Logica: Improve Performance - Glenn Inniss

Finance is emerging as the common language through which a company can articulate, measure and improve its performance, Logica’s Glenn Inniss tells FDE.

Financial performance management (FPM) has become an increasingly important theme for many companies. In recent years, this has been prompted by the need to rationalise operations in the wake of merger and acquisition activities or in response to increased competitive pressures from emerging economies. More recently, pessimistic news about the global economy has brought home to many companies the urgent need to gain more effective control over their operations.

Despite the growing level of interest in FPM, it seems that organisations are aiming at very different targets. Some interpret it in terms of their planning, budgeting and forecasting activities, others in terms of their financial close and reporting process and others still in terms of ROI analysis for major projects.

Shift in focus

ICT services company Logica is working with its clients to establish a more integrated, organisation-wide view of FPM. Glenn Inniss, head of Logica’s Financial Management Practice, puts forward the following definition: ‘At its most basic level, corporate performance management is about ensuring that a company meets the expectations of its stakeholders. FPM is about how a company’s finance function can best support those expectations.’

Inniss goes on to say ‘As keeper of the numbers, finance functions are in a unique position in that they have access to an organisation-wide view of business performance, down to the lowest operational level. With this view they have the power to shape and guide practical actions that will improve their company’s performance. In essence, it is a question of asset utilisation: how can finance help ensure that the assets of their company – such as cash, people, and property – are best used to maximise profitability and secure a healthy long-term revenue stream? This is a shift in focus for most finance organisations from risk managers, to opportunity managers who understand risk.’

According to Inniss, many CFOs now embrace this role and are seeking to organise their finance functions accordingly – a movement known as finance transformation, in which finance resources are directed away from operational finance activities – such as accounts payable – towards business support activities aimed at improving overall business performance.

Implementation so far

During 2007, Logica conducted an international survey on finance transformation.

‘The conclusions of that survey are that whilst many finance organisations now have a roadmap to improve their level of business support, few have been able to effectively re-position their organisations to deliver significant added-value for their company. The majority of finance organisations are still spending most of their time on basic accounting, reporting and control activities. Only a few organisations have built effective business analysis and investment support activities,’ says Inniss.

‘Our survey shows that the attention required to comply with increasingly stringent financial regulations, such as Sarbanes-Oxley, has slowed many transformation programmes. It also tells us that most companies, who have looked to the implementation of new ERP systems to streamline their financial operations and give them better visibility of their company’s financial performance, have been disappointed with the improvements achieved.’

Tool kit for the future

Inniss sees finance transformation as a means to tie together all business functions, using the common language of finance to measure and manage their activities. He also points out that the metrics used by operations and finance might be closer than they seem. People tend to define performance management and metrics in terms of their own functions, as they measure the values on which they are assessed.

‘An effective FPM approach is able to translate these measures into a coherent financial model that links the key performance drivers within a business at a financial statement level. Creating this link enables finance to effectively predict and steer the business.’ For Logica, this means working with clients to understand where they would like to achieve improvements in their financial performance and translating these performance requirements into practical actions that help align a business’s operations with that strategy.

FPM framework

To deliver an effective FPM framework for their clients, Logica has a multi-level approach: management consulting to support the development of financial business models, business intelligence tools to support both strategic and operational analysis, IT services for business process optimisation, and full finance BPO for those clients who would like to outsource their finance operations and focus exclusively on business support activities.

‘We aim for a holistic approach to FPM that aligns business processes with strategy,’ says Inniss. ‘Technology alone will not deliver the improved financial performance our clients are looking for.’

Meanwhile, Logica is striving to gain more insight into the arena of FPM, and in October 2008 will release a major international survey on the subject, covering all business sectors.

Using Logica’s FPM maturity model, companies can score the performance of their finance function across a number of organisational dimensions. The survey is intended to allow companies to benchmark themselves against competitors in their sector.

Inniss urges people to take part in the survey in order to help the financial community better understand the current state of play.