Archive for CFO as service

Integrated business planning – How to successfully use it !

Integrated business planning – How to successfully use it !

The adoption of integrated business planning (IBP) over the last ten years has allowed organisations to develop an agile approach to planning and execution in an increasingly challenging external environment. It has also demonstrated its value in enabling the finance function to deliver excellence in its emerging role as a business partner across the organisation.

Whilst the deployment of IBP represents a significant organisational change, considerable insight on the key success factors for the execution of IBP has now been accumulated. This deployment learning is crucial when planning the adoption of IBP, and, as outlined below, the finance function plays a key role in this.

IBP as presented in this article is not integrated thinking or integrated reporting, as they might be used in developing an integrated report using the International Integrated Reporting Council’s Integrated Reporting Framework. The use of the terms “sustainable” and “sustainability” in the context of this article refer to adoption of an IBP approach as outlined in the article and not the adoption of a multi-capital approach to sustainable management.

IBP is a specific process for using specific business goals to develop precise financial and operational resource requirements with the goal of minimising risk and maximising either cash flow or profit. As presented in this article, IBP is an operational planning system with origins in supply chain planning systems. Sustainable growth in IBP refers to the maximum rate of growth that a company can support without taking on new financing, and not to broader environmental, social, and governance factors that are taken into account in a broader definition of sustainability.

Deployment insights

The graphic “Key Success Factors for IBP Deployment” summarises four points for effective adoption of IBP based on deployment experiences over a wide range of industry sectors.

Key success factors for IBP deployment

Source: Camelot Management Consultants.

Historically, due to its evolution from sales and operations planning (S&OP), IBP has often been seen as a supply-chain-centred process. However, experience shows that the enterprise-wide benefits of the process are not achieved or sustained when deployment is approached in this way.

A key feature of IBP deployment is the creation of genuine cross-functional collaboration to deliver enterprise goals as reflected in the key success factors:

  • Cross-functional C-suite sponsorship:IBP entails significant change not only in processes and systems but also in mindsets and behaviours across the business. For this reason, strong senior leadership sponsorship is critical. Furthermore, the cross-functional and interdependent nature of IBP has been shown to be more successfully deployed when the collaborative character of the process is reflected in the C-suite’s sponsorship of the programme. In particular, joint sponsorship by the key functional leaders (finance, commercial operations, and supply chain) has proved very powerful in role-modelling the teamworking that underpins effective IBP.
  • Senior enterprise leadership:Ideally, IBP deployment should be led by a senior manager with either a commercial or financial background and strong cross-functional awareness and connections. This differs from the traditional handling of IBP (and S&OP), as outlined above, where supply chain leaders have often been tasked with deployment. This senior enterprise leadership provides the credibility and commercial acumen to lead change across the various parts of the business.
  • Building cross-functional teams:Most organisations are not set up, either structurally or culturally, to excel in cross-functional working. It is therefore essential to invest time to support the development of the cross-functional teams that are at the core of creating value through IBP. This goes beyond basic team building to include, for example, the development of team-based reward-and-recognition approaches and cross-functional metrics and goals.
  • Coaching and mentoring:In common with many organisational changes, IBP deployment has often focused on the process and system aspects (which are undoubtedly important). However, applying new cross-functional leadership practices and executing a new corporate process requires hands-on support, especially for managers working in IBP for the first time. Coaching and mentoring have been shown to be very effective approaches for rapidly building new capability and driving quick wins from the process.

In addition to these broad deployment learnings, it is also clear that the finance function has a critical role in ensuring successful and sustainable deployment of IBP in four key areas:

CFO sponsorship

As one of the key C-suite sponsors, the CFO has a very significant role in the sponsorship of IBP adoption. IBP leads to a major change in the philosophy and execution of business planning (typically a key part of the CFO remit), from major annual or biannual activities to a rolling monthly financial planning cycle. This change has far-reaching effects across functions and, hence, the road map for change and its organisational benefits must be strongly owned and promoted by the CFO.

An important part of this sponsorship role is working directly with C-suite peers to maintain a disciplined adherence to the IBP process, especially in the early stages of deployment. IBP sets out a clear and structured approach for performance review, empowered decision-making, and forward planning. This approach can often challenge existing ways of working amongst senior leaders who over time have built personal networks and practices that allow them to access business data and make decisions, often from a siloed perspective.

A key role of the CFO is therefore to model the behaviours of the senior leader within IBP, supporting and leveraging delegated responsibilities in the IBP cycle and not overriding decisions outside the designated process.

CFO sponsorship of IBP is also critical across the finance function itself. The IBP approach shifts current practices in business and financial planning and creates new and increased expectations for finance staff to operate as business partners with a broader influence beyond the traditional accounting role.

The role of the finance partner in IBP is vital (as described further below), and, hence, the CFO must engage and inspire the team to respond to this opportunity. Whilst extending the expectations of the finance staff beyond the core of traditional accounting to a broader business role is exciting for many, it also presents challenges.

Leading this functional shift as part of IBP deployment is a key role for the CFO to ensure that high-quality finance support is present throughout the various cross-functional IBP teams and when decisions are made.

Cross-functional partnerships and influence

Finance leaders play a key role on the newly formed IBP teams to build the connection between commercial and supply chain teams. Traditionally, these teams have often not established an open and trusting partnership, with the supply chain team often seen as a back-office or “arms-length” provider to the commercial organisation. However, the finance team is typically experienced at working across teams in the process of aligning and reconciling financial plans.

This experience, and the trust built with these teams, enables finance to play a critical role in focusing the cross-functional IBP teams on enterprise outcomes and metrics. Over time, trust and collaboration is built through the positive experience of executing IBP, but finance is often a key catalyst to accelerate this.

A key foundation for enterprise-optimised decision-making in IBP is rigour and transparency to create a common, cross-silo view of business performance and outlook. This is a crucial role for finance, leveraging its traditional strengths in management accounting and financial stewardship.

An important feature of IBP is the application of standard data sources, definitions, and metrics (typically supported by the business ERP system). This consistent foundation for situation analysis and decision-making is essential in aligning cross-functional perspectives and creating transparency for decision-makers. This can often be problematic in the early stages of IBP adoption, where there can be considerable resistance to letting go of silo-based data or interpretations.

Here finance has a key responsibility to help educate cross-functional partners on the new data sets and metrics and their importance in supporting decision-making optimised at the enterprise (rather than the silo) level. Finance members of IBP teams often also take on a “champion” role to ensure adherence to this new approach in the monthly IBP meetings, and this has been shown to both improve the quality of individual IBP team outputs, but also the overall flow and decision-making efficiency of the overall IBP cycle.

Investing in new skills for finance

Given both the key role of finance in deploying IBP, and the degree of change in the finance team to deliver this, it is vital that the function invests to build the capabilities required.

Key finance capabilities for IBP

Source: Camelot Management Consultants.

This capability development can be categorised into three themes, as shown in the graphic “Key Finance Capabilities for IBP”:

  • Cross-functional leadership: Finance leaders have an important role in supporting the integration of the new cross-functional teams that are central to IBP and in enabling strong, coherent team outputs. Capability development should include the rational, task-focused aspects of building cross-functional teams, such as aligning around common goals, agreeing roles and responsibilities, and defining team metrics. However, it is important that this is complemented by capability building in softer topics such as an understanding of team dynamics, personality types, generational differences, and communication styles, and how to translate this understanding into effective team leadership.
  • Business acumen: The finance role in IBP demands a broad judgement of business issues to understand and influence responses to risks and opportunities. A common element of this role is also the development of scenario plans and advocating the optimal business response. It is important that finance staff members are able to leverage strong analytical inputs with business credibility. This can be developed, for example, through job rotations across functions and with coaching/mentoring support within finance.
  • Advising and influencing business leaders:IBP delegates decision-making throughout the various cross-functional teams. This requires that the decision-maker in each case is briefed in order to ensure that rational, enterprise-optimised decisions can be made. Finance has a key role to play in this, and this often creates a need for relatively junior finance staff to build their capability and confidence in advising and influencing the relevant business leader. Developing skills in presenting, influencing, and negotiating are therefore key for finance staff as increasing demands are made by IBP.

New mindsets and behaviours for finance

Expanding finance’s traditional skill base can be a key mindset change for the finance function, which requires clear direction and sponsorship from the CFO, as well as engagement and support from all functional leaders.

A further success factor for finance staff working in IBP is the ability to balance the need for championing financial rigour whilst adopting a dynamic and agile approach to driving the business.

The rolling monthly cycle requires a major mindset change from traditional (typically annual or biannual) financial planning processes. Monthly IBP discussions focus on changes, outliers, and closing performance gaps; and a key strength of the process is the ability to dynamically create robust updates to the business and financial outlook. This discipline brings finance closer to the operational edge of the business and is a key asset in ensuring the resilience and relevance of the business plan and associated financials. The capacity of finance to adapt to this new way of working is a key success factor in IBP, providing a competitive advantage in a volatile and complex market environment.

Source : FM

Finance innovators- Watchlist for future

Finance innovators – Watchlist for future

At a recent accounting conference in Malaysia, the chief executive of the Malaysian Institute of Accountants opened the first panel discussion by presenting statistics from a World Economic Forum report on the future of jobs. In the report, accountants and auditors are classified under “redundant roles” that will see steep decline in demand over the next few years due to automation. Minutes later, one of the most popular questions from the audience was “How accurate are those statistics?” It reflects a sense of incredulity amongst professionals in the accounting and finance industry. Change can’t be that soon, can it?

You may share the same sentiment. You may have heard buzzwords like automation and artificial intelligence generate chatter in the office or at networking events. They have become ubiquitous in our business vocabulary, yet they are minimally understood. Perhaps you can’t help wondering, “How many of these new technologies are truly ‘disruptive’ and not passing fads?” (History tells us: Whatever is practically useful and reaches a tipping point in adoption survives).

Experts are saying that these new tools are not an evolution of current technology. Rather, it’s a revolution. Klaus Schwab, executive chairman of the World Economic Forum, wrote that the scale, scope, and complexity of this revolution is “unlike anything humankind has experienced before”. And these changes are not limited to technology. Climate change is also affecting the availability of natural resources like water and arable land. It is forcing businesses to rethink the sustainability of their practices.

There’s a silver lining amidst these changes: We are only at the beginning, and there’s still some time to learn about them. Management accountants are needed now more than ever to help navigate this tumultuous time. We dug deeper into six must-know topics from a recently published watchlist by the Association of International Certified Professional Accountants and listed resources to help you learn more. Here’s to future-proofing your career.

1. BLOCKCHAIN

Invented as the technology behind bitcoin ten years ago, blockchain has garnered greater attention in recent years as a technology with the potential to transform financial transactions, supply chain management, and even large portions of the internet. A blockchain report by the American Institute of CPAs defines it as a distributed public ledger that makes a record of every transaction and adds it to a chain of all the transactions that have come before. In accounting and finance, blockchain may enable firms to create immutable and continually updated financial records that are difficult to tamper with. In other industries, companies such as Walmart and Pfizer have completed blockchain pilots to improve food safety and track medicine.

Large and consistent investments into blockchain startups are an indication of interest in the technology. In 2017, venture-capital funding for blockchain startups was up to $1 billion, according to a McKinsey report. In the same report, the consultancy identified some sectors that are inherently more suited for blockchain implementation; namely, financial services, government, and healthcare. In the short term, blockchain’s value lies in cost reduction, but meaningful scale is still three to five years away, according to the report. Some cite its instability, high cost, and complexity as causes for its stuttering path toward mainstream adoption.

Bottom line: Experiments with and implementation of blockchain will continue in 2019 as more applications are identified. But meaningful scale of blockchain implementation to realise its full value in reducing costs and generating revenue is still a few years away.

2. ARTIFICIAL INTELLIGENCE

Artificial intelligence (AI) refers to a branch of computer science that strives to create software that mimics human intelligence. AI-related applications already have been implemented in operations and finance to automate repetitive processes. In 2019, 20% of US organisations plan to implement AI enterprise-wide, according to a PwC survey.

Far from a single technology, AI is an umbrella term that covers a number of areas, among them machine learning, natural language processing, and deep learning. Banks are using AI surveillance tools to prevent financial crime, and insurers use automated underwriting tools in decision-making. In an FM magazine interview, UBS wealth managers spoke about building robo-advisers and using AI and natural language processing to conduct due diligence on the bank’s clients.

The software the bank built can conduct quicker and more convenient know your client (KYC) and anti-money laundering (AML) checks compared to a human worker. It parses hundreds of pages of search engine results for negative news and conducts checks on a potential client’s criminal history — a task that would have demanded a significant amount of a human employee’s time.

Technology expert Amy Vetter, CPA/CITP, CGMA, CEO of The B3 Method Institute, said in a series of video interviews with the Journal of Accountancy that “there are many who look at the technology that’s coming … that we’re going to be disrupted and accountants will go away. And I do not believe that is the case at all.” Instead, new technologies will free up time for finance professionals to provide analysis of financial data, she said. For that to happen, finance professionals will have to train on new technologies, whether through courses or hands-on experience. Communications skills will also be pivotal to help accounting and finance professionals explain their analyses effectively.

Bottom line: AI technology is already implemented in various finance functions and industries. The first step is to learn more about AI — its opportunities and limitations. Its potential is in freeing up human workers to provide more value-added services. Great opportunities await the eager student.

 

3. ROBOTICS

The inconsistent use of vocabulary to describe robotics, sometimes called automation, has created much confusion. Some may even imagine a physical robot sitting in an office. Robotics here refers to robotic process automation (RPA), and quite simply it’s a class of software used to process transactions, manipulate data, trigger responses, and communicate with other digital systems.

Although not an entirely new phenomenon, RPA’s capabilities have improved remarkably over time. Rob King, author of Digital Workforce and vice-president of education at RPA Academy, said in an Association podcast that “RPA has definitely arrived”.

Last year, FM magazine got an inside look at how a Koch Industries subsidiary successfully implemented RPA, freeing up almost 50,000 employee-hours after less than two years of implementation. At the company, RPA was used to automate invoice transactions and track third-party labour.

In 2019, companies will continue to explore RPA implementation and reskill employees to adopt the technology. Research firm Gartner estimates that global spending on RPA will reach $2.4 billion in 2022, compared to $680 million in 2018.

Bottom line: Robotics’ capabilities have matured over time. More companies will want to use RPA to automate repetitive tasks, increase efficiency, and reduce costs. Most large enterprises will embrace RPA in the next few years. For smaller firms, the cost barrier to implement RPA will gradually diminish.

 

4. NATURAL CAPITAL CONCERNS

The only nontechnology trend on this list, but no less significant, is natural capital concerns or environmental risks, which have been brewing in the background for years. We would need 1.7 planets to sustain our current global levels of consumption, according to the World Wildlife Fund (WWF) Living Planet Report 2018. The study estimated that at our current rate, we are using up natural resources faster than they are replenishing themselves. In relation to the Financial Times WWF Water Summit last year, Margaret Kuhlow, WWF’s finance practice leader, wrote that businesses need to get serious about water risks and disclose greater asset-specific location data to identify water investment opportunities.

Former New York City mayor Michael Bloomberg has led the establishment of the Task Force on Climate-related Financial Disclosures (TCFD), encouraging organisations to provide voluntary financial disclosures related to climate that can paint a fuller picture of their businesses. Momentum has also been gathering on nonfinancial reporting. FM magazine reported on a recent debate organised by Oxford Saïd Business School where speakers posed arguments on whether standardised nonfinancial reporting should be mandated for it to be useful to investors. “We need to make sure that climate change, biodiversity, and inequality are dealt with in the future. … There is an urgency,” said Paul Druckman, former CEO of the International Integrated Reporting Council, an organisation that advocates for natural capital and other nonfinancial information to be included in corporate reporting.

Bottom line: Businesses are realising that environmental sustainability must be given greater consideration in business decisions. In 2019, there may be greater support and practice of disclosing climate-related information in corporate reporting.

5. BANKING EVOLUTION

Last year in an issue of the IMF magazine Finance and Development, Stefan Ingves, the governor of the world’s oldest central bank, Sweden’s Riksbank, pondered the question, “In a cashless society, what would legal tender mean?” The question is not far-fetched because Swedish society has almost stopped using paper money, preferring transactions through cards and digital platforms.

Other than changing consumer preferences, banking is also evolving because of the rise of bitcoin and other cryptocurrencies. Although many do not consider cryptocurrency a reliable substitute for cash due to its price volatility, consumers and businesses are already performing transactions using these virtual currencies. Among many are Microsoft, Subway sandwich shops, and e-commerce site Shopify.

In 2019, Sweden’s central bank is expected to issue its first cryptocurrency, e-krona. In the UK, the Bank of England published a working paper last year to understand the implications of a central bank-issued digital currency. In this banking evolution, traditional functions of banks as clearing houses will also change, causing banks to rethink their business models. According to Deloitte, 2019 will see retail banks race to be digital leaders in embracing a mobile-centric customer experience, while fintechs attempt to devour a larger piece of the market share by providing faster payments that work seamlessly across borders.

Bottom line: Debates on whether cryptocurrency can be money will continue in 2019. But consumer preference for hassle-free banking introduced by fintechs is already the standard baseline. What happens in fintech doesn’t stay in fintech — “Why can’t I pay with my e-wallet?”

6. QUANTUM COMPUTING

IBM kicked off 2019 by launching the world’s first stand-alone quantum computer, the Q System One, for commercial applications. Quantum computers are radically different from today’s computers. Instead of running on bits, they run on quantum bits or qubits, and promise to surpass even the fastest supercomputers of today. But don’t run off to get a quantum computer just yet. IBM is not producing quantum computers for sale, and the quantum computer’s processing powers are only accessible through IBM’s computing cloud, similar to what the US’s Rigetti Computing and Canada’s D-Wave are offering. More importantly, the Q System One is still an experimental device used to figure out how quantum computers might work.

Winfried Hensinger, professor of quantum technologies at the University of Sussex, told The Verge that “it’s more like a stepping stone than a practical quantum computer. … Think of it as a prototype machine that allows you to test and further develop some of the programming that might be useful in the future.”

That said, banks like Barclays and JP Morgan Chase are already experimenting with quantum computing. IBM, as quoted in the American Banker, said that organisations are interested in using quantum computing to develop a competitive advantage. Financial institutions are testing it to help minimise risk and maximise gains from their portfolios.

In the US, a law was signed in December to provide $1.2 billion over five years to boost US quantum technology. In China, quantum technology was deployed in the Micius satellite to develop new forms of secure communications.

Bottom line: Albeit in its infancy, quantum computing will have huge political and economic implications once the technology matures. It will be enterprise-ready when it can deliver reliable performance. IBM expects revenue from its quantum computers in two years.

Source : GCFM

Working For A Boss Who Supports You

Working For A Boss Who Supports You

Employers seek loyalty and dedication from their employees but sometimes fail to return their half of the equation, leaving millennial workers feeling left behind and unsupported. Professional relationships are built on trust and commitment, and working for a boss that supports you is vital to professional and company success.

Employees who believe their company cares for them perform better. What value does an employer place on you as an employee? Are you there to get the job done and go home? Are you paid fairly, well-trained and confident in your job security? Do you work under good job conditions? Do you receive constructive feedback, or do you feel demeaned or invisible?

When millennial employees feel supported by their boss, their happiness on the job soars — and so does company success. Building a healthy relationship involves the efforts of both parties — boss and employee — and the result not only improves company success, but also the quality of policies, feedback and work culture.

Investing In A Relationship With Your Boss

When you’re first hired, you should get to know your company’s culture and closely watch your boss as you learn the ropes. It’s best to clarify any questions you have instead of going rogue on a project and ending up with a failed proposal for a valuable client.

Regardless of your boss’s communication style, speaking up on timely matters before consequences are out of your control builds trust and establishes healthy communication. Getting to know your boss begins with knowing how they move through the business day, including their moods, how they prefer to communicate and their style of leadership:

  • Mood: Perhaps your boss needs their cup of coffee to start the day. If you see other employees scurry away before the boss drains that cup of coffee, bide your time, too.
  • Communication: The boss’s communication style is also influenced by their mood. Don’t wait too late to break important news. In-depth topics may be scheduled for a meeting through a phone call or email to check in and show you respect your boss’s time. In return, your time will be respected, too.

Some professionals are more emotionally reinforcing that others. Some might appear cold, but in reality, prefer to use hard data to solidify the endpoint as an analytical style. If you’re more focused on interpersonal relationships, that’s your strength, but you must also learn and respect your boss’s communication style.

  • Leadership: What kind of leader is the boss? Various communication styles best fit an organization depending on its goals and culture, but provide both advantages and disadvantages. Autocratic leaders assume total authority on decision-making without input or challenge from others. Participative leaders value the democratic input of team members, but final decisions remain with the boss.

Autocratic leaders may be best equipped to handle emergency decisions over participative leaders, depending on the situation and information received.

While the boss wields a position of power over employees, it’s important that leaders don’t hold that over their employees’ heads. In the case of dissatisfaction at work, millennial employees don’t carry the sole blame. Respect is mutually earned, and ultimately a healthy relationship between leaders and employees betters the company and the budding careers of millennials.

A Healthy Relationship With Leaders Betters The Company

A Gallup report reveals that millennial career happiness is down while disengagement at work climbs — 71% of millennials aren’t engaged on the job and half of all employed plan on leaving within a year. What is the cause? Bosses carry the responsibility for 70% of employee engagement variances. Meanwhile, engaged bosses are 59% more prone to having and retaining engaged employees.

The supportive behaviors of these managers to engage their employees included being accessible for discussion, motivating by strengths over weaknesses and helping to set goals. According to the Gallup report, the primary determiner of employee retention and engagement are those in leadership positions. The boss is poised to affect employee happiness, satisfaction, productivity and performance directly.

The same report reveals that only 21% of millennial employees meet weekly with their boss and 17% receive meaningful feedback. The most positive engagement booster was in managers who focused on employee strengths. In the end, one out of every two employees will leave a job to get away from their boss when unsupported.

Millennials are taking the workforce by storm — one-third of those employed are millennials, and soon those numbers will take the lead. Millennials are important to companies as technology continues to shift and grow, and they are passionate about offering their talents to their employers. It’s vital that millennials have access to bosses who offer support and engage their staff through meaningful feedback, accessibility and help with goal-setting.

In return, millennial happiness and job satisfaction soar, positively impacting productivity, performance, policy and work culture. A healthy relationship between boss and employee is vital to company success and the growth of millennial careers as the workforce continues to age. Bosses shouldn’t be the reason that millennial employees leave. They should be the reason millennials stay and thrive in the workplace, pushing it toward greater success.

Trends to look out for in 2019

Trends to look out for in 2019

What will the year ahead bring for you and your business?

What developments will we see in the business landscape over the next 12 months? We asked some of our faculty to look ahead and, well, there’s good news and bad… On the plus side: exciting new opportunities to do things differently and get results. Better stop reading now, though, if you’re hoping for quick fixes.

1. Companies will own less
Tammy Erickson, Adjunct Professor of Organisational Behaviour

2019 will be the year in which we’ll begin to see companies step up to the “own less” reality: identifying resources (functions, facilities, people) it makes sense to “own” and embracing a variety of flexible arrangements for others (rent, contract, share).

Notice the rapid growth of companies that rent ever-changing wardrobes, allowing customers to have exactly the clothing they need for this week’s activities. Or the number of teens and twenty somethings who are not learning to drive, content to rely on just-as-needed transport options. Watch how young people arrange to meet – not through pre-established commitments, but rather through real-time coordination, based on immediate need and convenient availability.

These behaviours make sense. Economists, beginning with Ronald Coase in the 1930s, predicted that as communication costs fell, we would own less. Today it’s easy – and virtually free – to get what you want, when and where you need it.

Smart companies will continue to own or employ full-time certain categories of resources: those that are extremely scarce, to ensure availability; those that are highly strategic, to prevent availability to others. I would also argue in favour of holding tight to the humans who perform roles that will be least likely to be taken on by technology: those who form relationships and make tacit, values-based judgements. 

But there are other categories of resources, both physical and human, that companies should begin to access in new and creative ways, leveraging today’s technology: fungible resources – particularly if demand fluctuates and if qualifications are easy to verify and, most importantly, resources for which future demand is difficult to predict and where greater optionality would have high value. 

Just as the 1980s was the decade of process redesign as businesses leveraged the power of computers, the 2020s will be the decade of enterprise or business model reconstruction, leveraging the power of digital and related technologies. Smart companies will get a head start in 2019. 

2. Performance management will give way to performance leadership
Dan Cable, Professor of Organisational Behaviour

In 2019, leaders will start thinking more about performance leadership systems instead of performance management systems.

The goal of management is to relieve uncertainty by making processes more predictable and efficient. Performance management systems focus on hitting quarterly targets and following known processes, so that promises and regulations are met. Achieving these results is really good, until you end up efficiently producing what customers don’t want any more. Think Kodak, Blackberry, Nokia, Sears, Borders. The goal of a leader is to help an organisation stay effective and competitive. Leaders need to balance something that doesn’t want to be balanced. Efficiently meeting promises to customers and regulators makes it hard to experiment and learn. But short-term results are in vain if they can’t help keep the organisation relevant to the future. As one leader told me: “We need to be able to work on the plane while it is flying.” 

There are two good reasons why leaders will become increasingly wary of performance management systems in 2019. First, they are usually focused on the past, not the future. Focusing on high-quality cellphone reception might work until competitors offer internet access and music capabilities on cellphones. Aiming for more and more efficient performance today is a great way to go out of business in five years. Second, measuring results means that you are not rewarding learning. When you focus on outcomes and achievement, what you lose is experimenting with new approaches. If we want people to innovate, stop rewarding good results based on bad processes and start rewarding experimentation even if the results are bad.

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“In 2019, organisations will continue to experience greater complexity and ambiguity, fuelled by the growth of nationalism, divisive politics and reverse globalisation.”

Performance leadership is when each employee understands and feels responsible for working on the airplane while flying it. Helping to meet current promises while helping the organisation adapt and learn about the future. Performance leadership encourages teams to work together to solve problems and stay market competitive, rather than individual employees trying to look good and compete with each other. Performance leadership is when an employee understands that her job is to find ways to do her job even better, and brings her unique talents, passions and interests to the work. 

3. AI will remain top-of-mind
Julian Birkinshaw, Professor of Strategy and Entrepreneurship, Deputy Dean 

Every year brings another tech trend. 2016 was all about big data, 2017 was blockchain, and 2018 was the year AI hit the mainstream management press. 

So what comes after AI? My hunch is it will continue to stay top-of-mind among businesspeople for another few years yet. But rather than focusing on the potential benefits of artificial intelligence, we will see a complementary narrative take shape about the unique qualities of human intelligence. 

John Naisbitt and Patricia Aburdene, authors of the 1982 guide Megatrends: Ten New Directions Transforming Our Lives, said: “Whenever a new technology is introduced into society, there must be a counterbalancing human response… We must learn to balance the material wonders of technology with the spiritual demands of our human nature.” 

The AI debate is already turning to these questions. What is left for humans to do when the computers take on more of our traditional jobs? What is the point of having firms for coordinating activities when technology can make coordination happen seamlessly and instantaneously? And what are the risks we create – for society – when we use algorithms rather than human judgment to make business decisions? These are important questions, but we have incomplete answers to them. Expect the debate in these areas to intensify in the next year or two. 

4. Data science will be democratised 
Nicos Savva, Associate Professor of Management Science and Operations 

Few pundits would disagree that data science, machine learning, and artificial intelligence offer a paradigm shift from reactive, approximate and slow decision making to proactive, precise, and fast decisions. With few exceptions, these tools have been the prerogative of technology firms born in the digital era (Google, Facebook, Amazon, Uber) or incumbents with substantial scale (Walmart, P&G, Marriott). 2019 is going to be the year where data science will revolutionise non digital SMEs (manufacturers, hospitals, traditional media and more).

“This coming year is likely to be full of uncertainty – due to events ranging from Brexit to the US-China trade tensions to EU reforms.”

Three factors are converging to make this happen. First, cloud computing is delivering substantial amounts of computational power to anyone that needs it — power that was only available at a huge upfront cost is now available at a small variable cost. Second, new tools have made it easier to collect, analyse and use data — you no longer need a PhD in data science to be able to meet the data science needs of an SME. Third, human capital is becoming more sophisticated. The emergence of data science masters and data-science-focused MBA programmes is producing analysts and managers who have the skill sets and the imagination to make data science work at smaller scale. 

What are the implications of the new wave of data science? In the short term, more customer choice, better products/service customisation and lower costs. In the longer term, new and highly successful business models that would not have been possible without data science (e.g. AI-driven medical consultations or self-driving fleets of taxis). But as more decisions are delegated to automated data-driven systems, we need to worry about social implications — white-collar employment, data security and privacy, and algorithmic bias/discrimination will come to the forefront of public debate, as they should. With every new technology, there will be risks, and data science is no different. 

5. Political and economic uncertainty will continue
Linda Yueh, Adjunct Professor of Economics

This coming year is likely to be full of uncertainty – due to events ranging from Brexit to the US-China trade tensions to EU reforms. And it’s coming at a vulnerable stage in the business cycle where half of US Chief Financial Officers are expecting a recession in 2019 and over 80% of CFOs expect it by 2020. Starting in the UK, there is considerable uncertainty about whether Parliament will pass the Prime Minister’s Brexit withdrawal agreement, now scheduled for a vote during the week of January 14th. 

The EU has indicated that they would be open to extending the departure date by three months, but that hasn’t precluded the Cabinet from stepping up “no deal” preparations to ensure the UK can trade on WTO terms at the end of the first quarter of 2019. 

As if that wasn’t enough uncertainty, the first quarter of the year will also see the US and China aim to agree a trade deal or see 25% tariffs on all Chinese imports into the US and likely retaliation by China. The stakes are high. Can the US and China negotiate a trade agreement in three months? In one sense, a deal can be done fairly quickly if China opens up its market, particularly for services, as that should increase American exports since the US is the world’s largest exporter of services. 

And there is uncertainty in the EU as well. Italy seems to have softened its stance around its budget deficit while France looks to be running afoul of EU budget rules after granting concessions to defuse the “yellow vest” protests. In addition, President Macron’s proposed EU reforms to create a central fiscal authority have stalled. So, where EU reforms are headed looks uncertain. 

All of this uncertainty is coming at a time when the business cycle looks to have passed its peak. That’s the consensus for the US where economic growth likely peaked in the middle of 2018. And we tend to fall within the same business cycle. So, if the above uncertain geo-economic events affect the economy, it may worsen the cyclical slowdown. 

Therefore, brace for uncertainty in 2019. It’s likely to be a volatile start to the year. 

6. Complexity will throw up new opportunities
Richard Jolly, Adjunct Professor of Organisational Behaviour 

In 2019, organisations will continue to experience greater complexity and ambiguity, fuelled by the growth of nationalism, divisive politics and reverse globalisation. My current work with CEOs shows that they are less clear about what to do than ever before. We will continue to see firms with a track record of success struggling if they are unable to evolve. 

Themes such as agility, the emergence of millennials into managerial positions and the rise of artificial intelligence (AI) and blockchain will make traditional command-and-control styles of management increasingly problematic. But, while things will get more challenging, the opportunities are going to be greater – whilst there will be losers, there will be winners. 

So what will differentiate these winners? Less and less is it having the right strategy. Many organisations that fail have the right strategy – they just can’t get it to happen. The role of leaders is increasingly to create an empowering context. 

When things are so complicated, one of the toughest challenges is building and retaining confidence. Some organisations bounce between over- and under-confidence. The great ones, whether mature or early stage, are able to retain the middle ground of the confidence spectrum. 

What does this middle ground look like? Confident organisations have a well-articulated, compelling purpose; senior managers who role-model the behaviours they want from others; effective communication about what specific behaviours are needed to achieve the firm’s ambitions; a culture of psychological safety where people support each other, balanced with healthy challenge and feedback. They have a resilient attitude where “what doesn’t kill us makes us stronger”; people spend their time on their key priorities, rather than being lost in emails and inefficient meetings; and an environment where everyone feels that they can contribute.

Source : London Business School

Transformation-The Head, Heart, and Hands

Transformation-The Head, Heart, and Hands

It is rare these days, as digital transformation sweeps the business landscape, to meet a business leader who hasn’t either recently led or been part of a transformation. Once a one-off event in response to an urgent need—a dire competitive threat, sagging performance, an overdue process overhaul, or a post-merger integration—transformation is now the new normal. In fact, it has become so commonplace that we have dubbed this the era of “always-on” transformation. 

Yet from experience we know that transformation continues to be very difficult, and the evidence shows that it often fails or falls short of expectations. Moreover, it can exact an enormous toll on leaders and employees, who are constantly being asked to step up, reach further, move faster, and adapt to change, with no end in sight. For leaders and employees alike, it’s less a marathon and more a triathlon; no sooner does one leg finish than another is under way, giving participants no chance to catch their breath before giving their all once again. Still, many organizations overcome the odds; some even achieve lasting results. How do these companies succeed where others fail?

A REIMAGINED APPROACH TO TRANSFORMATION

While there is no one-size-fits-all method, our extensive client work, along with our study of more than 100 companies that have undergone transformations (three or more for 85% of them), points to an approach that combines three interconnected elements. It involves thinking expansively and creatively about the future that the organization aspires to and focusing on the right strategic priorities to get there. It addresses the unrelenting, ever-shifting, ever-growing demands on employees by elevating the importance of actions that will inspire and empower people at all levels of the organization. And at a time of rapid change and disruption, it calls for more than just applying the appropriate means and tools to execute; it calls for companies to innovate while they execute—and do both with agility.

“Transformation in the new digital era requires a holistic, human-centric approach.”

In other words, transformation in the new digital era requires a holistic, human-centric approach, one we call the Head, Heart, and Hands of Transformation. The heart has received the least consideration, but it is attention to all three elements that enables organizations to succeed today and thrive tomorrow.

THREE CHALLENGES IN THE ALWAYS-ON ERA

Transformation today takes place from a variety of starting positions. Some organizations need to move quickly to improve the bottom line. Others enjoy respectable performance but lack a clear path to enduring success. Many companies are simply in need of rejuvenation, ready to imagine a new destiny and perhaps even to increase their contribution to society.

Transforming not merely to survive but to thrive entails addressing three broad challenges, crystallized in these questions:

  • How do we create our vision for the future and identify the priorities to get there? Many companies face an even bigger challenge than overcoming short-term performance pressures: How to reconcile multiple strategic options to envision a different future amid shifting customer needs, evolving technologies, and increasing competition. 
  • How do we inspire and empower people? The relentless pace of always-on transformation can demoralize even the most engaged employees. Sustaining it while offering employees meaningful opportunity and fulfillment—intrinsic rewards that millennials and “digital natives” seek—adds substantial complexity to the challenge.
  • How do we execute amid constant change? Changing the business once meant executing from a playbook of primarily short-term, discrete actions. But transforming to thrive in the future often requires disrupting existing business models and value chains to solve customer needs—and doing so at digital speed. Today, when changing the business means simultaneously executing and innovating with agility, a conventional approach to execution is no longer enough.

Taken together, these three challenges can seem overwhelming. But they need not be.

Consider Microsoft. In February 2014, when Satya Nadella took the helm, the company was by no means broken, yet there were strong headwinds: Windows’ market share had declined, Microsoft had missed the mobile wave, and competitors—and customers—were moving aggressively to the cloud. The company’s inhospitable culture was depicted in a now-famous meme showing managers in different corners of the organization chart shooting guns at one another.

Since then, Microsoft’s performance hasn’t just improved; it has flourished. Revenues (particularly cloud-based revenues) have soared, the company’s stock price has more than tripled, market capitalization is approaching $1 trillion, and annualized TSR, at 26.5%, is twice that of the S&P 500. Perhaps most important, the company now boasts a visibly new culture of cooperation and a renewed commitment to innovation.

“Microsoft’s wholesale transformation has been the result not of a single move but of many changes orchestrated in parallel”

Microsoft’s wholesale transformation has been the result not of a single move but of many changes orchestrated in parallel that have touched every part of the organization. Nadella honed a mobile-first, cloud-first vision, aligning leaders around it and shifting resources toward the relevant businesses to accelerate innovation. In other words, he addressed the head of transformation. He articulated a new purpose—“to empower every person and organization on the planet to achieve more”—and fostered a new culture and leadership model, thus tending to the heart of transformation. He also unleashed new ways of working that have not only enabled execution but also have spurred innovation and agility; that is, he equipped the hands of transformation.

Microsoft’s transformation has reinvigorated a maturing company, positioning it to define and embrace its future with the strength and agility needed to thrive in a fast-changing, tumultuous business landscape.

THE POWER OF HEAD, HEART, AND HANDS

What actions constitute this fresh take on transformation? And what sets it apart from more traditional approaches?

  • The Head: Envision the future and focus on the big rocks. In the digital era, constant change makes it harder to commit to a view of the future; yet providing direction to the organization remains essential. That means companies and their leaders must draw on their strategic thinking, their imagination, their knowledge of customer needs and desires, and their pool of expertise, experience, and wisdom to forge an aspirational vision of a digitally enabled, growth-oriented future. They set priorities, focusing on the “big rocks” that will deliver results and create enduring value.1 They secure the alignment and commitment of the leadership team. And they establish and communicate a compelling case for change, internally and externally. In the past, these actions might have been one-and-done moves, distinct from the daily rhythms of business. But today, because the environment is constantly shifting and these strategic actions generally affect the whole enterprise, they must be revisited and updated on an ongoing basis (ideally, annually) and be integrated into the operating model of the organization.
  • The Heart: Inspire and empower your people. When transformations were viewed as one-off, short-term programs, inspiring and empowering people wasn’t seen as being essential to them; in fact, people were often treated as a means to an end or, worse, as collateral damage. But successful transformation today depends on people who are engaged and motivated to go above and beyond. Organizations can create this condition through a set of heart “practices.” What does this mean? Leaders invest time and energy in articulating, activating, and embedding the organization’s purpose. Companies create an empowering culture, shaped by leaders, that allows people to do their best work. They also demonstrate care for those whose lives are disrupted by the change—not only departing employees but those who remain to carry out the new vision. Finally, senior managers exercise a more holistic form of leadership: they clarify and navigate, they include and empower, and they delegate and enable their people and teams.
  • The Hands: Execute and innovate with agility. Executing a prescribed set of actions used to be enough to generate short-term bottom-line improvements. In this new era, when the future is unclear and the present is constantly changing, organizations need to innovate as they execute, and do both with agility. Consider this: Rather than delegate responsibility for execution to a transformation program owner (who occasionally updates leaders), companies give joint ownership of the ongoing transformation agenda to senior leaders. They ensure disciplined execution by equipping teams with the resources they need to make sound, prompt decisions. Companies also apply innovative methods and digital tools, and institute agile ways of working, to accelerate output, remove impediments, and enable end-to-end focus on the customer. Whereas building organizational capabilities was often an afterthought, today companies build capabilities while carrying out the transformation.

The head, heart, and hands approach to transformation is most powerful when each element is fully deployed. For this reason, the three elements should not be viewed as sequential actions but as three vital sets of activities that should happen in parallel—a holistic system.

Evidence of the impact of this approach is striking. In our study, which included in-depth interviews of leaders involved in these efforts, we asked whether the companies had addressed the actions consistent with the three elements. We then correlated the response with their subsequent performance. Ninety-six percent of the companies that fully engaged the three elements achieved sustained performance improvement, a rate nearly three times that of companies that did not engage the elements. (See Exhibit 1.)

When we asked survey respondents about the relative attention given to each of the three elements during transformation, the head consistently got the highest rating, followed by the hands. The heart came last. (See Exhibit 2.)

It’s thus only fitting that the heart—as the metaphorical center and source of inspiration and power—is at the center of this holistic approach.

THE HEART OF TRANSFORMATION: INSPIRE AND EMPOWER YOUR PEOPLE

People—individuals and teams—are the lifeblood of successful transformation. Transformation requires their effort, engagement, alignment, and willingness to go the extra mile. But in practice, the importance of people in transformation is often neglected; people often end up being treated as expedient or even dispensable. In the always-on era, the consequences of this neglect can be great, as people grow exhausted from keeping up with the latest technologies and adapting to relentless change.

Successful transformation takes heart. The heart serves as an apt metaphor, capturing the essence of the vital, life-giving source of power that people need to effect change.

So how can organizations develop a strong, healthy heart to inspire and empower people? In the context of transformation, we see four imperatives. Each of them, like the atria and ventricles of the heart, works in concert to perform the heart’s complete job: empowering and enabling people to give life to the transformation. (See “Healthy Heart, Strong Performance.”)

HEALTHY HEART, STRONG PERFORMANCE

Activate and Embed Purpose

Increasingly, employees seek much more than a paycheck or tangible rewards; they want meaning, connection, and joy. They want to contribute, develop, and achieve. Organizations with purpose tap into these needs, producing a virtuous circle of benefits.

“In the always-on era, purpose is more important than ever.”

Purpose is an organization’s “why”—its existential reason for being. In the always-on era, it is more important than ever; it fuels transformation by fostering an emotional connection that inspires greater commitment and the willingness to go the extra mile. Purpose illuminates a direction as it links various transformation efforts in a way that is logical and accessible to everyone. But it can do so only when the organization translates it effectively into action.

Create an Empowering Culture

Culture is the lifeblood of the organization. It comprises a clear articulation of the values and behaviors that define how things get done in an organization. Activated by leaders, culture is reinforced by the organizational environment, or context, through such levers as customer service rituals, performance management systems, and informal interactions. A healthy culture serves as a tacit code of conduct that steers individuals to make choices that advance the organization’s goals and strategy. In the digital era, when self-direction and team autonomy are emphasized, a strong culture is particularly important.

Demonstrate Care

Layoffs, redeployments, and reskilling are inevitable today. Even healthy companies will likely have to restructure their workforce to add talent—in particular, people with digital skills and experience that align more closely with the business’s future needs. Such workforce turbulence can be traumatic not only for those who are laid off but also for those who remain. If left unattended, it can undermine morale and progress. At the very least, transformation can dampen engagement and disrupt employee cohesion, and it almost always puts extra demands on people.

For all these reasons, leaders must demonstrate care, compassion, and empathy—and not just through their words. For example, it is critical that leaders continue to solicit the input of employees who remain (say, through pulse checks or broader two-way communications) and actively, visibly address their concerns. To help employees who are leaving, companies can offer a battery of program options beyond the standard outplacement services, such as coaches to help individuals create a personal roadmap, job-market information sessions, resources for financial advice, and even guidance on entrepreneurship.

Lead with the Head, Heart, and Hands

Nothing is more important to the success of transformation than leaders. While they play many roles, leaders embody the heart of transformation.

Leaders clarify and navigate the way forward. Beyond envisioning the future and revisiting strategic priorities regularly, leaders provide constant guidance to their reports and unit heads and ensure that priorities remain linked to purpose. They are action oriented; they set clear accountabilities; and they work tirelessly to communicate a compelling case for change internally and externally.         

Leaders are inspiring, empowering, and inclusive. Leaders instill confidence and courage, and motivate and inspire people to perform. They strengthen and encourage teams and support cross-organization collaboration. They demonstrate care and empathy, actively and candidly communicate with their people, and exercise inclusiveness.

Leaders delegate and enable agile teams. Leaders delegate responsibilities to autonomous agile teams, remove obstacles, and ensure all the necessary cross-functional resources are in place. They also support capabilities building, both human and digital.

EMBRACING THE HEAD, HEART, AND HANDS OF TRANSFORMATION

In the digital era, transformation has become the default state for most organizations. But always-on transformation needn’t be debilitating, exhausting, or demoralizing. We owe it to ourselves, our organizations, and society itself to boldly transform the approach we take to transformation.

Leaders need to move beyond short-term fixes to envision a compelling future, and focus on the big rocks required to get there. They need to stop treating people as a means to an end or, worse, as collateral damage, and instead inspire and empower them. They need to change how work gets done, moving from the expedient and prescribed set of actions to an approach that enables execution and innovation to occur simultaneously, with agility.

The head, heart, and hands of transformation is not a panacea, but it is a holistic and human-centric approach that is proven to enable organizations that truly embrace it to succeed today and thrive tomorrow.

Source : BCG.com

Using advance Tech for predictive analytics in employee retention

Using advance Tech for predictive analytics in employee retention

This technique can help managers reduce attrition costs.

The future of human resources is changing. Like the rest of the business world, chief human resource officers (CHROs) and their teams are beginning to find that they need to focus on building a robust analytics capability to best prepare for the data-driven world.

“CHROs have said that they feel [pressured] as the only ones not bringing data to the table. The business is expecting HR to have similar numbers to marketing, though maybe not finance or operations,” observed Andrew Marritt, CEO of OrganizationView, a people analytics practice based in St Moritz, Switzerland. According to Marritt, the data-centric modern HR leader needs to know not only what has happened, but what is likely to happen.

A key HR concern for businesses is employee retention. There are significant financial and intangible costs associated with losing loyal and high-performing employees. Investments need to be made to find, hire, and train their replacements. There could also be a negative impact on the stakeholders they worked with regularly such as suppliers, colleagues, and customers. Some companies are starting to look to predictive analytics to increase their ability to mitigate the risk of employee turnover and increase retention.

Investment in building a people analytics capability need not be big at first, and businesses can benefit greatly from it. “Our research shows that the financial costs associated with attrition can range anywhere between 13% and 23% of annual compensation depending on the function/level of the employees under the scope of the study. In our experience, a focused attrition analytics predictive model can help lower this risk by 5% to 8% annually,” said Neeraj Tandon, director for workforce analytics and planning, Asia-Pacific, at Willis Towers Watson, in Gurgaon, India.

WHAT’S NEW

Traditional HR analytics are descriptive in nature and examine employee data across different dimensions such as department and demographics to identify past patterns within metrics like turnover and retention. Conclusions are then used to formulate talent policies. Descriptive analytics, however, cannot predict future outcomes at an individual employee level.

Predictive analytics does this by going a step further and using the evidence from descriptive analytics as inputs for advanced techniques like statistical modelling and machine learning. These methodologies provide forward-looking measures such as flight risk, which quantifies the likelihood of an employee’s leaving the organisation within a certain period of time.

Predictive analytics also identifies hidden connections between key factors contributing to employee turnover. The main predictor variables normally studied include pay, promotion, performance reviews, time spent at work, commute distance, and relationship with a manager. (See the chart, “Factors Contributing to Voluntary Turnover”, for a breakdown of key reasons for attrition at a sample organisation.) Organisations also use external data such as labour market indicators and the current economic scenario as causative variables while formulating hypotheses and building models for retention. HR teams and managers use the findings from the modelling to better design timely interventions to help retain employees.

Factors contributing to voluntary turnover

An ADP Research Institute white paper examined the factors leading to voluntary turnover at a sample company. The graphic below breaks down the reasons cited. By collecting and analysing the factors that contribute to turnover, companies can institute policies and procedures to address concerns.

In this example, management may want to focus its retention efforts on industry veterans who have not been with the company for very long or look at implementing more lenient telecommuting rules to ease attrition.

Source: ADP Research Institute white paper, Revelations From Workforce Turnover Study.

Deloitte estimates that about 8% of global businesses leverage predictive analytics for talent management, and the ones that do tend to be larger. According to Brian Kropp, group vice president at Gartner, organisations that develop this capability tend to be in sectors that are intellectual property dependent such as financial services, healthcare, and fast-moving consumer goods. Globally, businesses in all major economies are working towards acquiring this competence.

COST VERSUS BENEFITS

Organisations looking to develop competence in predictive analytics have several options. Consulting organisations offer expertise towards building this capability. For businesses looking to set up internal capabilities for smaller capital outlay, many choose to employ or train in-house data scientists who may turn to inexpensive software such as IBM SPSS or free open-source software known as R for their initial modelling.

External vendors that set up human capital management systems with predictive analytics capabilities are also available at different price points. However, experts warn that internal teams should make sure that the human capital management systems offered integrate with data systems within the organisation. The systems should not overpromise and underdeliver in terms of features and tools, and vendors should provide the guidance to use them insightfully.

DATA-BASED CHALLENGES

According to Bersin by Deloitte, an HR research organisation, setting up clean and accurate data streams is, and will remain, a challenge for people analytics. As the research indicates, most big organisations have five to seven systems of record for their human resources data. This means that information often used in predictive modelling is inaccurate or unavailable, a serious stumbling block.

“As statisticians, we do deploy multiple data treatments to improve the quality of data. However, often data on some important variable are incomplete, and as a result we ignore these variables. Some of these variables could be important to predict the outputs. Hence, it’s important that organisations continuously focus on data quality improvement,” Tandon said.

Companies should run specific data quality programs to make the data fit for modelling. These programs would be of greater effectiveness if they were directed at key variables that predict output variables such as attrition rather than across the entire dataset, he added.

BUILDING A GOOD MODEL

Besides clean, accurate data streams, a few further steps can be taken to ensure that predictive retention models are a robust tool for decision-making. For one, studying the workforce in clusters of employees with similar characteristics and reasons for leaving the organisation is essential for building models that lead to targeted and effective retention strategies, according to Tandon.

Model building also goes through multiple iterations to ensure it fits the data optimally, which includes choosing or eliminating causative variables scientifically, and testing the model on an existing dataset to gauge how accurately it predicts actual outcomes. With the acknowledgement that numbers do not tell the entire story, intuition is also factored into models. “There is a good reason people are intuitive; they have got experience,” explained Marritt on how this contributes to the model’s effectiveness.

However, a degree of inaccuracy is associated with predictive modelling, and this is where HR and managers play an important role. “Data should just be another voice at the table. Decisions have to be made by humans,” said Marritt, on how these tools can influence employees’ working lives. It is always better to roll up the data and use them at an aggregated level such as teams, rather than at an individual level, because the implications of making an incorrect decision are considerable, he added.

Last but not least, as with any new initiative, organisations must recognise that adequate coaching and oversight mechanisms should be in place to help users leverage the technique correctly and thoughtfully. According to Tandon, managers are being trained on the key objectives of developing attrition models and coached on how to use the information to prevent high-performing employees from leaving, without creating a bias against the identified individuals.

Central governing teams (often comprising business and HR team members) monitor and track interventions taken by line managers to reduce attrition risk for employees identified as a high flight risk. This also helps organisations bring some level of consistency in interventions to control attrition, Tandon added.

TARGETED APPROACHES

Once these checks and balances are in place, a data-driven approach that includes predictive analytics is seen to bring greater transparency and balance to decision-making. “There have been instances where decisions were made by those who were the most vocal. This will be harder in a world where data is needed to support decisions,” observed Marritt.

The key causative variables that emerge during modelling will also help organisations craft more effective retention strategies. If commute distance emerges as a major driver, for example, greater efforts can be directed towards options such as remote working. If a limited training budget is available, it can be used to provide inputs for those employee segments that have a high flight risk. While HR and managers have always designed these interventions, a forward-looking, rigorous technique enables them to direct time and money towards these efforts with greater precision and with greater confidence in the outcome.

Furthermore, finding unexpected patterns in the data can help design retention strategies that make strong business sense. Marritt’s team at OrganizationView, for instance, found that high work pressure was a key cause for attrition at a certain financial services organisation. However, it was more so for low to midlevel performers while top performers actually thrived under high pressure and were more likely to leave in its absence. Since high-performer attrition had a greater financial impact, the organisation focused on this rather than overall attrition.

THE NEAR HORIZON

Companies are experiencing a massive change in the data they have about customers, and the same change is coming to what they know about employees, according to Kropp. Organisations that figure this out and get there faster will retain a higher-quality workforce. It will be the single most successful differentiating factor on that front, and a must-have for businesses that cross a thousand employees, he added.

Over the last three years, Gartner has also seen a significant increase in the number of organisations that collect employee data in unconventional ways, such as social media activity, speed of keystrokes, mood recognition, email text and frequency, and wearable microphones. Organisations are attempting to understand employee behaviour and experience through these experiments, and some of them will be input into models, which will increasingly graduate from predicting flight risk and quality of hire, which are relatively easy to measure, to hard-to-define variables such as employee engagement and performance, Kropp said.

On the maturity front, while only a small percentage of organisations surveyed by Deloitte currently have the capability for people analytics, in a more recent survey 69% of businesses say they are integrating data to build a people analytics database. The analytics function will also grow into a multidisciplinary team that will solve business-critical problems to drive business results.

Source : FM UK

Strategies to use analytics for competitive advantage

Strategies to use analytics for competitive advantage

Organisations are building momentum for the use of Big Data by integrating data analytics into their strategy in small projects that deliver substantial results, according a new report.

Almost all respondents – 96% – said that analytics will become more important to their organisations in the next three years, according to a Deloitte report based on a mix of 100 online surveys and 35 interviews conducted with senior executives at 35 companies in North America, the UK and Asia.

Although analytics already is an important resource for many companies, analytical technology remains immature and data under-utilised, according to the report. Getting buy-in for further projects is essential, so analytics leaders are starting small.

“Projects that demonstrate analytics’ ability to improve competitive positioning help these initiatives gain traction across the enterprise,” Deloitte Touche Tohmatsu Limited’s Global Analytics Leader Tim Phillipps wrote in the report.

Companies can prepare themselves to use analytics for competitive advantage, according to the report, by using the following strategies:

  • Acquire the right talent now. Talent for analytics and Big Data is in high demand. Talent shortages may become more of a barrier to analytics implementation as more companies use data to drive more processes and decisions.
  • Tie analytics to decision-making. Better data and analysis don’t necessarily result in better decisions. Specific initiatives to improve decision cultures and processes, along with changing the understanding and behaviours of front-line workers, lead to better decisions, the report says.
  • Apply analytics to marketing and customers. Finance operations are the most frequent area of analytics investment, with implementation by 79% of respondents. Marketing and sales groups, at 55%, are the second-most frequent analytics users, and the report says the best financial returns from analytics often come from marketing and customer-oriented applications.
  • Coordinate and align analytics. There is little consistency among companies with regard to who oversees analytics initiatives. Business units or division heads (23%), no single executive (20%), CFOs (18%) and CIOs (15%) were most commonly cited. More co-ordination may be needed to realise the full benefits of data throughout the organisation.
  • Create a long-term strategy for analytics. While current analytical processes are being implemented, a multi-year plan for the growth of analytical capabilities – linked to strategy development – will help organisations better use data over time, the report says.

TOP key concerns keeping directors up at night AND How board can address them

TOP key concerns keeping directors up at night AND How board can address them

Concerns on board members’ minds are similar across the globe, the surveys suggest. Here are the top four:

Managing cybersecurity. “In my opinion, and as reflected in the two surveys referenced, cybersecurity is an area of focus for most boards,” Pickering said.

New digital technologies and cybercrime were two of the three top concerns amongst respondents in the InterSearch survey. The PwC survey found that cybersecurity is top of mind for US directors, with 95% of respondents saying their board is preparing for cybersecurity incidents and two-thirds (67%) saying their board is receiving more reports on cybersecurity metrics. Among the tactics boards are using to address gaps are increasing cybersecurity budgets (57%), engaging third-party consultants or advisers (56%), and providing directors with additional education opportunities on cybersecurity (66%).

The PwC survey suggests that increasingly, directors want the entire board to oversee cybersecurity instead of allocating the responsibility to a smaller group, such as the audit committee. In 2017, half of directors said the audit committee was responsible for overseeing cybersecurity, but in 2018, that number fell to 43%. In 2018, more than a third (36%) said the full board has taken responsibility for cybersecurity, up from 30% last year.

In Pickering’s experience, cybersecurity has best been overseen by the risk committee. “It’s such a specialised area, we really need people who are involved in risk oversight on a more regular basis,” she said, adding that the full board gets regular reports and participates in drills. According to the survey, just 34% of directors said their companies had staged crisis management drills or simulations.

Refreshing the board. Serving as a director is more demanding than ever, said Pickering, who was appointed to her first board two decades ago. “It takes a lot of time. You have to stay informed, read the journals, and make sure you are on the leading edge of what’s coming down the pipe. I believe every director needs to be fully engaged.”

But not all directors are as engaged as colleagues expect, both surveys found. Just 10% of the respondents in the InterSearch survey thought the competencies of current board members matched the competencies needed for the future, and 32% suggested their boards needed alterations. Competencies respondents felt were needed more on the board were digitalisation and new technologies (24.3%), innovation (12.2%), and customer orientation (9.3%).

In the PwC survey, 45% of respondents said at least one board member should be replaced. Directors age 60 or under were also more likely to say a fellow director should be replaced (52%) compared with those age 61 or older (43%) who wanted to replace a colleague. Among their chief complaints about colleagues were directors overstepping their roles (18%), being reluctant to challenge management (16%), negatively impacting board dynamics with their interaction style (14%), and lacking the appropriate skills or expertise for their role (12%). At the bottom of the list, 10% of respondents said they thought advanced age had diminished a colleague’s performance, which ties into long-standing debates about mandatory retirement ages and director term limits.

According to the PwC survey, directors think both mandatory retirement ages (73%) and term limits (64%) are effective strategies for refreshing boards, but less effective than a leadership focus on board refreshment, as well as assessments of the board, committees, and individuals.

PwC recommends annual assessments to identify directors whose expertise no longer aligns with the company’s needs. Less than one-third of respondents (31%) said their boards already use director assessments, but another 46% said they thought the board would be willing to adopt their use.

Avoiding corporate culture crises. Corporate culture is often thought of as the “tone at the top”, but according to the PwC survey, most directors think cultural problems can start both at the executive level (87%) and in middle management (79%). That’s why it’s important to offer employees at all levels opportunities to offer feedback, such as with an anonymous survey, Pickering said.

“You shouldn’t be afraid to ask your employees these questions,” Pickering said. “You need to know if there’s a potential issue. It’s good for culture and the health of the company.”

More than 80% of respondents in the PwC survey said their companies have taken action to address culture concerns, many by enhancing employee training (60%) or improving whistle-blower programmes (42%). But some organisations still are missing the mark by using ineffective tools.

According to the PwC survey, 64% of directors said they evaluated company culture using their intuition or “gut feelings”, even though just 32% said this was a useful approach. Another 63% said they looked to employee turnover to get a read on work culture.

PwC recommends that boards review the quantitative and qualitative metrics the company may already measure to identify gaps and ensure organisational culture is a regular topic on the full board’s agenda. Even if elements that contribute to organisational culture, such as ethics or compensation, are broken off and discussed in committees, the full board should discuss concerns that arise as part of their broader oversight of culture.

Determining the value of diversity. “Gender diversity on boards is still not where it needs to be,” Rand said. “Increased diversity on boards should not be the result of a box ticking or a public relations exercise.”

Almost all directors (94%) in the PwC survey agreed that board diversity brings unique perspectives into their discussions, and 91% said their boards are taking steps to increase diversity on the board, which is a slight increase from last year. However, about half the directors surveyed also said they thought efforts to increase diversity on boards are driven by a desire for political correctness (52%) and that shareholders were too preoccupied with this issue (48%). About a third (30%) said diversity efforts result in boards nominating extraneous candidates, and 26% said diversity results in unqualified candidates being nominated.

In the InterSearch survey, 43% of respondents reported changes in board membership that had already taken place to make the boards more diverse — 67% were driven by the wish for greater gender diversity, 46% to promote greater diversity in competencies, and 25% to provide greater diversity in nationality.

“Being a female, I understand and appreciate diversity,” said Pickering, who was the sole woman on the board for Hancock Whitney Bank for years. “You want to have a diverse board; I believe it makes a huge difference in how boards operate.”

Among attributes, respondents in the PwC survey placed the most importance on gender diversity (46%) compared with racial and ethnic diversity (34%) and age diversity (21%).

PwC recommends that boards consider diversity whilst developing strategies for board refreshment. Boards often recruit new directors by relying on recommendations from current ones, which limits results. The firm encourages boards to look more broadly and consider recommendations from investors rather than board members, and find candidates outside of the corporate world, such as those who have served in the military or worked in academia or at a not-for-profit.

To her board’s credit, Pickering said, it has added two female directors in the last two to three years, including one who was featured in Savoy magazine as one of the “2017 Power 300: Most Influential Black Corporate Directors”. “We partnered with a search firm and found great talent,” Pickering said.

 

What makes a CFO great

What makes a CFO great

A majority of finance leaders said they are increasingly expected to have digital know-how, use data analytics, and manage risks. They also have to deal more with shareholders and regulators than before, according to a global EY survey of more than 750 finance leaders.

Corporate finance leaders face four main challenges. Tackling them will allow CFOs to shape strategy and drive innovation necessary for sustainable growth, but it will also rapidly expand their role, EY research suggests.

Taking on the additional responsibilities is crucial to help develop and enable an overall strategy for the business, provide insights and analysis to the company’s executive management, ensure that business decisions are grounded in sound financial criteria, and represent progress on financial goals to external stakeholders, according to EY.

A great CFO is a partner to the CEO and in private his or her harshest critic when warranted, he said.

Digital know-how. To fulfil critical strategic priorities, 58% of the respondents said they need to better understand digital technologies and data analytics. Two technologies are shaping up to become particularly important for finance leaders to understand: Blockchain, which allows data to be exchanged with the help of a decentralised ledger, could transform corporate reporting. Robotics process automation promises to automate and reduce the cost of back-office processes.

Digital savvy is a priority across industry sectors, because it offers opportunities for growth – in new markets, through new products and delivery models, or by transforming existing products. Financial leaders who understand how their company can deliver on its digital strategy can co-ordinate and focus investments accordingly.

Digital issues to tackle include global tax implications for how goods and services are sold; where companies base their operations; robotics; and new competitors.

A good digital strategy helps a company figure out which technology provides the best return on investment and possibly other intangible benefits. “Not everything will work for your business.”

Data analytics. In the past decade, half of the finance leaders polled by EY have increased the amount of time they dedicate to advanced analytics to provide more insight to the CEO and senior management. Of the respondents in the 2016 survey, 57% said that being able to deliver the data and advanced analytics will be critical for the finance function.

“Using Big Data along with your own internal data makes your internal data even more powerful, and it provides context and connection to the marketplace,”.

For companies to turn these efforts into a long-term competitive advantage, data must become integral to the business strategy, and analytics delivery must match business requirements. To gain more value from analytics, business leaders should focus on training, easy-to-use tools for data users, and aligning incentives, rewards, and measurements.

Risk management. Two-thirds of financial leaders in large companies (more than $5 billion in annual revenue) and 54% of financial leaders in smaller companies said they believe risk management will be a key capability demanded of the finance function.

To play their part effectively, CFOs must think beyond prevention and identify strategic risks, bring up risks in strategic and business planning discussions, and take the time and resources to recruit talent in advanced analytical skills.

“By understanding the pain points of pivotal departments in your organisation,”, “you can look at a balanced level of risk that allows for creativity and mistakes in order to drive the best possible solutions and outcomes.”

Stakeholder scrutiny and regulation. Half of the financial leaders polled said they will have to improve their skills managing relationships with stakeholders, including investors and senior management; in emerging markets it was 59% of respondents.

Understanding what drives stakeholders, communicating proactively, and telling a consistent story about the business will be critical to strengthen stakeholder relationships.

Intense regulatory scrutiny requires CFOs to also work ever more closely with policymakers. Of the finance leaders polled, 71% said they will increasingly be responsible for the ethics of their company’s decision-making.

A great CFO “is a great communicator and is as comfortable talking to boards and investors as [he or she is talking to] a roomful of software engineers,”. “They are flexible and listen to ideas, commercially astute, and up to date with technologies.”

HOW TO TACKLE THE CHALLENGES

To help identify and assess fresh strategic approaches and help their companies, EY considers these five areas as critical:

  • Support innovation and new business models. Collaborating with entrepreneurs and start-ups helps drive innovation and meet changing customer and emerging market needs. CFOs play a key role in building successful collaborations, including effective due diligence on potential partners, aligning incentives between partners, and establishing an effective governance model.
  • Develop and deliver agile strategy. Business strategies should adapt to changing competitive dynamics, differing customer needs, emerging technologies, and a changing regulatory environment. CFOs can develop and deliver these strategies, for example, by unlocking capital for new business opportunities.
  • Drive sustained, long-term growth. Identifying risks as early as possible, managing negative exposures, and seizing opportunities help companies adapt to uncertainties generated by market and regulatory volatility. CFOs can provide investment flexibility to seize growth opportunities, such as new products and services or entering new markets.
  • Inspire and lead the way with strong purpose and ethics. Articulating a business’s purpose and ethical stance motivates employees to meet new challenges. CFOs help embed purpose in the business by leading through example and by grounding it to performance measurements.
  • Support digital. Understanding the opportunities and risks allows companies to incorporate digital into their strategy and into the delivery of the strategy. CFOs can then help the business to deliver the right digital capability at scale, be it by striking a balance between near-term targets and long-term potential or by building the business case for significant technology investments.

What a data breach means to your business

What a data breach means to your business

Consequences of a data breach could now be a lot more serious

Consequences of a data breach could now be a lot more serious

By Michelle Lindsay

In October 2016, the Australian Red Cross Blood Service announced it had been the victim of a significant data breach. More than half a million donor records, including personal information on sexual activity, drug use and health, were compromised when they were accessed from an unsecured server.

The scale of the breach, and the sensitive nature of the information disclosed, made it one of the most serious in Australia’s history, damaging the organisation’s reputation and opening it up to potential litigation.

While 2016 saw a number of high-profile data breaches, experts warn that this is not just an issue for the big end of town. With new mandatory reporting legislation also set to take effect in 2017, the consequences of a breach could now be a lot more serious.

According to new report, the IBM Cost of Data Breach Study: Australia, a malicious or criminal attack caused 46 per cent of data breaches in 2016, while 27 per cent were caused by a negligent employee or contractor, and a system glitch was the source of the remaining 27 per cent.

Organisations may be required to report data breaches

Under the proposed Privacy Amendment (Notifiable Data Breaches) Bill 2016, organisations will be required to go public on any unauthorised access, disclosure or loss of personal information which is likely to result in serious harm to the affected individuals.

If a business suspects a data breach, it will be required to carry out an assessment within 30 days. Then, if there are reasonable grounds to believe a data breach has occurred, it will need to notify the Privacy Commissioner, as well as all the affected individuals.

According to Ian Cunliffe, chief privacy officer at CPA Australia, the legislation will be a game-changer, making lapses more public and potentially more costly to address.

“Up until now we’ve had legislation that has the potential to impose serious penalties to people who breach privacy, but the obligation to self-declare, as the legislation proposes, raises the stakes enormously,” he says.

“Currently businesses are not required to self-declare, so we don’t know how many breaches there have been. If this legislation is passed, there will be the obligation to shout any data breaches from the rooftops, and a failure to do that will double the embarrassment if the company is found out and greatly increase the risk of criminal sanctions.”

Failing to disclose could also prove expensive, with businesses facing a range of potential penalties, including fines up to A$1.8 million.

Accountants are at high risk of a data breach

Cunliffe says that some small businesses may be underestimating their exposure to data security incidents.

“Every business has information that is confidential in relation to the privacy obligations that apply, for example, employment records. This might be information about people’s sick leave and the reasons for it and other personal information, so maintaining its confidentiality is a serious matter.”

He says that accounting practices are at particular risk, given the sensitivity of the data they hold.

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“Accountants’ stock-in-trade is providing confidential advice based on personal information – so it would potentially be very embarrassing if that information made it into the public arena.”

Cyber insurance expert Drew Fenton, from insurance and professional indemnity protection firm Fenton Green, agrees that accountants cannot afford to be complacent.

“If I were to rate clients from zero to 10, where 10 is the highest risk, accountants would be seven or eight. Even though they don’t have a large database, they have all of our personal information including our financial details. From that perspective they are high on the target list for hacking.”

He says that being aware of the potential for a cyber attack can go a long way to protecting a business from the reputational damage and financial costs that accompany a data breach.

“The number one risk is opening an infected attachment – that’s where viruses get into your system. On average a virus is in your system 140 days before it is detected – watching, waiting and collecting information.”

Maintaining trust

The IBM report on the cost of data breaches in Australia shows that the average cost of managing and rectifying a breach is around A$142 per compromised record.

Although the financial cost is high, IBM says the biggest consequence of poor data security is a loss of business following a breach.

Fenton agrees that reputational damage and reduced client trust are probably the biggest concerns for small businesses.

“If it happens, once, we’ll probably forgive it. Twice we’ll be very cautious, but if it happens three or four times, the company will have a very severe PR problem.”

Protect your business from data breaches

Here are three strategies to help keep your data safe.

1. Put robust data security protocols in place

The first line of defence against cybercrime is having a strong culture of data security and reporting, and up-to-date security software. Your systems, and those of your partners and suppliers, should be regularly tested for vulnerabilities, and a risk assessment and management process put in place.

Be aware of your industry compliance obligations such as the Payment Card Industry Data Security Standard (PCIDSS) for organisations handling credit card information or the Information Security Registered Assessors Program (IRAP) for businesses or other groups wishing to store or process Australian Government information.

Educate your employees about the importance of protecting client information, and create clear management reporting processes.

Only collect the data you need – the less you have on file, the lower the risk if a breach occurs.

2. Consider taking out cyber insurance

Cyber insurance is a relatively new type of insurance cover, which can help cover costs related to a data breach. Cyber insurance can cover first-party costs, such as having an IT expert come in and wipe the virus, or the cost of reporting the breach. It can also cover your liability costs if an affected client takes legal action.

3. Seek help if you suspect a data breach

As the proposed legislation hasn’t yet passed, it’s not clear exactly what the notification process will require. So if you think there may have been a breach of your data, speak to a solicitor to confirm whether you need to report it, and how to go about making the required notifications.

You may also want to consult a public relations firm to help limit the reputational damage, and help shape the message to affected clients.

Source :CPA