Chapter 11 Summary

This chapter provides some critical observations on the accounting and finance function’s contribution within a business, the measures of performance used by companies and the impact on the operations function:

• Investment decisions – investment is the lifeblood of development. It is essential, therefore, that a business takes a strategic-based view when evaluating investment proposals and to separate those that are strategic and those that are operational in orientation.
• Strategic investments to be based on order-winners and qualifiers – where investments are strategic in nature, they need to address the order-winners and qualifiers within relevant markets.
• One reason to substantiate an investment – to bring clarity as to why an investment is being proposed, companies should seek to establish the one reason that substantiates the proposal.
• Quantify working capital and infrastructure investments – while the ‘hardware’ of a proposed investment is specified and acknowledged, additional investment in working capital and for infrastructure is often understated only to be eventually met in an after-the-event way.
• Post-investment audits – while the detail underpinning investment proposals is typically well explained and substantiated, most companies do not undertake post-investment audits to ascertain the actual benefits secured and to use this learning in assessing future proposals.
• Performance measurements – ‘what gets measured gets done’ holds true for most companies. Selecting what to measure, therefore, is the key first step. Dimensions such as avoiding long lists, establishing priorities, separating strategic from operational measures, holding regular reviews, looking forward as well as backwards and measuring all parts of a supply chain are key to sound management.
• Setting targets – key issues when setting targets include debating the assumptions on which targets are based and ensuring that the targets set are feasible.