Thursday, December 31, 2009 | Last Updated Friday, February 12, 2010 15:04 Pacific/Honolulu
TechKnote #0501001
Enabling Project Success—the New CFO
by Donny C. Shimamoto, CPA.CITP
Donny has a BBA in Accounting and MIS. He gained a broad range of experience in financial & systems auditing, project management, application development, and business process redesign working at PricewaterhouseCoopers LLP. In 2001, he founded IntrapriseTechKnowlogies LLC—dedicated to enabling small and medium-sized organizations to leverage enterprise technology and knowledge management strategies.
1 Introduction
Many people, CFOs included, (Yes, CFOs are people too!) see the role of the CFO as that of a gatekeeper—one of the constant hurdles that a project must overcome to obtain and retain funding. Many department managers see their CFOs as lofty naysayers—rejecting ideas before they have the chance to be tried and tightfistedly withholding the funds that would allow progress.
This is the image that today’s CFOs must change. CFOs must instead utilize their talents in risk management and keen ability to measure and analyze, to enable projects to be successful and ensure the most return for an organization’s investment in its project portfolio.
1.1 Be an Enabler, Not a Gatekeeper
By embracing the role of gatekeeper, CFOs establish an adversarial image that can impede open communication and organizational growth. CFOs should instead focus on becoming an enabler—helping project teams to develop and measure their criteria for success, identify and track key performance indicators (KPIs), and estimate and evaluate the value received from the project relative to other projects in competition for funding.
CFOs can start by helping managers to develop business cases for their projects. Many department and project managers have strong subject matter expertise, but lack the financial expertise to do comprehensive cost-benefit analyses. They also tend to only focus on their own projects, rather than evaluate their projects in relation to all projects that could benefit the organization.
By working with departments to develop these analyses, CFOs enable managers to better understand why a project should (or should not) be funded (or continue to be funded). Sometimes success is not starting a project or halting a project, but CFOs must help managers to see the limitations in their projects from an organizational perspective, enabling managers to understand why another project provides greater value or less risk to the organization as a whole.
1.2 Adding Value Through Risk Management
At the initiation of projects, CFOs should work with project managers to ensure that project work plans address all internal control requirements and establishes a risk management framework for the project. As with any other financial investment, projects must have the proper safeguards put in place to ensure their integrity, minimize possible liabilities, and maximize the value that can be realized from the funds expended to launch the project.
Throughout a project’s life, CFOs should continue to work with the project team to identify, assess, document, and mitigate a project’s business risks. This includes establishing and supporting a framework for monitoring project performance against KPIs established as part of the project charter. A lot of quantitative data passes through transaction support systems and general ledger. CFOs are perfectly positioned to help obtain and analyze this data in support of the project.
1.3 Stay Involved to Make Your Work Easier
Too many CFOs often fund a project and then take an observer’s stance, watching the project unfold and only becoming involved when problems occur (usually as the one raising the red flag because the project is over budget). This perpetuates the perception of the “lofty CFO” and often generates more work for the CFO in the form of damage control. This reactive and perceived judgmental stance also often leads to the alienation of project and department managers.
Instead CFOs should remain involved in a project, applying their expertise in measurement (the process of obtaining quantitative and qualitative data) and business analytics to evaluate the performance of a set of predefined project metrics against a baseline or industry benchmark. In this way, CFOs can provide value to a project by helping to identify trends or statistics that may indicate that a project is heading toward trouble—enabling project teams to take proactive steps to address issues before they become problems.
If the project is affecting business processes or systems, the CFO should also be on the design team to ensure that proper internal controls and audit trails are incorporated into the business process/system. This enables the CFO to take a proactive stance that will allow auditing to be done though a process/system rather that around it. This increases the value of the project to the organization as a whole as it will keep internal and external auditors off of managers’ backs (and the CFO’s back too!).
2 Summary
At the start of a project, CFOs should work with project teams to create a business case that demonstrates value and to establish a risk management and performance measurement framework. CFOs should help to monitor and analyze the health of a project during execution, and remain involved in the project work when appropriate to ensure compliance with internal controls and auditability of deliverables. With a better understanding of the project, CFOs may be able to see other ways in which the project’s concepts could be augmented or reapplied to provide additional value to the organization. These actions break the traditional image of lofty naysayer and allow CFOs to become enablers of project (and organizational) success.