Accountability The Third Leg In The Annual Plan
Mar 09, 2010
Many companies develop strategic and operational plans only to have their value dissipate due lack of accountability. Creating an accountable organization is an ongoing continuous process.
“Accountability is a concept with several meanings. It is often used synonymously with responsibility, answerabilityand other terms associated with the expectation of account-giving. In leadership roles, accountability is the acknowledgment and assumption of responsibility for actions, products, decisions, and policies including the administration, governance, and implementation within the scope of the role or employment position and encompassing the obligation to report, explain and be answerable for resulting consequences.” (Wikipedia).
The owner is accountable to a number of stakeholders of the company, individuals or companies that may not have an ownership interest but have an interest in the success of the company. Stakeholders include vendors, bankers, and employees as well as the customers who depend upon the product or services. The managers need to be accountable for the promises and performance of the company against plans and projections. To be held accountable, stakeholders must be able to compare actual performance to the promises made, comprehend how performance differed between the promise and the actual, and communicate changes to future performance that the company will implement from that point.
“Comparing” requires timely generation of financial statements and any other standards used as Key Performance Indicators (KPI’s). “Timely” means that they are produced after period end so that management can affect the next operating period. “Period End” because some measures might have weekly timelines, some monthly and still others quarterly. In the restaurant industry, nightly P&L’s are generated to monitor performance. Financials generated the middle of the following month can’t be used to affect performance in that month. To compare, the goals and indicators need to be side by side for easy comparison. Without this specificity, you have only set up potholes for failure.
“Comprehending” means understanding the root cause of differences. Changes in sales, the product mix of the sales, staffing – all of these impact the differences between the budget or forecast and the actual performance. Often times increases in sales are not accompanied by comparable increases in profitability, so understanding why the bottom line is better, or worse, is important in changing behaviors later. 9 times as much time should be spent on analyzing the results as is spent preparing the comparison data. Since timeliness is important to affecting current behavior, having your CFO prepare the data quickly and efficiently is key to driving organizational change.
With the crystal clear expectations set from the beginning, Accountability means going public. Communicating is publicly acknowledging both the successes and the failures of performance, creating a system of notification and dialogue regarding results. Communicating results requires dialogue to confirm that the message was transmitted and questions have been resolved. Most importantly, Management must communicate an action plan to change behaviors to continue or to improve performance in the next period. Invite feedback – look for people who are actually doing the work to reflect on their performance, their feedback may contradict the numbers, and add context or provide explanations that numbers alone can’t provide. Most importantly communication provides connection – enabling people to connect their performance to the overall performance of the company. Communication occurs verbally and visually –signs, graphs or pictures help to reinforce the message.
Preparation, Execution and Accountability – the three most important aspects of your 2010 plan. Your CFO is a valuable resource in developing the plan, providing actionable goals to enhance execution and providing the comparisons and analysis for holding individuals accountable. All companies need a CFO, most don’t need one full time. With your B2BCFO, you have a seasoned professional available when you need a CFO.