The marketplace rewards agility. Likewise, it punishes companies that are too slow and myopic to see what’s coming and to act before they suffer serious consequences. In an era where tomorrow may not look anything like today, agility may well be the defining characteristic of success.
Some in the C-suite might think of an agile business as one that zigs when the marketplace zags. Yes, that’s part of it. But I define agility in terms of the results CFOs and others in management must answer for. It’s not just about responding. It’s about responding in a way that produces the outcome your board, shareholders, employees, and customers will see as successful.
I think of agility as the constant, timely transfer of business acumen to financial performance. Seen from that lens, agility quickly becomes not just a nice-to-have, but a strategic imperative. So the natural question for CFOs is: What can you do to help your business attain it?
The answer is two-fold.
First, Simplify Company-wide Planning
Complexity is the enemy of agility, and yet your future is bound to only grow more complex. The best way to prepare for a complex future is to plan for it. Planning processes themselves, however, can’t be complicated — not if they hope to be successful.
One reason is that businesses of all kinds are becoming increasingly data-driven. Overall, this is a positive: according to Forrester Research, businesses that operate on data-driven insight rather than instinct grow 30% a year on average. Data helps inform and validate the business acumen that leads to agility.
This is why traditional approaches to planning no longer work as effectively as they once did. You can’t afford to lock data away in static spreadsheets that are manually distributed across the organization. These slow, clumsy processes create unnecessary complexities that only grow worse as companies scale in size.
A better, more modern approach is to adopt solutions that can automate manual tasks. Doing so not only speeds and streamlines the planning process, but it also frees the finance team — and their partners in the business — from the often menial, time-consuming chores that are keeping them from more important value-added work.
Through automation, finance can simplify the planning, budgeting, and forecasting environment, which in turn allows more people in the company to do what they do best: run their part of the business.
Second, Amplify the Transfer of Knowledge
An important benefit of modern, automated planning is that it unlocks the ability of finance professionals to understand how specific decisions or procedures will impact financial results.
This takes agility to a new dimension: Finance not only sees which areas of the business are falling behind, but it can now dig in and determine why. And if the finance team has a planning environment that lets them collaborate with key stakeholders across the company, they can more easily transfer that business knowledge to the people who run the day-to-day business.
This is where modern planning really leads to agility. At P.F. Chang’s, we’ve seen this happen over and over. We’ve successfully transferred business acumen to financial performance across our international business, where our more than 300 restaurants operate as individual business units with their own P&Ls.
We achieved this by equipping our finance team, regional managers, restaurant managers, and other stakeholders with the time and tools they need to understand the cause-and-effect drivers that lead to sustainable productivity.
These tools and techniques helped us identify the reason some restaurants were experiencing shortfalls in growth margin for wine. Because he wasn’t tied up with manual, menial tasks, our FP&A analyst had time to compare differentials in margin performance across all our restaurants, pinpointing a few dozen locations where performance was lacking.
Were these locations experiencing higher input costs? Or was something else in play? A closer look determined these locations simply were not as productive in selling out our open stock of wine sold by the glass.
Once we determined the cause, we cured the effect by implementing new wine sales protocols to ensure that open stock wine received preferential recommendations from servers. Just one month after making that change, we saw wine margins at these locations jump by 300 basis points.
Our analysts now regularly study ways to minimize yield loss — because with an automated, simplified planning process, they can.
In a way, this represents a kind of dual agility. Not only must companies become more agile, but CFOs and the teams they lead must be as well.
A good example of this arose in 2018, when 18 states increased minimum wages, which had a big impact on restaurants like ours.
It was, as you might imagine, a tough time for restaurants. Our publicly held competitors saw upward labor cost pressures of 50 basis points. But our ability to closely analyze and measure productivity not only kept our costs from rising, it allowed us to optimize our cost of labor by 30 basis points. This resulted in a cost-of-labor advantage of roughly 80 basis points between P.F. Chang’s and our largest competitors.
It’s hard to imagine a better example of agility at a time when it counts the most. My team used modern technology and creative thinking to turn what would have been a serious problem into a competitive advantage.
That’s what agility looks like in the flesh. To achieve it, I urge every CFO to shed his or her old ways of planning and adopt modern tools and processes that free your finance team to operate at its most strategic and turn business acumen into financial performance.
Jim Bell was recently promoted from CFO to CEO of P.F. Chang’s, which operates more than 300 Asian-themed restaurants in 25 countries around the globe.