At Brightpoint, a global communications technology company, CFO Vince Donargo spends plenty of time studying both operational and financial metrics. But in order to track key data points, such as receivables and on-time shipping performance, he must sift through separate daily reports that land in his in-box as e-mails or spreadsheets sent from the company’s many global business units.
Although Donargo says this approach works, it’s far from ideal. So this year Brightpoint will implement a formal, integrated dashboard that will enable Donargo and other executives to monitor a wide array of key metrics through a single platform. The move will streamline financial analysis by integrating the numbers so that executives can more easily monitor them and communicate them to the CEO. There is also “a cost-saving aspect to having a dashboard,” Donargo adds, because it can save employees the time and effort they currently expend creating and disseminating multiple separate reports.
Dashboards have been around for many years, but it has taken time for their actual usage to catch up with their intuitive appeal. As business conditions become ever more volatile, however, and as companies lose what little margin for error they had in terms of responding to unpleasant surprises, interest in dashboards is accelerating. Companies are also starting to broaden the range of metrics they can access from dashboards, says David White, a senior research analyst at Aberdeen Group. While in the past senior executives might have focused solely on high-level metrics like sales revenue and profitability, they now use dashboards to track operational and tactical metrics, such as how many new accounts sales representatives have acquired in the last quarter.
When You Need to Know Now
One major appeal of dashboards, according to White, is that they can help executives narrow the “decision window” — the period of time they have to make a decision after a business event. A recent Aberdeen study found that 64% of business managers have seen their decision-making time shrink over the last year. A different Aberdeen survey found that 28% of business managers said they needed data to make decisions within an hour of a business event; another 42% needed information within a day.
“There’s a lot of pressure on the organization to take in raw data and to turn it into useful information in a time frame that suits the business,” White says. “There’s tremendous pressure on these operational managers to respond faster, and old-fashioned business intelligence is just not intuitive enough.”
As an example, if a dashboard showed that sales revenue was not on target, a CFO would want to know more, like what region had the lowest sales, or what product was lagging. For some finance chiefs, getting those numbers often means asking a junior finance staffer or someone in IT to dig them up, which could take days. Deploying dashboards that allow CFOs to drill down to the specifics themselves enables them to make decisions faster.
A Leg Up
Kevin Knapp, CFO of the online recruitment site CareerBuilder, agrees. “The importance of dashboards has increased as the speed of change has increased,” he says. “Every organization today needs to adapt quicker than its competitors.” To that end, he says, companies should include operational metrics in their dashboards to gain a competitive advantage. “Financial results are really just the consequence or byproduct of daily operational decisions,” Knapp says. “If you solely focus on financial targets, you can neglect the inputs that truly drive those results.”
At CareerBuilder, operational metrics “have a more prominent share of our executive dashboards than our financial results,” Knapp says. The site’s number of unique visitors, job listings, and applications per job seeker or job posting are all significant pieces of information.
Still, financial metrics remain critical. “By and large, companies . . . are interested in the basic revenue cycle and cash cycle fundamentals,” says David Pefley, former CFO at software maker Virtutech and now a consulting CFO for several technology firms. “I think [most businesses] should be focused on bookings, the sales funnel leading to the bookings, the revenues, the receivables, and collections,” he says.
Dashboards can be designed to enable CFOs to combine the two approaches, providing both a financial overview and a deeper look at granular operational data. And they will continue to evolve, says Knapp. “The world has become so much more data-centric, and the advancements in data-warehouse technology and related infrastructure continue to make it faster and easier to glean insights.”
Costs and implementation times vary enormously. One consultant said he built a simple dashboard for a client whose data was in good shape in a matter of hours, for just over $1,000. On the high end, a global system with many users may take months to develop and cost in the high six figures. “It’s hard to give a price,” one expert quips, “but it’s always between $1 and $1 million.”
Marielle Segarra is staff writer at CFO.
Finance and IT: A Beautiful Friendship?
CFOs looking for profitable growth are working more closely than ever with their IT departments, according to a recent survey conducted by CFO Research Services for Hewlett-Packard. The survey, which included interviews with more than 30 senior executives with finance experience at large companies, found that several factors have fostered this burgeoning symbiosis, including technology’s potential to promote top-line growth by driving better decisions.
Just as the right technology can help to increase revenue by enabling executives to make timely inventory and marketing decisions, outdated, slow systems can stunt growth, said some surveyed executives. Erick Haskell, current chief operating officer and former CFO of Adidas China, learned this lesson the hard way when demand shrunk in a key region, but the company’s IT systems did not reveal which specific products were laggards. Without this data, the company could not accurately predict how many of each item it should continue to stock.
Adidas has since invested in a system that allows its CFO to see consumer-level sales data almost immediately. “I now have direct interfaces with all of my retail distribution partners and can read my retail sales on the ground,” Haskell said in the study. “I can pull up data not only at the store level but down to the SKU level. I can see which products are selling, and that means we can react much faster to those trends.”
While CFOs cited several other drivers for a closer finance-IT partnership — such as the need to balance technological innovation with budget considerations, and the technology challenges associated with integrating global acquisitions — they also noted the pressure to turn data into actionable information. As Tony Ho, corporate finance funding director in China for U.K. grocer Tesco, says, “We are in an industry that needs a lot of information. If we don’t have the technology we need to support that, we will not be the winner in the marketplace.” — M.S.