Monday, September 12, 2011

Clarity and Fear, an Inverse Relationship

Guess what I did to commemorate 9/11? I got on an airplane and flew somewhere, specifically to CFO Magazine's Corporate Performance Management Conference (search Twitter for #cfocpm to catch the string of updates throughout the day). The 9/11 terrorists were far less concerned with the destuction and tragedy they caused 10 years ago than they were with instilling fear into those of us who were left pick up the pieces, trying to make sense of it all. What better way to remember and honor those who made sacrifices 10 years ago than to make sure the perpetrators did not accomplish their desire? Getting on an airplane, as insignificant as it was, seemed like a good way to honor them.

Was I afraid? No, not really. Fear is debilitating, but so many of us, especially those who are trying to make a go with one or more entrepreneurial ventures, allow fear to cripple our ability to make the right decisions. Let me explain...

Business analytics, business intelligence, corporate performance management, scoreboards, dashboards, etc. all lead to one thing if they are done correctly--clarity. The more clarity you have about your future, the less anxiety and fear you will feel as it relates to your business. You may not like the outcome you see in the future, but that creates a positive kind of anxiety and fear, the kind that drives you to overcome obstacles, solve problems, and make your business a success.

A major theme at the conference today was the best practices employed by CFOs to accurately forecast and plan for the future. Thomas Davenport's list of Performance Management Nirvana had this at the very top: "We'd have predictions of future corporate performance, not reports on the past." It's not just a state of nirvana. It can be accomplished in every business.

The other major theme that came out of the various meetings and workshops was the trend toward rolling annual plans, or budgets. Rather than create a 12-month budget only to see the number of forecasted months tick off, resulting in 1 fewer month forecasted as each one passes by, many organizations are moving to a rolling forecasting process. The static, one-time per year budgeting process is being set aside in favor of a dynamic forecast that adjusts and upates, sometimes as frequently as monthly but never less than quarterly, according to changes in your assumptions and the key drivers of your business model.

To validate this paradigm shift, John O'Rourke asked a room full of CFOs who among the group was adopting this new philosophy. He estimated 50% raised their hands, a pretty powerful testimony--CFOs take a lot of convincing to change, so obviously many are seeing positive results from the rolling forecast process.

Your competitors want you to be afraid. Your lack of confidence in your own abilities will make you feel afraid. The doubts of family and friends will generate some fear. Customers and employees leaving will create some fear. The way you face these fears and refuse to let them control you is to devote the resources necessary (a combination of staff, processes, and technology), which is usually much more affordable than you might think, to use the analytics of your business to improve performance and better understand the future. This brings clarity and reduces the anxiety and fear so many business owners experience.