The dusk of Management Taylorism is the dawn for the strategic CxO. Constant cooperation, communication and deep business process knowledge are the answer to digitalization, data lakes and disruptive threats. The opportunity for Finance is to extend resource allocation and financial planning towards becoming the trusted strategic advisor beyond the mere financials. How can FP&A support this achievement?
BY TAKING THE CFO BACK TO SCHOOL!
Mintzberg, Ahlstrand and Lampel go on a strategy safari and present the historic schools of strategy. Each school has a distinctive focus and their combination put the corporate strategy beast to live. There are there main classes that shape the decision-making of future profitability:
The Prescriptive Schools of Strategy
1. The Design School
2. The Planning School
3. The Analytical Positioning School
Designing a conceptual framework for strategy formulation, developing an organizational planning process and enhancing it with an analytical positioning in the marketplace dominated the literature from the 60s to the 80s. Financial Planning & Analysis is by its very name a kid of these decades. A visual sneak into the "Technology of the 80s" makes it obvious why FP&A can't stop there. Yet, these schools are the compulsory exercise for the CFO with the following six schools to be considered the free skate event.
Challenge the CxO league in all strategic schools!
The Descriptive Schools of Strategy
4. The Entrepreneurial School
5. The Cognitive School
6. The Learning School
7. The Power School
8. The Cultural School
9. The Environmental School
Moving from the foundation schools about strategy to the field exercise, entrepreneurs envision products and put them to live. This strain is a prerequisite to formulating a strategy to be a cognitive process deriving from individual brain activity and psychology. The Cognitive School is small yet powerful with Daniel Kahnemann and Edgar Schein contributing as psychologists to the strategist's mind. Btw, Eric Kandel, like Kahnemann also a Nobel laureate, wrote a tremendous book on the brain, perception and learning.
"Culture determines and limits strategy!" Edgar Schein, MIT (pdf Review here)
Taking a perspective beyond the individual are the latter four schools. Learning is equal to an emerging strategy as the complexity of the world is neither grasped in a moment nor steady enough for a once for all determination of the business future. The schools set a strong argument for a frequent planning and forecasting process facilitated by FP&A.
The Power School implies strategy as a result of negotiation and compromise. In this fpa-trends article, I laid out the negative effects of a group decision: the compromise tends to be loaded with risk. This being the most cooperative and communicative school, the CFO is well advised to cross borders into knowledge about the process of political decision-making (the german standard at google books). This holds true, esp. as the traditional, military styled organization makes room for more cooperative and communicative forms. The democratic design of special forces worldwide proofs, that the military again leads the way.
While the schools from 1 to 8 take an active stance, the Environmental School is a reactive school with a strategy derived from external forces. The CFO can manifest it in comparative KPIs and benchmarks. Being blind on this side, strategic actions will flow around Finance.
Look at the competition and express their performance to underline the strategic ambitions of the company!
Combinative and transformative:
10. The Configuration School
combines any selection of the empirical and theoretical findings clustered in the schools above. Here, why can't Finance hold the grail to a strategically shaped future with a
- solution-driven culture,
- close communication and cooperation,
- solid business processes and
- fit incentive systems
as laid out by the International FP&A Board? There may be a few personal related ones which bring us back to the beginning: back to School, learning never ends!