Out of Sight, Out of Mind?
Not any more with 20/20 foresight!

By Guy Haddleton
Chief Executive Officer, Adaytum

In the wake of accounting irregularities and in the aftermath of the high-profile bankruptcies of several major companies, financial professionals understand that the rules of fiduciary duty, disclosure, and communication will undergo a significant – if not radical – transformation. What happens in the boardroom and in the general ledger can no longer be a case of "out of sight, out of mind."

Recent events are driving discussions on a wide range of issues such as conflicts of interest between the consulting and accounting arms of the Big Five, clarity and detail in financial reporting, and ethical and forthright behavior by corporate executives.

Perhaps the most important issue to address is the resulting distrust and lack of confidence that increasingly characterize relations between shareholders and corporate officers. No longer can executives claim they were unaware of material issues facing their company. They will either be deemed dishonest or incompetent by one of the most critical stakeholders.

How can corporate executives establish – or re-establish – a trusting relationship with the investment community? The same way a trusting relationship is achieved – it must be earned, over time. By maintaining ongoing communications, clearly outlining expectations for performance, and continually meeting those goals, executives can reaffirm the shareholder's trust in both the corporation and its stewards.

Conveying expectations – and meeting them – is no small effort, of course. It is a significant challenge from both tactical and strategic perspectives – but one on which the future success of the corporation depends. This challenge is magnified for global enterprises that battle distributed operations, time zones and language barriers in the quest for meeting performance expectations.

To meet the challenge, companies must automate their planning processes, much like the ERP, supply-chain management, and instant communication solutions of the previous decade, which brought unprecedented speed, flexibility, and intelligence to those processes. The fact is, organizations have spent trillions of dollars on enterprise platforms for managing transactions and analyzing results, but still use antiquated means for a crucial business process: planning.

Executives must implement processes and solutions that demonstrate to investors they are accurately conveying corporate performance – not playing a high-stakes "shell-game." However, the significant obstacle to communicating ongoing and accurate performance, or taking internal action to stay on course, is that current business planning tools are unable to facilitate the "real-time enterprise."

Like the adding machine and calculator before it, the spreadsheet is being eclipsed as the corporation's preferred planning tool. In its place, real-time enterprise business planning (EBP) has emerged as the solution that will best enable companies to present current performance and forecasts on a real-time basis to inspire public and shareholder confidence.

EBP expands beyond financial planning to encompass all areas of the corporation in function, process, and strategy, including human resources, sales, marketing, and manufacturing. In adopting this broader vision, companies will achieve the benefits of enterprise business planning by fully aligning their goals and operations, gaining a much clearer picture on company-wide performance.

Planning is also a numbers game. It should no longer be "planning by the few for the masses." Instead, real-time EBP means planning by the masses for the few. Participation in the planning process must extend deeper into the organization, to the people at the front lines of the business. By putting the plan in the hands of those who are closest to it, planners achieve greater granularity (hence, accuracy) and speed.

This has an additional benefit – it creates confidence in the numbers for the executives who are monitoring performance. A key element in maintaining ongoing communication with shareholders is the executive's own "comfort zone" with the data. In this era of increased scrutiny, EBP provides a valuable offensive against missed targets and flawed forecasts.

Finally, companies must constantly refresh plans. As we all know well, business cycles are not always predictable. Unexpected changes in the business environment require the ability to change plans quickly. This requires real-time information for frequent analysis and adjustment.

It is the combination of all of these factors – the triangulation of historical data, top-down financial plans and continual bottom-up signals from the field, and real-time data – that will enable companies to monitor performance, take appropriate action, and convey realistic performance expectations to their shareholders.

A system and a process that can ensure a consistent track record inspires confidence by ruling out the potential for misleading accounting measures and enables the executive team to speak candidly and regularly about the state of their business.

No longer does corporate America have the luxury of obscuring the details in the name of competitive considerations or confidentiality. Instead, investors are seeking transparent access to a broader and deeper set of guidance. Real-time business planning and forecasting now operate in the light of day. Recent events have forced corporations to make it simple and to avoid needlessly complex – and tardy – disclosures and restatements. The only question is whether your company will start inspiring confidence now, or if it will wait for a journalist to do it for you.