How have you sought to align your cost base to your business strategic goals?

The key is to align resources (which are the source of all costs) in a cause and effect manner to intermediate and final managerial objectives.

The managerial objectives are then linked to the strategic goals. This type of modelling should be done non-financially to achieve an understanding of how resource capacity is employed. Then cost information is developed to support the 'operational' model.

This is counter to traditional financial modelling, particularly for external financial reporting. The focus there is on compliance with accounting rules.

To achieve clear alignment with strategic goals and support both large and small decision to be in alignment with those goals, the focus must be on modelling cause and effect relationships…unimpaired by accounting rules and conventions.

If managers, operating or financial managers, need to sort out general ledger figures for causality for each decision, critical time will be lost and clarity will be muddled with gross assumptions and estimates.

What analytics tools do you use in your organisation? What benefits do you think you have gained?

The key tools are:

  • Strong operational process data, generally non-financial in nature
  • A causal model of the organizations processes
  • Cost information designed to support the operational model
  • A business analytics tool that allows integration of data from various systems – financial and non-financial.

Financial accounting systems are often too oriented toward accounting rules and requirements to serve as a business intelligence or control system to execute strategy, except in limited areas like cash flow.

The key to a data management tool is the right data for decisions to support managerial objectives leading to achievement of strategic goals, and data which is accurate – not so much to the decimal point, but more that it represents/reflects the reality of a resource or process in a manner that is consistent with the reality the decision maker is managing – that is – resources and processes.

Data management tools are simply tools. The thinking about the organisational model and the design of the data collection is far more critical.

Have you aligned your finance department reporting with the business strategic goals?

Yes. Every resource and process is causally linked to a product, service, (sometime an intermediate (not always final or saleable) product, service, customer (internal or external)) or business sustaining goal.

How have you aligned the management reporting structure with the strategic business drivers identified?

The primary focus is on meeting strategic objectives with efficient use of resources. This places the primary focus on operational/non-financial data. Saving resources, even if they are initially just idle, always leads to savings or the opportunity to grow in a new strategic direction.