tag:blogger.com,1999:blog-1769111201327361230.post802399046461937876..comments2020-10-22T15:27:32.874+11:00Comments on Agile-jitsu: What will it take to get Agile-friendly finance models in corporations?Daniel Pragerhttp://www.blogger.com/profile/05502083078481742896noreply@blogger.comBlogger2125tag:blogger.com,1999:blog-1769111201327361230.post-87064891920229337122018-08-08T19:28:05.144+10:002018-08-08T19:28:05.144+10:00Having spoken to a bunch of finance types, I think...Having spoken to a bunch of finance types, I think the actual pain point in finance teams is diferent.... It's a responsibiity/control mismatch. They are responsible for the budget but in reality have very little control over how its really spent... And we are asking them to give up what little sense of control that they have.<br /><br />Finance teams are essentially trying to control the uncontrollable. To do that they impose all the things we know and hate - annual budgeting cycles, business cases etc. They are all ways of trying to exert control over money.<br /><br />The models presented above (beyond budgeting etc) don't fix that fundamental problem. They actually ask the finance team to devolve more control to the operational teams. To a finance team struggling with control, they make the problem worse.<br /><br />Finance teams (like the rest of the organisation) are locked into a system that forces them to behave in a particular way. What needs to happen is a change in organisational remit for the finance teams. They need to shift from controlling finances for the organisation to providing financial advice and reporting to the organisation. That will require changes from the Ceo and board level.<br /><br />Cheers<br />DaveDave Martinhttp://www.dontpanicitsolutions.com.au/noreply@blogger.comtag:blogger.com,1999:blog-1769111201327361230.post-60064066934896392072018-08-08T09:40:55.741+10:002018-08-08T09:40:55.741+10:00Thanks Dan for this. I’m appreciating how you have...Thanks Dan for this. I’m appreciating how you have summarised the startup vs corporate funding models and pointed out issues with the corporate funding model. Reading this, I reflect more generally on the pain points I imagine finance people to have. Clearly the overall concern of finance is how money is being managed - how it is (i) being allocated and (ii) tracked; that (iii) business cases make sense and (iv) are actually returning the results that were forecast. <br /><br />* For (i), inevitably there isn’t enough money to go around (except in rare circumstances) so the politics of who gets what money seems challenging to manage. Particularly when the cost cutting part of the cycle emerges. From what I’ve seen of the finance people I’ve interacted with, there can be frustrated heavy handed enforcing of decisions associated with who gets what money rather than collaborative negotiation of conflict.<br />* For (ii), money seems to be tracked through cost centre buckets that require a lot of management by PMs and justification of spending. Managing budgets is obviously super important. People need to be kept to account so that money is not fruitlessly spent. This can easily turn into policing that has people feel like they are having to answer to dad though. I think it would actually be super helpful to finance people to be able to trust that people are going to responsibly manage their money. What’s then important is evidence that people are being responsible rather than policing the specifics for people<br />* For (iii), business casing I think can be a bit of a dark art. How do you make reasonable assumptions that reality is going to do what we want. I see a lot of people having biases in their business cases because they want the results they are after. Seeking disconfirming evidence is so so important! This to me is a major piece that Agile approaches bring, they often not well - the more the business case can be treated as a hypothesis to be tested and then pivoted on as we learn, the more likely we’ll get results we want. This to me is the major problem with corporate financing models - that there is very little room to revise the business case based on learning.<br />* The above point is strongly tied to (iv) in that if there is no way to be measuring the validity of the business case then we have no idea if it achieved the results we expected. I see this as a major issue in corporates. Most people fudge numbers to make reality look like the assumptions generally because their incentives are tied to having achieved these results. I think it’s so important here to remember that correlation does not equal causation. I have sat in many a business team meeting with the team congratulating itself on it’s results (which is important for sure) but with no questioning of why tho results actually occurred - it could actually have been for all kinds of reasons separate to whatever feature or operational process has been implemented. Of course reality is complex with a lot of variables - it’s generally super hard to know what caused what. Any finance person worth their grain of salt I think should be asking for some sense of evidence that a team know’s why results have been achieved rather than just being happy that the results have been achieved.Khalihttps://www.blogger.com/profile/16192876304123474875noreply@blogger.com