Jumping Ship or Just Jumping?

I just read that Wachovia's Chief Risk Officer, Donald Truslow, is on the way out the door just a week after CFO Thomas Wurtz announced his resignation. Given the sad state of the banking giant, I wouldn't be keen to stay, either. It makes sense. And I'm sure that it makes very good sense if you are sitting in what are probably two of the hottest seats in the house when the risk around one major M&A activity, in this case the Golden West Financial Corp acquisition, may scuttle the company. So in Wachovia's case, the run for the door makes sense.

Then I read the following list of CFOs on the Move, which covers just the week of August 1: Wachovia, Campbell's Soup, The Children's Place, Navigators, Forbes.com, United Plastics Group, Icahn Enterprises, Hayes Lemmerz, ARI, Orisis, Michaels, JP Morgan Cazenove, EnBW, Friends Provident, Ascom, AP Moller Maersk, Sistema.

While I've been posting about the changing role of the CFO recently, I haven't written about the individual impacts of that changing role upon CFOs. According to Heidrick & Struggles, 106 CFOs at Fortune 1000 companies left their positions in the first half of 2008. What the heck is going on here? Where are all the CFOs going? Are these voluntary resignations, jumping ship like so many of the Wachovia team, force-outs, or is this a trend brought about by the expanding nature of the role.

Are CFOs leaving companies when there is little opportunity to participate as a contributor at the strategic level? As regulatory compliance becomes stricter, the risks associated with the CFO role increases. Well beyond job pressure, CFOs are putting their legal necks on the dotted line every quarter. I believe in this time, when the CFO manages such a large portion of the corporate risk, that the benefits of the position have to outweigh the risks they're been forced to assume. If data is accurate and trusted, performance management systems well-designed and implemented, and the business practices sound, much of the fear of compliance is eliminated.

Companies that are focused on innovative ways of running their businesses, with Finance as a key contributor to the strategic and operational vision, tend to be exciting places to work. If the CFO can trust the accuracy of data coming from their systems (and with a 3-5 year CFO tenure at the best of times, unless it's a startup, you can assure that most CFOs have inherited their accounting, G/L, performance management etc. systems), then they are freed up to focus on contributing to the company at a more strategic level.

My opinion: perhaps the incredible CFO turnover that we've seen in the past several years has less to do with the company as the role.

Thoughts?

Continuous Planning Architecture, Phase 2

Back in April, Kimberley Bermender posted on the finance systems architecture needed to support a continuous planning environment. The overall design goals included:

• Lower cost of maintenance,
• Standards-based data integration,
• Support of accurate, near real-time views into operations,
• A platform to support detecting, modeling, selecting and implementing change and then measuring results.

The main ingredients were:

• financial and operational data stores,
• an analytic (OLAP) engine – with reporting, and
• planning applications

Inherent in the architecture is the movement of data between data stores and OLAP cubes, as well as fact and metadata management. To build on that architecture, “phase 2” can include two other components that build on those design goals and get you closer to enterprise performance management nirvana.

The first is master data (or ‘reference’ data) management, and the second is a common enterprise performance management rules or calculation engine.

Master data management includes the tracking and control processes of data relationships (especially hierarchies) and instances across the enterprise. For example, product sales for a store in Ft. Collins, CO could roll-up to a ‘Central’ region one quarter, and then to the ‘West’ region the next quarter after a re-org. It’s important to keep track of which region it belonged to when doing quarter over quarter comparisons and other management reporting (not to mention statutory reconciliation and reporting). And that hierarchy could be contained in the store reporting application, the sales forecasting system, the G/L, the customer relationship management (CRM) system, and so on. Right now, those relationships are probably being manually managed and ‘lightly’ controlled. Our more complex financial systems require more automation and more rigorous control over master/reference data. And it certainly addresses at least the first 2 design considerations of Kimberley’s architecture.

For more on master data, see this DMReview landing page.

The second component is a central business rules/calculation engine. In any enterprise performance management environment, users can easily get bogged down in the definitions of data and information. For example, that Ft. Collins store could be looking at a ‘revenue’ report and not know if it’s booked revenue, commissionable revenue, recognized revenue, and so on. And even when they find out what kind of revenue it is, there can be a question of it’s accuracy: how did head office calculate it, where did they get the data from, and does it include intercompany sales or not?

Having one business rules engine lets the enterprise define ‘recognized revenue’ once, with control over the algorithms, the data refresh frequency, the data sources, and so on. Once the rules engine has certified a number, it can be used by all other enterprise performance management systems: planning can use it for prior actuals, strategic financial models can use it for long term scenarios, same store sales dashboards can use it for ranking, and so on.
The three-fold goal is to get better transparency into financial information (how did we get that number), better accountability (finance owns and certifies the number), more efficiency (define it once, don’t reinvent the wheel), and ‘believe-ability’ (start debating what to do about the results, not where the number came from).

Here’s a good article by Robert Blasum in DM Review on central rules (he also connects them to master data management)

Thanks to Kimberley and the team for letting me guest blog, please feel free to visit the Business Foundation blog over at http://businessfoundation.typepad.com/