Role of Finance in Process Improvement

Tweet

benjamin by Specialsocks on deviantart.com

I caught a great article from Brad Power that was posted a couple weeks ago on the Harvard Busines Review, entitled “Shifting Finance from Controlling to Improving.”

The article focused on what CFO’s can, and should, be doing to further improvement efforts in all areas of their organization.  Yes, there are lean accounting processes, and even generic efficeincy-improving activities and value stream maps that can take place within financial processes, but Power’s article stressed a different emphasis.

The CFO (and, I will add, the rest of the finance team) have an obligation to help people working in other functional areas understand the financial impact of activities within the company.  Personally, my own function to date (program controls and performance measurement) usually reports up the Finance food chain and I am frequently dismayed at the lack of financial awareness and business acumen in other functions that I encounter.  These are typically large cost centers such as Engineering and Manufacturing where, although they create the products we sell, there’s a lack of visibility into how the company makes money or what it does with the money it earns.  Very little beyond audit requirements and red/yellow/green charts in periodic presentations is ever given to them by the finance team, either.

What Power demonstrates are several CFO’s who have endeavored to make understanding finances simple to those who don’t live & breathe it in daily lives.  They change the terminology to something more intutitve.  They measure performance in a way that makes bottom-line impacts visible.  They help to spread the word about Lean to others with no-nonsense, easily articulated and – most importantly – easily acted-upon information.

The article reminded me of an all-too-familiar phrase: “If the student has not learned, the teacher has not taught.”  If people don’t “get” the financial impact and benefits to an improvement effort, it is most likely because it has never been explained to them in a way that they can understand.  A finance wonk spewing terminology the audience doesn’t understand accomplishes little and shifts the burden to the recipient (or, in a way of thinking, to the finance departments internal customers).

If information is provided in such a way as to make it intuitive, the burden is eased, making the concept more appealing and, therefore, more easily supported.