Better Businesses Work Together

About 20 years ago, I traveled to Philadelphia to visit a middle market manufacturing company that was a leading user of the Toyota lean manufacturing systems, a renowned factory process that eliminates “waste” and maximizes efficiency.  Brian Maskell (Performance Measurement for World Class Manufacturing) was leading a class on Lean Accounting. Between Brian’s coaching and the observations I made about my surroundings, I learned even more than I had planned.

Among the things that struck me most during my visit was where everyone sat at this company’s office. While that may sound trivial, the seating arrangement here made a huge impact on this facility’s productivity, efficiency, and communication. Here is what I observed: the accounts receivable team was sitting in the sales department; I found the accounts payable team next to the procurement department; the job cost accountant had a desk out on the plant floor; and the CFO’s office was situated between the CEO and the COO’s offices.  The net effect resulted in the accounting and finance teams’ ability to stay involved, allowing them to lead certain transformation initiatives within the company. 

Ultimately, the seating arrangement at this office made accounting and finance deeply involved in improving enterprise value.  Fast forward to today, many companies are still lagging behind in their capacity to blend teams and people. I see accountants who are siloed to the responsibility of all tasks involving financial reporting, internal controls, and budgeting.  Many times, these people are tucked away upstairs, down the hall, or in the back of the building.  This physical separation is palpable and it mirrors the finance team’s detachment from the other divisions, too – inhibiting these departments from driving value creation in the business.

The outcome results in ununified systems and independent data output from each function in the business. I estimate that only about 20% of the executives I work with are satisfied with the data they receive to compare information and data across business units. For example, finance will deliver data and metrics focused on financial performance and balance sheet leverage.  The sales and marketing team will compile metrics around customer engagement, sales turnover, segment performance, or product revenue growth. Operations will produce metrics on inventory turns, obsolescence, direct labor, or efficiency and throughput.  These metrics are often generated independently and can work against each other to cause competing goals and metrics. Sales may want to increase the amount of inventory on hand to drive up delivery performance, whereas finance may have a conflicting goal to optimize working capital and push to drive down inventory levels.  To refine and enrich an organization’s goals, finance, sales, and operations all need to work closely together to align around the key metrics they will all be held accountable for. 

By fostering alignment and active participation of the entire finance team across various business divisions, an organization will enhance its efficiency. The finance team’s involvement in the day-to-day operations of each division will deepen their understanding of the business’s value proposition, enabling them to better deliver on that value according to the business’s strategy and objectives. This added insight, facilitated by the close collaboration among teams, will drive improved financial and real-time data reporting.  The broader relationship will help finance understand how operational decisions impact the health of the company, while also creating an opportunity to help reduce redundancy and strive towards transaction elimination in accounting. 

Connecting finance, operations, and sales is essential for a business to operate efficiently, make informed decisions, and achieve financial stability and growth. While rearranging desks may not be as viable now as it was then, a simple step to initiating this change is to instill a process that brings different departments together on a regular basis.  By establishing this integration, you will contribute to creating a holistic view of the company’s performance, guaranteeing the financial stability of operational activities while aligning them with the organization’s broader goals.

For more information or questions on how Turning Point Strategic Advisors can help, contact us. We're here to help.

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