Involve process managers on financial management

Artigo publicado hoje nos grupos de discussão do LinkedIn

An article published in Harvard Business Review February 2009 opens a very interesting perspective in business management, especially in the world that we live today.
The article is called Seize Advantage in a Downturn was written by David Rhodes and Daniel Stelter and be found here.

It is neither anything new nor a return to back to basics. The article is very focused on financial fundamentals and to understand the impact regarding a set of financial decisions. What may happen if sales fall and costs cannot be supported, how can we maximize the results if we cut some unnecessary costs and make operations more efficient? What will be done to reduce working capital? Ultimately how can balance the typical trade-off between the ROA and ROE?
The use of this practice can identify the financial needs will be, how companies can survive obtaining liquidity and the extent to which the company can meet the needs of current and future funding concerning investment portfolio. Afterwards it is up to the managers implementing the action plan for achieving the outlined assumptions and actively monitors both the measures and financial results. Course that if at the end you don’t sell there is no other way that shut down business.

The key question is how all this relates to business processes management? A smart financial management works with the assumptions that must be supplied by the process managers because they are running what at the end appears at the balance sheet, including: supply - what are the needs of raw materials to meet the product stock policy? What is the production plan that will be implemented? Which results in processes improvements will allow us to work faster and cut in operating costs? What information people responsible for research and development can provide regarding new product/services to be offered to customers? What will be credit policy? Time for customers to pay for their invoices will be extended or are we going to cut it? What discounts will be offered to customers? What kind of bonuses our human resources can achieve? What are the needs of human resources? Can we transfer people from low margin product/services that are going to be shut down (don’t execute blind downsizing)? Do we need capital? What investments will be really necessary?

Making financial management without a participated involvement with process managers will become a mathematical exercise completely out from reality and it can put a company in danger. Ultimately will result in indiscriminate resources cutting with the results that many of us know: products transferred to factories were you can produce cheap but with very low efficiency ratios, delivery time increase, worst quality, increasing customer complaints, fire people arbitrarily (often getting rid who really needs to stay) etc.

According to my experience it’s necessary to bring financial management to another level. I had the opportunity to put this in practice with very good results.

Please bring process managers to participate on financial management. At the end everybody wins.


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