Although it is fashionable to use key performance indicators (KPIs) in business management decisions, CFOs are being advised to balance their reliance on them.
“The issue with the KPIs is that there are too many PI’s and not enough K’s.” That is the view of Jason Balogh, principal at the performance management transformation practice The Hackett Group. The Hackett Group has recorded close to 100 KPIs in use across different industries, and Balogh suggests companies should consider the relationships between existing KPIs before devising new ones.
Balogh supports his view with the example of a low days-in-inventory delivering a good KPI for a chief supply chain officer, but quite the opposite for a chief customer officer who has to contend with product stock-outs and customer dissatisfaction. He says that many metrics designed to measure the performance of one department will cross over to affect the performance of another.
How Centralizing KPIs Helps Resolve the Issue
With business leaders in different departments being accountable for the performance of their departments, a broader picture is required. For this reason, more CFOs are assuming the responsibility of interpreting diverse KPIs in order to determine whether the metrics are connecting with actual company performance and to see if they are aligned with the company´s strategic goals.
According to a survey conducted by Adaptive Insights, nearly half of the three hundred respondents said that they acted as de facto chief data officers, and more than three-quarters said that their finance departments track some of the company´s nonfinancial metrics. John Mulhall from financial management consulting firm KPMG says it right that CFOs perform this role. He said:
“Many CFOs have a clear understanding of the company’s strategy, operating model, customer channels, and competitive challenges to ensure that the right financial and nonfinancial metrics are used to drive performance. They also have the ability to translate the numbers for the CEO, board of directors and shareholders.”
Is CFO Reliance on KPI Metrics Getting Out of Hand?
The fashion of using KPIs to influence business management decisions may be going too far claims an article in the Journal of Business Ethics. Authors Natalia Cuguero-Escofet and Josep Rosanas suggest that, in the pursuit of formal evaluation criteria, some businesses have abandoned factors such as company culture, managerial discretion and personal relationships.
Rating managerial performance against a number of objectively measurable indicators tied to the corporation’s strategic agenda – rather than less regimented forms of motivation and evaluation can have a negative impact on the performance of a company. The authors cite four examples of companies that failed to balance how business management decisions were made and paid the price.
The reason why so many CFOs are assuming responsibility of interpreting KPI data is because no one metric is perfect, and the article concludes by saying that a balance between formal systems and “soft management” is required to put companies in a better position when metrics go wrong. This will not only help prevent future crises, but also contribute towards creating a better workplace environment.
Sharing these tips for effective business email communication can help improve collaboration and productivity – and avoid difficult working relationships.
I received two pieces of great advice from a former mentor. First, always proof-read important emails (out-loud if possible) to avoid mistakes. I have caught many errors reading emails out-loud. Second, if you must send an email when you are a bit exercised always hold the email in draft form for 10 or 15 minutes after finishing…then re-read. Often, you will make key changes that will get your message across more effectively.
I remembered my mentor´s advice recently when I came across an article written several years ago about embarrassing business email blunders. My favorite concerned a company vice president who accidentally sent details of all his employees’ salaries on a company group email. Realizing his mistake, he set the fire alarm off to clear the office before deleting the e-mail from every inbox.
Best Practices Can Avoid Email Blunders
Perhaps proof-reading his email, or waiting ten minutes before sending it, might not have prevented his company losing several hours of lost productivity. We shall never know. However, after finding that story amusing, I browsed for similar email blunders and came across an email-related article written by the author of the excellent book “Leadership is Hell: How to Manage Well and Escape with Your Soul” – Rob Ashgar.
In his article, Ashgar does not dwell on the blunders, but provides advice on how to avoid them. Not all of his advice is related to business management, but I would like to share with you the best practices I found particularly relevant – the final one being a best practice I know many CFOs avoid at all costs. Hopefully some I know will read this article and realize the error of their ways. Hopefully.
Tips for Effective Business Email Communication
- Keep it Short and to the Point
Business emails should convey vital information at the beginning of the email. Nobody (apparently) reads the last lines of an email. If you have to write a long email to get the point across, use short sentences and paragraphs to make the email easier to read.
- Don´t Put Something in an Email You Don´t Want Forwarded
Sometimes you may write a comment in an email to a colleague that you would rather was not shared. The best way of ensuring it is not shared is not to write the comment at all. And, if you receive an email from a colleague with a thoughtless comment in it, don´t be the one to share it if you don´t have to.
- Respect Multi-Party Conversations
Be thoughtful about your conduct in multi-party conversations. Using “Reply All” is not always appreciated by everyone in the conversation and, when introducing others to the conversation, use the BCC button to inform the initiator of the conversation which direction it is heading in.
- HIPAA Compliance, other compliance issues
Be aware that some information can not be sent via email unless the email is secure. For example, HIPAA-compliant email is used for healthcare records.
- Even When You are Busy, Send an Acknowledgement
In many business environments, no reply means “no”. Make sure you don´t give the wrong impression by acknowledging an email you don´t have time to attend to immediately. It only takes a few seconds to write “get back to you later about that”.
- Don´t Use Email to Avoid Tough Conversations
This is the big one. Your colleagues will not appreciate you initiating a tough conversation – or a conversation likely to deteriorate into a tough one – by email. Tough conversations are always better managed over the phone or face-to-face.
Email communications allow for assumptions to be made about motives or tones, and oftentimes the intended motive or tone can be lost in translation. Phone and face-to-face conversations give all parties the opportunity to convey what they want to say in a manner more likely to be translated accurately.
Finally, if you receive an email from a colleague who has avoided a tough verbal conversation, politely engage directly with the sender to give them an opportunity to clarify. A direct conversation can often diffuse follow-up email correspondence that can exacerbate tense situations.
If you share just one of these tips, please make sure it is the last one.
CFOs who are busy analyzing KPI reports for benchmarking the broader organization should not neglect to benchmark the efficiency of their own finance teams.
With everything finance teams are expected to do in a working day, it is sometimes difficult to take a breath to look at how efficiently your finance team is working. However, benchmarking the finance team is more important than ever. By monitoring performance levels, CFOs can determine how teams can be streamlined, how efficiency can be boosted, and how to best incentivize team members to do a better job.
By taking a breath to evaluate and optimize finance teams, CFOs can trim excess capacity in less value-added activities, and reassign resources to more key areas. One example of how this would work is to eliminate redundant processes or automate tasks in order to increase capacity in more business-critical tasks such as analysis to further strategic objectives.
Key Metrics for Efficient Finance Teams
Some CFOs will argue that their finance teams are doing just fine and, of course, they do not have the time to assess performance. However, the time taken to assess the performance of your finance team can reap significant productivity benefits. The following key metrics for efficient finance teams can help determine whether or not your team is actually doing just fine, or whether there is some room for improvement.
In Accounts Payable, do you know:
- The total department spend divided by the number of invoices processed?
- The average time taken between its receipt and when it is processed?
- The percentage of invoices paid within terms and those that qualify for early pay discounts?
- The percentage of erroneous or duplicate payments, and the time taken to correct them?
In Accounts Receivable are you aware of:
- The days sales outstanding based on total accounts receivable/total credit sales?
- The best possible days sales outstanding that you can collect invoices in?
- The average number of days your invoices go past their due date?
- Your Collections Effectiveness Index or CEI – the amount collected within a time period compared to the amount of receivables within the same time period?
Where are you in Payroll with regard to:
- The cost per payroll payment?
- The cost per payroll enquiry?
- Payment errors and the time taken to resolve them?
- The number of manual checks cut?
It is important to note that the purpose of the exercise is not to catch errors and those most prone to making them. Indeed, it should be made clear from the outset that benchmarking the finance team has the objective of enhancing its value to the organization as a whole.
When used correctly, employee total compensation statements can help eliminate potential pay issues, increase workforce morale and enhance productivity.
Compensation – or the lack of it – is one of the biggest causes of low workforce morale and decreased productivity. Just one unhappy employee venting their grievance to colleagues can create a general feeling of dissatisfaction that permeates throughout a workforce – no matter how unjustified the grievance is.
When the grievance relates to the lack of a traditional raise, or a smaller raise than usual, there is a straightforward way to overcome the grievance – by correcting using employee total compensation statements to communicate the value the business places on the employee in a meaningful way.
Employee total compensation statements should show employees how much the business is investing in them – not only week by week or month by month, but in comparison to how much was invested in them in the previous year. In this way, employees can see that their total pay and benefits are increasing at a higher rate than they imagined – eliminating potential pay issues and creating a more motivated workforce.
What to Include in an Employee Total Compensation Statement
Has the business had to pay more for employees´ health insurance this year? Have employees received extra paid time off? Has the amount contributed to employee retirement funds increased since last year? Probably all three, but unless businesses make employees aware of these increases, they will remain in the dark. Other items businesses should consider (where applicable) include:
- Any paid leave for personal time off, sick leave or vacation.
- Each employer-paid portion of insurance plan premiums should be listed separately.
- The business´s contribution to a retirement plan, such as a 401(k) or pension.
- Employee use of a company vehicle and associated costs such as maintenance.
- The value of any Employee Assistance Program on a per-employee basis.
- Tuition assistance or training courses paid for by the business.
- Home office benefits such as Internet use or cell phone service.
- Per Diem payments when travelling, paid for public transportation and parking.
- Other benefits such as fitness club memberships, on-site child care, and company-sponsored discounts.
How businesses present an employee total compensation statement is just as important as the items listed on it. It is okay to surface enhancements in a manner that informs employees of the value of benefits they receive, but not as an attempt to divert focus from a lack of straight pay increases. It can also help the communication of the message if a letter is enclosed detailing how employees can use the benefits being provided for them.
How to Avoid Issues over Compensation Statements
Naturally, employees will compare compensation statements in the same way as they compare paychecks, so it is important that employee total compensation statements are accurate and do not “double count” – for example, counting paid leave on top of salary when the amount received by the employee in pay and benefits does not exceed the base salary.
Other issues where sensitivity is required include advising an employee who uses public transportation that he or she has benefitted from a parking discount, or including health insurance payments for an employee not yet eligible to take advantage of a health insurance plan. As you can see, employers should be careful when presenting this information. While employee total compensation statements have the potential to be useful tools, they also have the potential to have the opposite effect.