Closing C-suite collaboration gaps: How CFOs can strengthen their weakest links

2015 IBM Corporation

Closing C-suite collaboration gapsHow CFOs can strengthen their weakest links

October 2015


CEOs say collaboration is the top factor in C-suite effectiveness and that ability to work together is linked to enterprise performance

28%more72%Underperformers

92%Outperformers

2

Top trait for C-suite effectiveness

50%CollaborationCollegiality, teamwork, alignment

Hon

esty

Col

labo

ratio

n

Shar

ed P

urpo

se

Kno

wle

dge

Com

mun

icat

ion

Skill

s

Questions: What do you think are the three leading factors of a top performing C-suite team? Indicate your agreement or disagreement: My C-suite works together effectively in a collaborative, collegial and productive way

Sources: IBM Institute for Business Value, Exploring the inner circle: Insights from the Global C-suite Study, December 2014; The Customer-activated Enterprise: Insights from the Global C-suite Study, 2013

Outperforming C-suites work together well

http://www-935.ibm.com/services/us/en/c-suite/csuitestudy2013/http://www-935.ibm.com/services/us/en/c-suite/csuitestudy2013/Chart1

92

8

Column1

Sheet1

Column1

9292

88

To resize chart data range, drag lower right corner of range.

Chart1

72

28

Column1

Sheet1

Column1

7272

2828

To resize chart data range, drag lower right corner of range.


Although CFOs have relationships across the C-suite, they tend to have weaker ties with the CHRO, CSCO and CMO

CEO

CFO

CHRO

CIO

CMO

CSCO

Question: Which of your C-suite peers do you work most closely with in support of the enterprise?Source: IBM Institute for Business Value, Exploring the inner circle: Insights from the Global C-suite Study, December 2014

Who works with whom?

3

Relationships strongest to weakest1. CEO2. CIO3. CHRO4. CSCO5. CMO

http://www-935.ibm.com/services/us/en/c-suite/csuitestudy2013/


CFOs must improve their collaboration with CHROs, CSCOs and CMOs to address enterprise challenges

4

CFO-CHRO

CFO-CMO

CFO-CSCO

Attract and manage top talent within finance and across the enterprise

Take advantage of a future business landscape that requires new products/services, improved customer interactions, and entering new markets

Address the external and internal factors that are dramatically impacting the supply chain


Drive insight and measurement to supply chain decision-making

CFO-CSCO

Address the external and internal factors that are

dramatically impacting the supply chain

CFOs need to increase their collaboration with CHROs in order to improve both talent acquisition and workforce performance

5

Collaborate on workforce planning and performance

management

CFO-CHRO

Challenge:

Opportunity:

Attract and manage top talent within finance and

across the enterprise

Apply analytics to marketing and revenue

growth

CFO-CMO

Take advantage of a future business landscape that

requires new products/services, improved customer

interactions, and entering new markets


Having the best financial talent is essential for CFOs but they also have a vested interest in attracting top talent to the enterprise

Previous 3 years

Next 3 years

58%

41%

Questions: How important are each of the following areas of responsibility to your enterprise? How effective is your organization in the following areas?(Effectiveness gap = Importance Effectiveness)What are the top priorities in your business strategy?

Sources: IBM Institute for Business Value, Pushing the frontiers: CFO Insights from the Global C-suite Study, 2014, New expectations for a new era: CHRO Insights from the Global C-suite Study, 2013

6

CFOs top 3 effectiveness gaps Attracting top talent is arising CEO priority

Develop talent in the finance

organization

Drive integration of information across

the enterprise

58%46%

Optimize planning, budgeting and

forecasting

42%

http://www-935.ibm.com/services/us/en/c-suite/csuitestudy2013/http://www-935.ibm.com/services/us/en/c-suite/csuitestudy2013/


Enterprises in which CFO and CHRO work well together report significant advantages

CEO

CHRO

CFO

32% more outperformers vs. underperformers have strong CEO-CFO-CHRO collaboration1

7

Outperformance Faster growth Better productivity

41% of strong collaborators experienced EBITDA growth greater than 10% vs. 14% of others2

43% of strong collaborators have seen a significant improvement in workforce productivity compared to only 10% of others2

Sources: 1 IBM Institute for Business Value, Exploring the inner circle: Insights from the Global C-suite Study, December 2014; 2 EY Partnering for performance, Part 2: the CFO and HR, 2014

http://www-935.ibm.com/services/us/en/c-suite/csuitestudy2013/http://www.ey.com/Publication/vwLUAssets/EY-Partnering-for-performance-the-CFO-and-HR/$FILE/EY-Partnering-for-performance-the-CFO-and-HR.pdf


To build a more collaborative relationship, CFOs should team with CHROs in two key areas

8

1.

2.

Get more involved in workforceinvestment decisions

Apply analytics approaches to workforce acquisition, retention and productivity


CFOs and CHROs at high-performing companies are collaborating on workforce analysis and planning

Source: EY, Partnering for performance, Part 2: the CFO and HR, 2014

Area 1: Get more involved in workforce investment decisions

9

High performers All others

High performers

vs. all others

14%

Scenario planning

Predictive workforce analytics

Bridging the gap between strategic workforce planning and operational execution

Skill gap analysis

13%

13%

16% 3.6x

4.2x

4.0x

3.5x

58%

54%

52%

49%

Percentage who say the CFO is heavily involved in the following human capital investment choices:

http://www.ey.com/Publication/vwLUAssets/EY-Partnering-for-performance-the-CFO-and-HR/$FILE/EY-Partnering-for-performance-the-CFO-and-HR.pdf


Organizations with increased workforce analytics prowess see better results across a wide range of human resource measures

Area 2: Apply analytic approaches

10

Analytic outperformers effectiveness at talent management vs. All others1

52%vs. 25%

ROI on workforce analytics initiatives related to talent management, strategic workforce planning, ROI-based HR policy22x-5x

1-year employee retention for analytically advanced Finance organizations vs. All others3

+5%points

Workforce productivity for analytically advanced Finance organizations vs. All others3

2.5xmore effective

CFOs and CHROs from high performers use analytics to gain a better understanding of the drivers of employee performance and engagement vs. All others4

70%vs. 42%

Talent management effectiveness

Return on investment

Employee retention

Workforce productivity

Use of analytics

Sources: 1 IBM Institute for Business Value, New expectations for a new era: CHRO Insights from the Global C-suite Study, 2013; 2 Data sourced from IBM Global Business Services; 3 Additional data from IBM Center for Applied Insights, Inside the mind of Generation D: What it means to be data-rich and analytically driven, 2014; 4 EY, Partnering for performance. Part 2: the CFO and HR, 2014

http://www-935.ibm.com/services/us/en/c-suite/csuitestudy2013/http://www.ibm.com/ibmcai/Gen_Dhttp://www.ey.com/Publication/vwLUAssets/EY-Partnering-for-performance-the-CFO-and-HR/$FILE/EY-Partnering-for-performance-the-CFO-and-HR.pdf


Teaming on workforce analytics can bring big benefits

11

A leading retaileris using advanced analytics to address attrition

A logistics company is optimizing their workforce mix

The estimated annual indirect cost of attrition for part-time pharmacy techs and clerk cashiers is $143M

Used a predictive model ingesting 80M+ rows of multi-sourced data to identify top drivers of attrition

Enables store-level analysis of attrition and its impact on revenue, prescriptions and customer satisfaction

Ingested and cleansed 80M+ rows of data from disparate sources

To optimize its workforce mix on a per-store basis, built a predictive model that identified top drivers for peak demand

~$20M estimated cumulative cost savings (2015-2017)

Source: IBM Global Business Services projects


Drive insight and measurement into supply

chain decision making

CFO-CSCO

CFOs need to increase their collaboration with CSCOs to more effectively respond to supply chain challenges

12


management

CFO-CHRO

Challenge:

Opportunity: Apply analytics to marketing and revenue

growth

CFO-CMO









Cutting supply chain costs is critical to CFOs putting a premium on collaboration with CSCOs

Source: Adapted from Grant Thornton, Why CFOs are a vital supply chain link, 2015; EY, Partnering for performance, Part 1: the CFO and the supply chain, 2014

13

http://www.slideshare.net/GrantThorntonUS/vacfo-manufacturingsupply-chaindeckhttp://www.ey.com/Publication/vwLUAssets/EY-Partnering-for-performance-the-CFO-and-the-supply-chain/$FILE/EY-Partnering-for-performance-the-CFO-and-the-supply-chain.pdf


Companies that have a business partnering model in place between the CFO and the CSCO report higher EBITDA growth

Source: Adapted from EY, Partnering for performance, Part 1: the CFO and the supply chain, 2014

14

EBITDA change over the past 12 months

48%

22%

0%

10%

20%

30%

40%

50%

60%

Over 5%increase

1-5%increase

No change 1-5%decrease

Over 5%decrease

Business PartneringTraditional

http://www.ey.com/Publication/vwLUAssets/EY-Partnering-for-performance-the-CFO-and-the-supply-chain/$FILE/EY-Partnering-for-performance-the-CFO-and-the-supply-chain.pdf


To build a more collaborative relationship, CFOs should team with CSCOs in two key areas

15

1.

2.

Integrate financial planning with sales & operational planning (S&OP)

Use analytics to address supply chain challenges


44%

Forecasting and demand planning are key areas for collaboration, given their ties to enterprise performance

30%All other CFOs

51%Top-performing Finance organizations

46%Top-performing Finance organizations

70%more

32%All other CFOs

more

Effectiveness of demand planning and forecasting

Effectiveness of supply chain financials,economics and forecasting

16

Area 1: Integrate financial planning with S&OP

Note: Top-performing Finance organizations defined as those having high finance efficiency and strong business insightQuestion: How effective is Finance in the following areas?Source: Additional data from IBM Institute for Business Value, Global C-suite Study, 2014

http://www-935.ibm.com/services/us/en/c-suite/csuitestudy2013/Chart1

46

54

Column1

Sheet1

Column1

4646

5454

Chart1

32

68

Column1

Sheet1

Column1

3232

6868

Chart1

51

49

Column1

Sheet1

Column1

5151

4949

Chart1

30

70

Column1

Sheet1

Column1

3030

7070


Network, inventory, and transportation optimization

Reduce costs and improve customer service via Network optimization: Number, size, location, and

characteristics of nodes Inventory optimization: Multi-echelon policies based on

variability Transportation optimization: Routes and fleet

Model the entire supply chain and determine the

financial and environmental impact of changes to any

element

Scenario modeling

Predictive analytics

Improve business outcomes using analytics engines that

run on both internal and external data

Supply chain visibility

See across all network nodes (plants, central DCs,

regional DCs, stores)

Tailor real-time optimization to the requirements of a

specific industry, company, supply chain function, or

process

See end-to-end Do more with less Predict the future

Through the use of analytics, CSCOs and CFOs can tackle their mutual supply chain objectives

17

History

Partner

Causal Optimal Forecast

ForecastEngines

Area 2: Use analytics to improve the supply chain

Custom optimization


Teaming on supply chain analytics can yield significant outcomes

18

Del Monte increased productivity throughperformance management analytics1

McKesson applied analytics to operational, environmental, and financial decisions2

Becker Underwood improved productivity and increased inventory turns with better S&OP3

Enhanced integrated planning cycle through better risk and sensitivity analysis

Accelerated productivity savings to 4% cost of goods, approximately $100 million per year

Eliminated over 40 million miles through optimization, reducing transportation costs

Delivered 80% savings in supply planning efforts moving from 5 days to 1

Incorporated customer and product-level plans into a 12-month rolling forecast for greater visibility

Resolved supply chain issues resulting in 50% decrease over three years

Incorporated order data into the forecast process and increased accuracy by up to 15%

Created four predictive analytic engines (driving a fifth that shows profit & loss impact) to optimize supply chain:- Inventory Positioning to optimize inventory

policy

- Sustainability to quantify impact of actions on energy use and carbon emissions

- Network Analysis to optimize network structure and supply flow

- Vehicle Routing & Customer Clustering to minimize number of trucks used and total distance traveled

Delivered $100 million working capital savings

Sources: 1 IBM Business Analytics Just in time: How three companies are anticipating demand with adaptive rolling forecasts, 2010; 2 IBM Case Study McKesson Corp., 2014; 2 IBM Press Release, Made in IBM Labs: McKesson Taps IBM to Reduce Greenhouse Gas Emissions, Boost Pharmaceutical Supply Chain Efficiency. 2010; 3 IBM Business Analytics Becker Underwood achieves an ROI of 383 percent within 4 months, 2011.

ftp://public.dhe.ibm.com/software/data/sw-library/cognos/pdfs/whitepapers/wp_how_three_companies_are_anticipating_demand_with_adaptive_rolling_forecasts.pdfhttp://www-01.ibm.com/common/ssi/cgi-bin/ssialias?subtype=AB&infotype=PM&appname=SWGE_IM_IM_USEN&htmlfid=IMC14865USEN&attachment=IMC14865USEN.PDFhttp://www-03.ibm.com/press/us/en/pressrelease/33007.wss?cm_sp=MTE15682https://www.ibm.com/smarterplanet/global/files/se__sv_se__intelligence__Becker_Underwood.pdf


Drive insight and measurement to supply chain decision-making

CFO-CSCO

CFOs need to increase their collaboration with CMOs in order to take advantage of emerging business opportunities

19


management

CFO-CHRO

Challenge:

Opportunity: Apply analytics to improve marketing and drive

revenue growth

CFO-CMO









CEOs turn most to CFOs and CMOs for strategy input yet, CFOs and CMOs are the least collaborative

37%35%

CMOCIO

CSCO42%

CFO 72%

CHRO

63%

Questions: Which senior executives are involved in formulating the organizations business strategy?Which of your C-suite peers do you work most closely with in support of the enterprise?

Sources: IBM Institute for Business Value, Pushing the frontiers: CFO Insights from the Global C-suite Study, 2014; Exploring the inner circle: Insights from the Global C-suite Study, December 2014

20

Involvement in developing organizations business strategy

Strength of CFOs C-suite relationships

CFO

CEO CIO CHRO CSCO CMO



Strong CFO-CMO collaboration correlates with better performance and is increasingly critical to address top business changes

Question: How do you see the landscape changing over the next 3 to 5 years?Sources: IBM Institute for Business Value Exploring the inner circle: Insights from the Global C-suite Study, December 2014; Additional data from IBM Institute for Business Value, Global C-suite Study, 2014

CEO

CMO

CFO

21

35% more outperformers vs. underperformers exhibit strong CEO-CFO-CMO collaboration

Top business changes over next 3-5 years

83%

69%

61%

55%

54%Focus on customers as individuals

Partnering for higher business value

Social / digital interaction with customers

Develop new products and services

Enter new markets



An analytical approach to marketing provides common ground for CFOs and CMOs

22

1.2.

Invest in analytics to drive revenue growth

Increase ROI for digital strategies

3. Establish key marketing performance metrics


Analytics are a key enabler to reach CFOs and CMOs shared revenue objectives

23

Area 1: Invest in analytics to drive revenue growth

On revenue growth opportunity identification & tracking by top performing Finance organizations vs. All others1

70%more time spent

Of big data to identify new products and services by top performing Finance organizations vs. All others1

69%more use

Revenue through digital channels for analytically advanced Finance organizations vs. All others2

+6%points

CFOs and CMOs that adopt a marketing analytics approach unlock marketing budget to either reinvest or return to the bottom line3

+10-20%more available

Revenue growth opportunity

Big data to identify new products

Digital channels revenue

Marketing budget

Questions: Where does Finance spend its time?For each measure please indicate approximately how your business performs on that measureHow effective is your enterprise in doing the following today? Please rate on a scale of 1 to 5, where 1 is 'not effective at all' and 5 is 'extremely effective.'

Sources: 1 Additional data from IBM Institute for Business Value Global C-suite Study, 2014; 2 IBM Center for Applied Insights, Breaking the data barrier: Lessons from analytically advanced Finance organizations, 2014; 3 McKinsey & Company, Why cant we be friends? Five steps to better relations between CFOs and CMOs, December 2013

http://www-935.ibm.com/services/us/en/c-suite/csuitestudy2013/http://www.slideshare.net/SpencerLin1/breaking-the-data-barrier-lessons-from-analytically-advanced-finance-organizationshttp://www.mckinsey.com/insights/corporate_finance/why_cant_we_be_friends_five_steps_to_better_relations_between_cfos_and_cmos


Analytics also allow CMOs and CFOs to demonstrate the return on investment from marketing activities

Source: 1 McKinsey & Company, Why cant we be friends? Five steps to better relations between CFOs and CMOs, December 2013 (Jonathan Gordon, Jean-Hugues Monier, Phil Ogren), 2 IBM Institute for Business Value, Stepping up to the challenge: CMO insights from the Global C-suite Study, 2013; 3 Additional data from IBM Institute for Business Value, Global C-suite Study, 2014

Area 2: Increase ROI for digital strategies

OpportunityReality

Just 36% of CMOs have successfully used analytics to demonstrate marketing ROI1

63% of CMOs report marketing ROI will be the primary way they are measured over the next five years, but only 44% prepared to manage it2

51% of CFOs and 55% of CMOs see undefined ROI measures as one of the top challenges with implementing a digital strategy3

24

With companies spending as much as 10% of their annual budgets on marketing, depending on the industry $1 trillion globally1 the ability to put quantitative numbers against marketing performance is critical to a CMO and CFO partnership

http://www.mckinsey.com/insights/corporate_finance/why_cant_we_be_friends_five_steps_to_better_relations_between_cfos_and_cmoshttp://www-935.ibm.com/services/us/en/c-suite/csuitestudy2013/http://www-935.ibm.com/services/us/en/c-suite/csuitestudy2013/


Marketing performance management can help foster a closer working relationship between the CMO and the CFO

Potential revenue-aligned metrics Revenue how much revenue has been

generated by marketing and within what time frame?

Opportunity-to-won ratio what percent of marketing generated pipeline is converting into closed business?

Cost-per-lead / Cost-per-win how much marketing expense per lead or win is incurred on average?

Pipeline velocity how quickly are qualified opportunities being progressed through the sales cycle?

Area 3: Establish key marketing performance metrics

Source: CMO.com, 5 ways CMOs can get their CFO onside, December 19, 2013 (Nadia Cameron)

25

Customer retention rates what impact is marketing having on retention and advocacy metrics such as the Net Promoter Scores?

New vs Install base pipeline and revenue what is marketings contribution to helping grow the existing business versus growing net new business?

Brand equity and reputational risk how is brand and reputation impacting the organizations market capitalization and financial stability?

http://www.cmo.com.au/article/534628/updated_5_ways_cmos_can_get_their_cfo_onside/


By collaborating more closely, CMOs and CFOs are demonstrating marketing ROI more clearly and improving marketing spend

26

Source: Harvard Business Review, How Big Data Brings Marketing and Finance Together, July 17, 2014

A cross-functional group of executives from insights, brand, marketing, media, digital and finance meet regularly to adjust spending allocation plans based on modeling and analytic results

Agreement on a common set of ROI metrics helped facilitate decision making about investing in short-term sales versus brand equity

Formed a special Marketing ROI (MROI) team a collaboration between Marketing and Finance

Shared a fully transparent analytics platform that both Marketing and Finance could access to run what-if scenarios, optimize marketing-dollar allocations across products and markets, and get course-correcting feedback on the performance of those allocations

Example: Quantification of how Intels social media marketing on Facebook affected PC sales paid Facebook ads and the companys own unpaid Facebook postings increased Intel brand and product search volume by 1.9%-2.3%

Intel uncovers new insights via a partnership between marketing & finance

Mattel uses analytics and common metrics to inform enterprise spending decisions

http://www.hbr.org/2014/07/how-big-data-brings-marketing-and-finance-together/


Are these key C-suite relationships tight or tenuous? Enterprise performance depends on that answer.

27

CFO-CHRO CFO-CMOCFO-CSCO

1.

2.

Integrate financial planning with sales & operational planning (S&OP)

Use analytics to address supply chain challenges

1.

2.

Get more involved in workforce investment decisions

Apply analytic approaches to workforce acquisition, retention and productivity

1.

2.

Invest in analytics to drive revenue growth

Increase ROI for digital strategies

3. Establish key marketing performance metrics

Closing C-suite collaboration gapsHow CFOs can strengthen their weakest linksCEOs say collaboration is the top factor in C-suite effectiveness and that ability to work together is linked to enterprise performanceAlthough CFOs have relationships across the C-suite, they tend to have weaker ties with the CHRO, CSCO and CMO CFOs must improve their collaboration with CHROs, CSCOs and CMOs to address enterprise challengesCFOs need to increase their collaboration with CHROs in order to improve both talent acquisition and workforce performanceSlide Number 6Enterprises in which CFO and CHRO work well together report significant advantagesTo build a more collaborative relationship, CFOs should team with CHROs in two key areasCFOs and CHROs at high-performing companies are collaborating on workforce analysis and planningOrganizations with increased workforce analytics prowess see better results across a wide range of human resource measuresTeaming on workforce analytics can bring big benefitsCFOs need to increase their collaboration with CSCOs to more effectively respond to supply chain challengesCutting supply chain costs is critical to CFOs putting a premium on collaboration with CSCOsCompanies that have a business partnering model in place between the CFO and the CSCO report higher EBITDA growthTo build a more collaborative relationship, CFOs should team with CSCOs in two key areasForecasting and demand planning are key areas for collaboration, given their ties to enterprise performanceThrough the use of analytics, CSCOs and CFOs can tackle their mutual supply chain objectivesTeaming on supply chain analytics can yield significant outcomesCFOs need to increase their collaboration with CMOs in order to take advantage of emerging business opportunitiesCEOs turn most to CFOs and CMOs for strategy input yet, CFOs and CMOs are the least collaborativeStrong CFO-CMO collaboration correlates with better performance and is increasingly critical to address top business changesAn analytical approach to marketing provides common ground for CFOs and CMOsAnalytics are a key enabler to reach CFOs and CMOs shared revenue objectivesAnalytics also allow CMOs and CFOs to demonstrate the return on investment from marketing activitiesMarketing performance management can help foster a closer working relationship between the CMO and the CFOBy collaborating more closely, CMOs and CFOs are demonstrating marketing ROI more clearly and improving marketing spendAre these key C-suite relationships tight or tenuous? Enterprise performance depends on that answer.

Closing C-suite collaboration gaps: How CFOs can strengthen their weakest links

Data & Analytics