Effective strategic planning creates a vision for the future, develops actionable near- and long-term goals to achieve objectives, and provides clarity for employees on their role in the future success of the company.
Business leaders are finding their ability to craft strategy is being squeezed. Sixty-eight per cent of chief strategy officers said their strategy development timeline was shrinking and 55% said their strategy refresh frequency was increasing, according to a Deloitte survey of chief strategy officers.
Management accountants can help address that problem, offering the information and insights companies need for productive business strategy and development.
Melissa Spence, managing director of UK-based utilities company Burgar Hill Renewables Limited, spoke to FM and set out seven ways that management accountants can make that contribution. Spence is a speaker at the AICPA & CIMA ENGAGE UK & Ireland 2024 conference in October.
Establish the strategy’s importance
Because of their deep knowledge of the organisation, management accountants can play a unique role in establishing and ensuring the value of strategic planning. They can explain, among other things, the many benefits that a plan can offer, Spence said.
An effective plan maps a direction and sets guardrails to ensure that the organisation’s day-to-day efforts are aligned to its long-term business goals. A good plan helps steer the organisation through noise and confusion so that people can make timely and impactful decisions and allocate resources effectively, she said. In addition, Spence said “the strategic plan and the financial plan of the business should be very closely aligned”.
Take a role in strategic plan development
A strong strategic plan is built on a thorough understanding of the market and competitive landscape. That means that a comprehensive, specific, and honest evaluation of the company is essential, Spence said. Finance teams can offer a detailed assessment of the company’s current financial position and where it stands relative to competitors in areas such as revenues, profit margin, market share, customer satisfaction, and other key indicators.
Management accountants “have the ability, the skills, and the responsibility to forecast the financial impact of the strategic plan on the business”, she said. Their financial analysis and forecasts can help shape strategic choices and provide a deep understanding of cost structures, profitability, and financial risk, she added.
Ensure opportunities align with strategic goals
Spence said that strategic plans often aren’t clear about what the organisation should not do. Businesses often waste time on potential opportunities that do not align to longer-term strategic goals. This might include an unrelated new sales channel or maintaining products or formats that are not a strategic priority but still take up disproportionate amounts of management time and other resources, she explained.
As an example, Spence worked with a company that had made a definitive strategic choice to focus on one product category. However, opportunities kept arising to invest in other adjacent categories that didn’t align to the strategic plan and were not within the organisation’s core competencies.
The board insisted on spending time assessing these other opportunities, which devalued the company’s strategic choices and distracted the team from its core strategic focus. Management accountants can offer data-driven evidence of the limitations and potential negative effects of such digressions.
Help minimise ‘wishcasting’
One risk in strategic planning occurs when organisations make overly rosy assessments of their current state and end up confusing where they are with where they wish they were, Spence said. Being unrealistic about their current status can prevent organisations from identifying the projects and initiatives that will help them reach their goals.
Finance teams can provide the data and insights that can keep the organisation on a more realistic path, providing new KPIs, for example, advising on the reallocation of roles or responsibilities, or identifying new financial risks to consider, she said.
Contribute to implementation
Management accountants also have a key role in the execution and monitoring stage. “Good strategic planning does not mean you set it and forget it,” Spence said.
In the planning process, finance will have already projected the impact of goal achievement on revenue growth, profit margins, and other key indicators. Among other things, it would have forecast the costs of executing the plan, including changes to the overall organisation. “If there is to be a change in strategy, there should be a resulting change in the structure of the organisation that enables time and money to be spent on the new strategic priorities,” she advised.
In the implementation phase, finance will be able to consult on these structural changes and measure and monitor how the organisation is performing against goals.
“Having performance indicators is critical,” Spence said. Finance should develop KPIs and business forecasts specific to plan goals. Finance can also determine where new allocations of resources or responsibilities are needed, such as further financial investment to enable delivery of the plan. It can also consult on change management required for effective implementation.
Another consideration is how the environment around the company is changing. If new trends in the business or political environment are likely to have an impact, businesses will need the data and insights that management accountants can provide to update or revise their plans. “Strategy is about remaining competitive over the long term,” she said.
Harness AI
AI technology “can crunch through an extraordinary amount of data in a very short time and draw out patterns that you might have identified yourself, but it would have taken longer to get there”, Spence said. With AI-based tools and algorithms, such as intelligent document processing software, to do the process work for them, management accountants can spend more time on high-value insights.
“AI can be used to build complex models that can scenario forecast and bring many sources of data together to simulate models that can be used [in] strategic decision-making,” she said.
Stay curious
In the end, remaining interested in what goes on throughout the organisation is one of the most valuable skills that a management accountant can have, Spence suggested.
“The finance team’s curiosity about the business can really connect them to what is happening,” she said. “Management accountants have an increasingly important role in every company’s success, and their ability to offer analysis, insights, and leadership is their superpower.”