The Tango Between Ops And Finance

Every year, like clockwork, the dreaded annual budgeting process comes around. For up to a 6 month period there are spreadsheets making their way around the organization, back and forth between different departments, countless inter and intra departmental meetings and negotiations, all to arrive at a set of numbers for the upcoming year that everyone is “happy” with, but more importantly - (should) align with the company’s goals!

While it might seem on the surface to be one long and extremely painful exercise to undertake each year, it does force leaders across the organization to interact and focus on building the plan to achieve the organization’s objectives.

“I know what we produce, but I don’t know how effective we are at producing it”

Depending on the budgeting process employed by the organization, ops leaders are generally required to provide input that includes:

• Performance against plan for the current year, and expected performance for the remainder of the year
• Current and forecasted capability of their operation
• Analysis of the company’s current internal and external environment to obtain information and insight that will help predict the future
• Historical attrition rates
• Historical levels of absenteeism

Throw into the mix the challenges most organizations face when attempting to understand the relationship between resourcing, performance and the impact on service delivery, and you’re left with making some very complex decisions based on limited objective data, and lots of subjective opinions.

A lot of the back and forth and the time taken to finalize the budget is caused by not having the right information readily available and visible to both Finance and Operations. But let’s be honest: if you work in {insert your department here}, you know that {insert other department here} has no idea what they’re doing right?😜

In a recent meeting with a Senior Finance Executive at a large Bank, the conversation turned to the process between Operations and Finance to land on a budget each year. Worth noting that this company has a market cap north of $20bn.

Here is the process the organization currently undertakes:

August

• Open conversations with appropriate Operations Leaders and request relevant Ops metrics from them
• Collate relevant financial metrics for the Ops departments
• Hope the two data sources somewhat align

September

• Meet with Ops Leaders to review a first-cut of next years’ budget (often multiple touchpoints required)
• The conversation inevitably revolves around the need to hire or maintain current levels of staffing because…service levels.
• Wrap-up September with a laundry list of edits to the budget and a litany of qualitative rationales from Ops that are difficult to validate with the data at hand

November

• The arm wrestle is in full-swing now. As the deadline approaches, the negotiation really fires-up. Again, lacking a single source of holistic data, budget-planning devolves into either:
  • Cattle-trading
  • Mandates (typically from Finance) that increase friction between the departments

December

• Finally the budget is locked-in! Nobody is really thrilled with it but hey, it’s done.

January

• One month in and tweaks are already required (“happens every year”) for a number of reasons
• Let’s change it! Although this time Finance is just going to mandate to Ops exactly what needs to happen

Sounds familiar…?

The great irony in this example is that everybody in the process is trying to do the right thing. It starts consultatively - “let’s do this together” but the outcome inevitably becomes direct and lop-sided - “you need to do this”. This is due to the disparate systems being used across the business that causes the disconnect between the data finance looks at, and the metrics operations manage to… which is when subjectivity enters the dancefloor.

Wouldn’t it be nice if all departments had real-time access to the information required to populate their forecast?

If a company has any desire to reduce the time, cost, and frustration of their budgeting process, they should look for better alternatives in products (such as Bramble) that at a high level provide:

Access to good financial information so Ops can effectively work to their budget

Access to good operational information so Finance can build better budgets

The ideal solution should provide a ‘single pane of glass’ view of all the operations metrics and KPIs that play a role in establishing a forecast to inform the budget, such as:

• Productivity
• Utilization
• Service level requirements
• Attrition
• Leave (planned and unplanned)
• Capacity within a team in the current state
• Potential within a team in the current state
• Seasonality in workload
• An objective understanding of the impact process or system changes have on resource requirements

You’ll notice that all the metrics listed above can be managed daily by Ops Leaders. It is pointless building a budget based solely on headcount and inbound volumes as an Ops Leader has limited ability to impact these two metrics…yet they can impact the productivity, utilization and absenteeism (to a certain extent) within their team or department for example.

Once the product is in place, you’ll find that you will immediately be able to provide full transparency of these metrics to both Finance and Ops, so they can start dancing to the same song. Operations can track and manage these metrics on a daily basis, and by embedding a framework that challenges your leaders and individual contributors to move the needle incrementally on the aforementioned metrics, you’ll better align individual and team KPIs with overall strategic goals and make future budget discussions much more pragmatic.

By embedding the ‘single pane of glass’ view of operational performance, providing a transparent forecasting model, and daily visibility on the metrics that a leader impacts, you have created a planning loop that allows for:

• A rapid analysis of performance against budget
• Root-cause analysis on any deviations (and consequently, how to get back on course)
• Universal and recursive KPIs that start at the strategic level and trickle-down to the Individual Contributors
• And most importantly - a repeatable process that will save you hours of meetings and frustration (unless you like hours of meetings and frustration of course…)

Without a product like this, you’ve only provided the venue and the dance floor. If you want to make sure Finance and Operations are dancing in step, you’ll need to provide the music too.