The first step any company must take to improve the results of their work is thoroughly analyzing and monitoring their progress. The development of FP&A solutions (particularly, innovations such as FP&A software) in recent years has empowered many organizations to both better understand and significantly improve their performance. Although all members of a finance team play a role in the integration and use of FP&A solutions, the influence of the Financial Controller (FC) is particularly important to note. As a vocal component of an organization’s finance team, FCs play an important role in the advancement of not just their skills with cutting edge software, but that of other finance professionals. Yielding the best results from your efforts to improve your organization’s approach to CPM requires an understanding of what CPM means in a uniquely high tech corporate landscape, as well as how the new competencies of FCs play into developing CPM.
Defining CPM & Its Benefits
CPM is the set of methodologies used to manage and analyze a company’s performance. The term was first used by the IT company Gartner in 2001, and has evolved significantly since then due to the increased use of Agile software in project management. The business metrics of CPM fall into 5 categories:
Customer: Satisfaction and loyalty of customers.
Strategic: Quality of various strategies helping companies reach short and long term goals
Compliance: Abide by laws regarding environmental regulations, financial reporting, etc.
Internal: Employee experience and quality of company management.
It should be noted that people often mix up Human Performance Management (HPM) and CPM. The difference between these two management strategies is the role of employee reviews. HPM is a subset of HR that aims to improve operational capability as well as employee productivity and satisfaction. Success in HPM is indicated by employee reviews and retention rates, whereas CPM is not focused on this. CPM involves a greater emphasis on improving communication and business strategies within a company.
Recent studies show that strategy execution is among the biggest priorities for senior executives today. CPM is a way to ensure business strategies get executed. Through integrating organizational goals, metrics, and projects, your company is aligned around strategic priorities and can focus on the key drivers of the organization.
Given its significance to C-suite positions, many organizations now have a department dedicated solely to strategy or performance management (occasionally merged with project management). These offices, sometimes called the Office of Strategy Management (OSM) or Project Management Offices (PMO), handle measures, reporting, strategic projects, alignment, communications, and strategic planning, which are all under the guise of CPM.
This is becoming such a popular and well-received concept that performance management is becoming a true profession. There are even certification programs to help individuals become true experts in performance management.
The development integration of software aimed at CPM has proved to be a game changer for many organizations. Historically used within finance departments, CPM software is now designed to be used enterprise-wide, often as a complement to business intelligence systems. CPM software includes budgeting, forecasting and planning functions, as well as graphical scorecards and dashboards to deliver and to display corporate information. A CPM user interface usually displays KPIs so that employees can track individual and project performance relative to corporate goals and strategies. The benefits of CPM software are as follows:
Reduced operational costs
Automation of previously manual tasks
More streamlined and productive workflow
Complete data analysis (DA)
Cloud-based CPM software can benefit organizations further by making the tools easier and faster to deploy, increasing innovation speed, decreasing the cost of ownership and enhancing collaboration throughout the company.
New FC Competencies and Their Relation to CPM
The responsibilities of controllers today extend to more than just accounting and forecasting; FCs are now expected to engage in business administration and financial planning. Thus, they communicate with C-Level executives differently and more frequently than in the past. Additionally, given the significance of new technologies in today’s context of business, FCs need to know how to leverage technical innovations to manage risk and generate value. A prime example of such innovations is of course CPM software. FCs must not only develop their own ability in using such tools, but that of their teams as well. Three competencies of a modern controller in relation to CPM are as follows:
1. Leadership Skills & Collaboration with C-Suite Professionals:
Due to the emergence of their increasing leadership responsibilities, FCs today often leverage their position to analyze and generate their own strategic insights in collaboration with the CFO, rather than simply serving up information. In this way, the FC can provide high-detail, granulated financial analysis that can be used by the CFO for broader financial planning. A collaborative approach can also vastly improve risk management. With their detailed view of internal processes (and related internal controls), FCs are well positioned to identify and communicate risk to the C-Suite before a potential problem becomes an actual crisis. Financial controllers can also proactively develop risk mitigation strategies based on their own analyses.
2. A deep understanding of critical business functions and value drivers:
Cultivating such an understanding involves investment in further education and training (advanced degrees, financial, operational, and technological certifications, etc.). It is particularly critical to eliminate skill gaps in the accounting department, both through training for current staff members, and by recruiting team members well-versed in collaboration and communication, digital transformation technologies, strategic planning, etc. FCs should also take on projects in other areas of the business to gain insight and knowledge. This means using performance and analytics metrics to identify opportunities for not just cost savings, but value creation through cost avoidance and proactive accounts payable risk management.
3. Proficiency in systems, processes, and their data, and willingness to work in tandem with IT and engineering partners to yield the most benefit from their high tech resources:
High tech resources like FP&A software provide a competitive edge to any finance team. Such software can improve FP&A team’s data insights, accuracy, efficiency, management, and reporting. That considered, FCs should be proficient in the use of this powerful tool in order to maximize their organization’s productivity.
The second competency is what enables controllers to play a critical role in CPM. Through their technological proficiency and increased leadership role, FCs can lead reskilling efforts to improve their team’s ability to use CPM software, and coordinate performance management and analysis strategies with the CFO.