Driving Organizational Excellence With Strategic Modeling and Accountability

Every organizational leader looks for new ways to improve their business and operations over time. There are many approaches to achieving competitive success. However, every strategy focuses on delivering the same internal result: organizational excellence. While the definition of ‘excellence’ varies from business to business and industry to industry, the underlying meaning stays the same: achieving the delivery of products and services that fulfill and exceed customer requirements and business expectations. 

Organizational excellence is a holistic and aspirational concept targeted at management’s ability to extract additional value from their valuable workforce through strategic decisions and internal processes. As a user of the Synario platform, you already know how important effective modeling and planning are to both financial teams and key decision-makers. Leveraging the modeling platform in an advanced way allows organizations to implement higher-level strategies, monitor their effectiveness over time, and make rapid adaptations when required.

The importance of digital analytic tools in 2021

Organizational excellence has shifted rapidly over the past year as COVID-19 has adjusted working conditions, day-to-day operations, and, in many cases, longer-term strategic goals. One of the most significant shifts has been the migration to digital tools that enhance the quantitative insights available to management (primarily the CFO, from a financial perspective) and influence their qualitative decision-making.

According to a Gartner survey of 173 CFOs in October 2020, top CFOs stated that access to advanced data analytic technologies and workflow automation were their key priorities for 2021. However, almost 80% of respondents said that these priorities would also be difficult to achieve. What this tells us is that the effective use of digital software – including Synario, is critical for organizations to adopt these tools efficiently—and as soon as they are capable.

Regularly review time-sensitive targets

The best-practice approach to achieving target organizational outcomes—and, in turn, organizational excellence—is to set attributable and measurable short- and long-term goals that can be assessed along the way. 

Organizational executives often misunderstand this value-add. In fact, according to McKinsey research, almost 40% of CFOs strongly believe they create the most value through their role in performance management, as opposed to more traditional financial ownership.

A regularly reviewed mix of varied, time-sensitive targets by multiple high-level stakeholders ensures both accountability and integrated planning. The CFO remains the main allocator of capital and other company resources. While they should oversee the modeling of future targets, the delegation of responsibility to other key business managers is critical.

When developing your models, start by focusing on the big picture. Create and decide upon the long-term, aspirational goals and plans. Develop the annual targets required for the business to achieve these goals. Once this process is ratified, cascade the long-term goals for each business unit, which then influences their respective shorter-term budgets. The manager of each unit is responsible for hitting and exceeding their budget, together ensuring the overall plan is maintained and eventually achieved. 

Once annual financial targets are locked in, develop and reassess a five-year plan for each business unit. The specificity required from each responsible business unit manager should then be rolled back up into an aggregated bird’s-eye view for the CFO (as well as the CEO, if need be) and compared to the overall targets and goals of the organization.

Take a two-pronged approach: macro & micro

Depending on your modeling process and timelines, it’s best practice to review your progress and make adjustments on a regular basis (usually monthly). Taking a look from two lenses is often helpful to consider the isolated impacts of each business unit’s absolute performance, as well as their impact on the wider organization.

Each business manager, as well as the CFO, should review the performance of their area of responsibility by comparing their modeled financial targets and targets to the actual results achieved. According to KPMG’s study on organization culture, budgeting, forecasting, and planning should be an organization-wide process—not one singular to finance. Only 23% of high-level respondents indicated that the CFO and the finance function should own the process of performance and insights analysis. The CFO must however work proactively across the business with each leader to ensure alignment to the goals of the wider organization.

The impacts on the organization as a whole can then be acknowledged on a regular and timely basis. There are risks and opportunities that emerge from every aspect of the organization. Without a cross-functional partnership across both short- and long-term time horizons, many insights may be missed. 

Underperforming components can then be addressed on a proactive, top-down basis. Does anything need to change operationally and strategically to alter the short-term outlook (less than a year)? If so, are those adjustments sufficient for the organization’s longer-term success, or do higher-level plans need to change? This granular, micro-based approach allows for responsive modeling and decision making.

It is then the CFO’s responsibility to allocate resources in the context of the broader organization. Does funding need to shift from one business to another in order to achieve the organization’s holistic goals? If so, does the allocation of resources play its hand across the long-term strategy of the business? These questions can then inform how best to achieve the CEO’s goals for delivering their target organizational outcomes. Repeating this process on a consistent basis (monthly) ensures all hands are kept on the pulse.

How monthly accountability drives organizational excellence

This process of monthly accountability is the key to driving organizational excellence for four main reasons:

1 . Every business manager is aligned with the CFO. Instead of driving blind and operating their unit in the sole context of their own targets, business managers are consistently reporting to the CFO. Each is aware of their impact on the overall business’s performance and the expectations of the CFO. More importantly, the constant touchpoint provides a meaningful context to pivot strategy when needed.

2. The CFO better understands the organization’s current position. Having a segmented and detailed financial model and regular performance tracking allows the CFO to take a granular approach when assessing results. Is the business on track to meet its goals, or is it lagging behind in certain areas?

3. Consistent, planned reviews of short and long-term goals. Any goal should be measurable and regularly reviewed. Conducting these reviews on an organized basis provides the framework for executives to make appropriate long-term decisions that are informed by meaningful data.

4. Ability to pivot the organization based on performance. Effective decision-making is dependent on the quality of the inputs received. The CFO and CEO are empowered to make meaningful decisions by reviewing performance. PWC notes that CFOs at top-performing firms spend more time (>50%) analyzing data than gathering it, while the average organization dwells on collecting data with less intent to use it. 

An efficient reporting and modeling process supports meaningful data on a predictable basis. If significant changes need to be made to either the primary project mandate or the organization’s longer-term strategic direction, it can be actioned in an agile fashion.

Organizational excellence is, therefore, both a culture and a discipline. By enacting a consistent, structured process that empowers and aligns critical management personnel, the wider business benefits. 

As this process is ongoing and adaptable, there is no singular correct method to achieve sustainable organizational excellence. As a user of Synario, you already know how powerful the software can be as well as the importance of extracting the most value from your efforts. If you would like further assistance or tips in regards to driving excellence within your organization using financial modeling as a tool, reach out to your designated client success representative today.