Analysis Paralysis
When does too much information hurt your business?
Company CEOs and leadership teams reach out to us for financial information to make data-driven decisions. After all, accurate and timely Reporting is part of the role of a CFO and a component of the FGC Financial Flywheel™.
Every month we provide a variety of financial reports including financial statements, scorecards, dashboards, metrics, KPIs, forecasts, Pro Forma models, ratios, budget variance, sales projections, and, and, and… – you get the point – for the monthly leadership team meetings.
In the book, The Creative Act, Rick Rubin writes, “Because there’s an endless amount of data available to us, and we have a limited bandwidth to conserve, we might consider carefully curating the quality of what we allow in." This also holds true with the financial information you consume monthly.
Does this mean you shouldn’t track all this information? Absolutely not. However, you should pick carefully. Why do you need the information and what are you doing with it?
Here are some ideas on how to use data to gain insight into your business – and then use it to Create the Next™ strategic step:
1. Identify the unique levers that drive the overall goals of your organization by department. Revisit these quarterly.
2. Select a maximum of 5 metrics and KPIs per department. This includes financial reports. Reviewing your income statement in detail should not be part of your monthly management meeting. Let’s not take the time of the entire leadership team to discuss why supply expenses are higher than budgeted.
3. Ensure you are preparing a trend analysis and not simply a historical report or variance analysis. Use visual reports to quickly identify trends.
4. Expect your management team to join the meeting with insight and recommendations. If needed, you can read the reports prior to the meeting.
And lastly,
5. What are the three numbers you need to see daily to ensure you are on target? Just pick three.
