John O’Rourke, Vice President of Product Marketing at Host Analytics, discussed alignment, agility and financial and operational planning during a Thought Leadership Spotlight with Argyle’s CFO membership at the 2015 Chief Financial Officer Leadership Forum in Chicago on Nov. 18. In his discussion, “Uniting Financial and Operational Planning for Alignment and Agility,” he shared his thoughts on the available tools that can be used to align finance with operations.
O’Rourke began his presentation with an in-depth look at enterprise performance management (EPM), which continues to play an important role in today’s organizations. He also pointed out EPM becomes financial performance management (FPM) in many cases. However, FPM can be problematic at times, O’Rourke noted: “When [FPM] happens we end up creating top-down budgets that don’t align with the operational plans, the bottoms-up plans those guys were building out there in the field. They’re not aligned, they don’t really have buy-in between the operating guys and what’s happening with the financial planning process, and resources typically aren’t allocated on a totally optimized basis.”
Examining the budgeting process, and a budget itself, empowers a CFO with information he or she can use to improve an organization’s EPM processes, O’Rourke said. Creating an effective finance department requires collaboration, O’Rourke added, as well as myriad resources. As such, he pointed out CFOs should maintain a “living” process for effective EPM: “Think about sales volume forecasts or demand planning or manufacturing, supply chain planning. It’s highly iterative. There’s a lot of thought that goes into it. It’s all about helping to optimize resources and deploy resources in the best way to achieve their goals and objectives. It’s really a living process, a living document that’s being revisited on a regular basis. You really need a combination of both a budget and a plan to function correctly.”