%

4%

0% 20% 40% 60% 80% 100%






42%

43%

44%

46%

43%

33%

34%

39%

3%

9%

6%

6%

8%

11%

7%

13%

4%

4%

3%

4%

0% 20% 40% 60% 80% 100%


and support costs)








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But for companies considering whether to invest in tech-nology dedicated to performance management, these results open another question: how do the benefits that companies are realizing through dedicated performance management technologies stack up against the cost of that technology? Although the benefits that flow from technology invest-ment—improved visibility, more time to devote to high-value activities, better business decisions—are often difficult to quantify, the cost of technology is relatively easy to quan-tify. Weighing qualitative benefits against quantitative costs has proven to be a persistent challenge. Even so, most of the finance executives who responded to our survey acknowl-edge the importance of recognizing and documenting qualitative benefits when evaluating the business case for technology investment. Eighty-five percent of respondents, for example, confirm that comparing the qualitative benefits of technology improvement to its costs is important. (See Figure 9.) But many respondents say their companies are not well equipped to document qualitative dimensions of the business case for technology investment. Forty-six percent of all respondents, for example, say their companies are not well equipped to compare the qualitative benefits of tech-nology improvement to its costs, even though they agree that it’s important to be able to do so.

In a challenging business environment with few resources to spare, companies that aren’t well equipped to articu-late and fully document the business case for performance management technology investment—even if that case is a compelling one—may hold back on technology investment that could make a substantial contribution to their efforts to manage performance. Under these circumstances, compa-nies may find themselves with suboptimal systems and infra-structure just when the need for technology to support more rigorous business performance management is cresting.

Forty-six percent of all respondents say their companies are not well equipped to compare the qualitative benefits of technology improvement to its costs, even though they agree that it’s important to be able to do so.















2%

10%

7%

44%

38%

0% 20% 40% 60%

Not sure






0%






4%

4%

6%

27%

52%

7%

0% 20% 40% 60%

Not sure


Far fewer

Somewhat fewer

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5%

21%

43%

5%

27%

3%

13%

15%

20%

49%

0% 20% 40% 60%

Other activities


capitalized





+22% pts

-28% pts

3%

4%

5%11%

12%

14%

18%

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17%

18%

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21%

33%

43%

44%

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45%

53%

74%

62%

69%

53%

43%

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36%

28%

4%10%

4%

3%

3%

3%1%

3%

3%

1%

1%

1%

1%

1%

1%

0% 20% 40% 60% 80% 100%





Risk management

Cost management





26%

33%

35%

38%

39%

39%

42%

47%

49%

51%

37%

33%

41%

39%

43%

47%

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37%

38%

39%

24%

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8%

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8%

9%

7%

5%8%

6%

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2%

1%

1%

6%

1%

1%2%

3%

3%

4%

4%

9%

12%

3%

4%

4%

0% 20% 40% 60% 80% 100%



Budgeting

Long-range planning



Business modeling



Forecasting


8%

14%

36%

38%

47%

49%

53%

54%

43%

50%

51%

40%

44%

37% 10%

36%

42%

14%

11%

13%

7%

1%

2%

1%

1%

1%

0% 20% 40% 60% 80% 100%
















4%

28%

36%

32%

0% 20% 40% 60%




improvement efforts


improvement plans


7%

29%

46%

75%

61%

52%

46%

10%

13%

7%

5%

15%

15%

12%

5%

4%

0% 20% 40% 60% 80% 100%






42%

43%

44%

46%

43%

33%

34%

39%

3%

9%

6%

6%

8%

11%

7%

13%

4%

4%

3%

4%

0% 20% 40% 60% 80% 100%


and support costs)







Getting from here to there: What finance executives sayThe results of our survey show that finance executives are eager to improve their companies’ ability to manage business perfor-mance. The fiercely competitive environment that they expect to face in the coming months and years is likely to favor companies that are well equipped to sense opportunities and threats, and to act quickly in response.

Survey results also suggest, however, that many companies will find it challenging to document the business case for the tech-nology investments that are often required to support efforts to improve performance management, even if those efforts, if carried out well, would deliver a substantial competitive edge.

Of course, technology decision making—deciding whether to invest in technology and selecting the right systems—is only one dimension of the challenge facing companies as they seek to improve performance management. Previous CFO Research studies have found that successful performance management improvement efforts—and, in particular, successful technology implementations—call for leadership from top management, an internal technology sponsor and implementation team with deep knowledge of the business, and well-considered change-management efforts that emphasize open communication and training. The results of this survey tend to confirm those findings. For example, although finance executives in our survey, unsur-prisingly, most often cite business and economic volatility and inadequate technology systems among their greatest obstacles to improving performance management (35% in each case), nearly as many respondents say that a lack of organizational alignment among business constituents on business objectives and risks to performance (34%) is among their greatest obstacles. These results suggest that finding ways to improve communication and to foster collaboration among business constituents on the factors that lie at the heart of performance management efforts is just as critical to improvement—and just as challenging—as mastering volatility and improving technology.

When we asked respondents to offer advice to their peers on overcoming the barriers they face in improving performance management, the finance executives who responded to this survey confirmed that commitment from top levels of manage-ment and collaboration among business constituents are indeed critical to success. Among their most frequently cited pieces of advice were gaining the support of top management; fostering better communication and collaboration between different busi-ness units; and taking small, incremental steps that can be used to show concrete progress.

Gaining the support of senior management and other end users is critical to making a successful case for performance management technology investment, according to survey respondents. As one finance executive writes, “You need to have senior management as a champion from the beginning and gear the output to how they view the business.” Another says, “The push has got to come from the top. The finance function can’t drive necessary opera-tional changes without CEO directives.” (The same respondent also urges companies to give performance management efforts operational teeth by aligning incentive compensation with performance targets.)

Formal benchmarking and informal conversations with peers can help document requirements and prepare a team for the serious work of implementation. One respondent notes that his company has benchmarked its capabilities against those of top performers to help “dimension the tasks that need to be achieved and the potential benefits of success.” To the same end, another finance executive writes, “Gather all your facts first, and then take a step back and look at the overall direction of your industry before putting your case together,” while a third simply urges his peers to “talk to others who have already been down the path.”

Once a company decides to go down that path, finance executives say that proceeding at a steady and deliberate pace contributes to success. One respondent advocates for “slow and steady prog-ress—take things one piece at a time, get buy-in (or wear [people] down), and move on.” From another respondent we hear, “Culture is key. Focus on incremental improvement; radical change is only necessary or achievable in a crisis.”

Finally, finance executives note that setting clear objectives, communicating those objectives well, and understanding the needs of other functions or business units contribute to success. A respondent writes, “Make results easier to understand for non-accounting professionals (metrics and targets vs. full-blown financial statements). Share successful cost-savings results.” Another touches on finance’s role in putting performance analysis in context for operating decision makers. The executive explains, “Our greatest challenge has been converting analytical insight into an action plan. While the numbers may contain a story, it is imperative that the finance function articulate that story in a way that allows operations to develop an appropriate performance plan. We spent too much [time] preparing the analysis, and not enough time discussing intelligently what the analysis meant.”

In the end, finance executives need to be able to convince top management, as well as their companies’ end users, that “quality decisions cannot be made without quality information,” in the words of one respondent. “Investments in technology that improve management’s ability to make real-time decisions with accurate data must always be a priority.”



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Sponsor’s perspective

CFO Research Services’s report, Finance’s Changing Mandate, illustrates that finance executives believe that the finance function’s mandate is beginning to shift from the fundamen-tals of cost control and company funding to activities associ-ated with performance management. They also recognize the value that performance management discipline can provide, but also suggest that their companies are not well equipped to document the business case for the technology that is often integral to performance management improvement efforts. Most often, finance executives cite business and economic volatility and inadequate technology systems among their greatest obstacles to improving performance management. In this challenging environment characterized by competing priorities and a scarcity of resources, companies that are able to articulate the business benefits of performance manage-ment priorities and bring those to life may gain a substantial competitive advantage.

Performance management solutions enable decision makers to use the financial and non-financial information within

their businesses to better understand what drives company results, align resources toward common goals, and achieve ever-higher levels of operational and financial performance. After years of investing in ERP, CRM, supply-chain manage-ment, and data warehousing systems, corporations now have the data required for effective performance management, and Internet-based tools make it possible to access that data anywhere in the world. Specific performance management solutions make it possible to collect, store, analyze, and report on all this data in real-time and turn it into a true business advantage. Performance management solutions enable significant transformations to take place within the finance organization, affecting processes, tools, and the roles played by all levels of finance staff, including the CFO. Although, historically, ERP financial modules have improved transaction processing efficiency, they cannot support the strategic planning and analysis required in today’s economic environment. As a result, finance departments continue to rely heavily on spreadsheets, file extracts, and manual processes for mission-critical activities such as planning, consolidation, management reporting, and tax provisioning.A proper performance management solution can transform

an entire organization by creating a single repository of financial truth to drive process improvement, efficien-cies, data accuracy, and transparency for all finance func-tions including reporting, planning, budgeting, forecasting, modeling, consolidation, financial close, tax, and analysis. The right CPM application, like Longview 7, provides organizations with:

integration and Financial accuracy —• It is advantageous to find a single application that provides the organization with one central repository for financial and non-financial data enterprise-wide. This results in enterprise-wide finan-cial integrity, elimination of redundancy, consistent appli-cation of business rules, and a firm knowledge that business decisions are being made with confidence from a foundation of financial truth. An organization’s planning, budgeting, forecasting, consolidation, financial and management reporting, modeling, tax, and analysis requirements are supported with a single application.

Best-of-Breed application—• Typically, smaller vendors focused on performance management can provide best-of-breed capabilities as compared to mega-vendors. However, the best-of-breed application should co-exist with any mega-vendor infrastructure and augment existing mega-vendor performance management applications by integrating select processes such as planning, tax provisioning, etc.

Fast and accurate Reporting—• Fast and accurate reporting provides financial analysts and executives more time to actually analyze data. A more thoughtful analysis of the bottom line allows key stakeholders to monitor results against set objectives and develop more meaningful, long-term strategic plans that are actionable and trackable. It also enables users to peer into the depths of the complex organization and gain an insightful view of its financial reality. The SEC is demanding corporations be able to have this insight and it is also critical for an organization’s finan-cial health. A performance management application should provide a single repository of accurate information and, enterprise-wide, the books should always be in order and ready to close.

About Longview SolutionsLongview Solutions provides corporate performance manage-ment (CPM) and tax provisioning software that leading compa-nies such as Trustmark, Time Warner, Home Depot, Eaton, Welch’s, and Integrys use to drive performance with speed, visibility and financial integrity. Since 1994, many of the world’s most respected companies have been using Longview to create a single repository of financial truth from which all, or any one of the following key financial processes can be performed: Financial Planning, Budgeting, Forecasting, Modeling, Statu-tory and XBRL Reporting, Financial Consolidation, Manage-ment Reporting and Tax Provisioning. Longview is an Exact company headquartered in Toronto, Canada with regional offices in Philadelphia (USA), Chicago (USA) and London (UK). For more information, please visit www.longview.com.


Finance’s Changing Mandate is published by CFO Publishing LLC, 51 Sleeper Street, Boston, MA 02210. Please direct inquiries to Jane Coulter at 617-790-3211 or [email protected].

Longview Solutions funded the research and publica-tion of our findings, and we would like to acknowledge Jennifer Bentley and Kristina Holmes for their contribu-tions and support.

At CFO Research Services, Celina Rogers directed the research. David Owens and Celina Rogers wrote the report.

CFO Research Services is the sponsored research group within CFO Publishing LLC, which produces CFO magazine.

September 2010

Copyright © 2010 CFO Publishing LLC, which is solely responsible for its content. All rights reserved. No part of this report may be reproduced, stored in a retrieval system, or transmitted in any form, by any means, without written permission.

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