An Introduction to Horizontal Management in Financial Services (Part 2 of 2)

• Date: 01 November 2016
• Author: Alan Vercio,Jeff Dauphinee
• DOI: http://doi.org/10.1002/jcaf.22233
• Published date: 01 November 2016

57

© 2016 Wiley Periodicals, Inc.

Published online in Wiley Online Library (wileyonlinelibrary.com).

DOI 10.1002/jcaf.22233

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An Introduction to Horizontal

Management in Financial Services

(Part 2 of 2)

Jeff Dauphinee and Alan Vercio

INTRODUCTION

“An Introduction

to Horizontal Man-

agement in Financial

Services (Part1)”

published in the

July/August issue of

JCAF identified the

requirements for an

organizational struc-

ture to support hori-

zontal management

in financial services.

In the context of “we

cannot manage what

we do not measure,”

Part 2 establishes the

measurement requirements. It

begins with the end, which is a

horizontal process profit and

loss (P&L; Exhibit 1). Subse-

quent requirements include

data structures to support

horizontal management, the

operational plan that feeds the

financial plan, and the prereq-

uisite operational transparency

requirements to achieve finan-

cial transparency.

PROCESS P&L

All financial service orga-

nizations perform three core

processes:

1. Creating new services

2. Maintaining the capability

to deliver existing nancial

services

3. Delivering nancial

services

Note: Because

financial services is a

service industry and

not a product indus-

try, the term service

will be used to repre-

sent product as well

as service.

When processes

are defined and mea-

sured, a customer-

centric process

P&L can be created

(Exhibit 2). (The

numeric values are

illustrative.)

The revenue and

profit before tax val-

ues are identical to the audited

published financial reports.

This is important because it

gives the executive team con-

fidence in the process P&L

and holds the process owners

accountable.

How does a process P&L

improve management? This is

usually the first time the execu-

tive team will have a fair repre-

sentation of the cost associated

This article is a follow up to “An Introduction to

Horizontal Management in Financial Services (Part

1)” published in the July/August issue of JCAF.

Part 1 identified the requirements for an organiza-

tion structure to support horizontal management

in financial services. This article, Part 2, estab-

lishes the measurement requirements. It begins

with the end, which is a horizontal process P&L.

Subsequent requirements include data structures

to support horizontal management, the operational

plan that feeds the financial plan, and the prereq-

uisite operational transparency requirements to

achieve financial transparency.

© 2016 Wiley Periodicals, Inc.

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