Fuel Costs on the Mind: A Little Innovation Required

As Duke University/CFO.com released their Global Business Outlook Survey, it came as a real shock that as much as inflation or the weak US dollar, rising fuel costs were identified as a key concern for many CFOs. Equally surprising, that almost half of the companies surveyed are dealing with this by raising prices (by up to 4%), while wage increases are estimated to grow by only 3%. Most surprising, that we’re just now dealing with fuel costs as a major business impact. Fuel costs have been rising for years. Every commuter has watched their gas bills jump, often to the point of impacting their monthly household finances. As a finance community, we have only to look as far as our own households, take the lessons learned, and apply them to our companies to find cost-saving opportunities.

For several years now, chip manufacturers have battled as hard on energy efficiency as processor speeds. Why? Because energy costs have soared and companies know that there are huge savings to be found in lower energy-consuming server farms. Technology companies have had telecommuting programs for years, realizing diverse savings from facility management to employee retention. To what percent can we reduce business travel? What opportunities exist in our manufacturing departments, shipping, alternative fuel source options? What are the impacts to our internal processes and external stakeholder groups as we consider these changes?

There is still opportunity for companies to streamline operations, even within manufacturing, where most companies tend to focus efficiency programs. Unfortunately, it tends to be at points where we hit economic crises that we get creative about searching for these opportunities. This is one area where the Finance team has the chance to take a leadership role in driving change within your organization. Finance teams that have access to both the financial and operational data have a unique perspective into the entire business model. Who better to be able to identify opportunity, model scenarios and impacts to internal and external stakeholders, and educate line of business teams on potential areas for improvements across business lines?

The Global Business Outlook Survey provides a bleak picture for the economy, with raised prices and layoffs in the forecast. But it is exactly at these points when the true value of the innovative CFO can be felt across the organization. Ours is the only team that has access to the financial and operational data, combined with the tools to analyze and model the impacts of potential scenarios on the business. By working with the executive team and lines of business, we can explore creative improvements or alternatives to current processes and company business practices. The opportunities are myriad.

Instant Continuous Planning: Just Add Water

It's a strange feeling when personal and business lives intersect, and as I sit down to write about the value of continuous planning cycles in the business process, I am struck by recent personal experience.

It's March 25th, 10 pm, and I am sitting on the floor of my home office, a cardboard box beside me, as I stack piles of receipts, 1099s, stock sale receipts, etc in preparation for tomorrow's tax meeting with my accountant. I really don't know what to expect from this meeting – where am I in relation to the plans I set in January 2007? I could swear that I sat in the same place last year promising myself that I was going to improve this system.

And while some of you may relate to my experience (hopefully, as misery does love company), it gives me pause to think that, on a much larger scale, many of our corporate planning cycles don't fare much better. As a business director responsible for budget and planning cycles, when do you start your process? How many annual/monthly/weekly iterations do you go through? What is the effect of business change on your planning cycle? Are you feeling like there's a cardboard box beside you, yet?

With the demand for businesses to adapt quickly to changing markets in order to stay competitive and operate at maximum efficiency, we have seen significant streamlining of the planning process in recent years. In parallel, we've seen the tools and supporting infrastructure technologies become more sophisticated and robust in order to support operational and reporting needs. With pressure to move from a lagging to leading view of the business, we've evolved from annual budgets, to quarterly planning, to rolling 13 month plans and now we're recognizing the need for a continuous planning cycle that provides an accurate, real-time view of our operations.

I often hear that the concept of continuous planning in a fast-changing corporate environment is a Utopian vision rather than a realistic goal. And yet large, dynamic companies such as Symantec and Yahoo have successfully implemented continuous planning cycles into their business processes. So how do they approach this? What tools do they use? How do they measure results from their planning process?

Implementing a continuous planning cycle in your organization is not about buying a tool. It's not about agreeing to a process during a management meeting. Continuous planning requires the direction and support of the entire management team to reinvent the way the company approaches the planning process. It needs management to create a chain of accountability throughout the organization, from C-level to individual contributors; every person knows their role, their goals, the company's goals and where they stand in relation to meeting those goals. Continuous planning requires the implementation of best practices and an effective process within the organization, as well as the tools to support the process.

A successful continuous planning process requires collaboration between executive management, finance department and operational teams:
1. Define strategic goals.
2. Create plans, rolling forecasts & budgets for all levels of the
organization.
3. Roll out, analyze against execution & provide feedback loops.
4. Model & realign plans as needed.
5. Monitor & report, with audit information for regulatory & statutory
reporting requirements.

In a continuous planning cycle, steps 3 & 4 are iterative and constantly changing, driving the need for updated information to be delivered to the desktop at a near real-time rate.

To Be Continued... The Secret Sauce in the Technical Details