The role of finance in agile stuff, getting better at using software to create and drive business, is to first mover faster and get out of the way, and second, to figure out how to actually help innovation and growth beyond “investing.” I’m not sure we know how to do the second.
Finance is in a position like security. When things go wrong, they go really wrong. So, the most human way to operate is as cautiously as possible: lots of detailed plans, operating slow (takes many months – a year even! – to ask for, approve, and actually get the money), and requiring people asking for funding to be “accountable.”
Here’s some ideas:
The CFO taught leaders of all agile teams to sequence their activities by constructing a simple financial scenario: How much value would be lost if each initiative began six or 12 months from now rather than today? Initiatives that had the highest cost of delay—either because the benefits were so big or because seasonal opportunities or competitive advantages would be squandered—rose to the top of the backlog.
And, then, instead of just being the experts and authority on money related metrics, doing so on business health metrics:
Her most important work lay in her own domain. She began revamping the planning, budgeting, and reviewing process—first for Project Fusion and then for other parts of the company that were tackling innovation programs. She reset corporate objectives to reflect the new priorities. She created new financial reports for the strategic agile initiative. She also commissioned agile teams to develop planning and budgeting processes similar to those used by venture capital firms with start-ups. Previously done annually, the processes would now occur more frequently—at least quarterly—but would be less onerous. Rather than relying strictly on financial forecasts, teams would increase the transparency of key assumptions, create ways to test them, and identify potential impediments. For example, teams would not simply forecast sales; they would break them into the number of customers per year, frequency of purchases per year, number of items per purchase, and average revenue per item. The most critical and risky assumptions could thus be tested first, and deviations from expectations could be examined and refined. As data began to come in, frequent feedback loops would accelerate decisions to grow gains and limit losses, just as in the venture capital world.
I go over the growth board model in my recent book The Business Bottleneck.
I don’t know though: a lot of bottlenecks in large organizations are just due to scale and the inability of higher level executives to understand what’s going on below them. There’s just too much to understand and know across the organization: no one could know how to govern and manager 100’s, if not thousands of projects.
One school of agile thought wants to “push down” decision making. This implies that (1.) executives primary set strategy and operational constraints (how you can do business and how you can’t, e.g., we’re not going to sell in the Nordics, we’re going to start an hourly rental business, we should remove costs from our building insurance business, etc.), and, (2.) be less involved in day-to-day operations, mostly by reducing the time to not takes to do over-site and, er, “helping.” Number two is colloquially known as “meetings”:
We studied the calendars of three senior executives whose companies became agile organizations, quantified how they spent their time, and then interviewed them. We ran the findings past about a dozen other agile executives, and the results were consistent and eye-opening. By the end of the transition to agile (a three-year process for those firms), the leaders had quadrupled the time spent on strategy (from 10% to 40%) and reduced the time spent on operations management by more than half (from 60% to 25%). The time spent managing talent had risen slightly (from 30% to 35%).
Original source: The Agile C-Suite