Decision-making: closing the partnership performance GAP.

• Author: Militello, Frederick C., Jr.
• Position: Professional Development

Over the years, financial professionals have sought a seat at the business table. Chief financial officers want to play a larger role in decisions impacting the strategy of their companies. Moreover, they see the finance organization as a critical source of business decision support. By helping to facilitate more effective decision-making, finance can make a contribution toward enabling the creation of business value. It's no surprise, perhaps, that chief executives consistently agree with these aspirations.

But surveys show, and senior financial executives readily admit, that finance frequently falls short on delivering. Namely, there is a performance gap between partnering aspirations and their organizational realization. There are a number of key causes for this performance shortfall.

First, there have been the distractions of recent financial and economic turmoil--not to mention a plethora of increased regulatory and compliance challenges. Second, with tighter budgets and reduced staff there is only so much the finance organization can accomplish. In challenging times, executives lose sight of less measurable actions, such as partnering, giving an impression of inconsistent prioritization.

Finally, and perhaps most importantly, this performance gap has been exacerbated by decision-making itself. For example, it is well known that decision-making often suffers from short-sightedness. Less discussed is the fact that it is not always driven by an understanding and/or accurate articulation of business needs--especially when those needs involve more emotional elements.

Alternatively, needs may be understood but outcomes still suffer as a result of a misalignment between decision-making frameworks and the underlying circumstances to which they are being applied.

When any of the above conditions exist, there tends to be a retreat of business people from their financial counterparts and a widening of the performance gap between partnering and its organizational realization.

Closing the Performance Gap

There are two benefits of closing the performance gap. First, it is critical for bringing finance closer to the business. It is the only way that a partnership of equals can be achieved. And closing the gap is essential for increased business value. In many cases, decision-making requires going beyond cognitive skills, defined as the mental skill of knowing, reasoning, recognizing, etc. Goal achievement is not the single test of success or failure. Rather, the creation (or destruction) of value is part and parcel of the process of decision-making itself and how that process embraces emotion, intuition and experience.

To address the performance gap, there are a number of fundamental truths to be discussed. They are both cognitive and emotional--covering both the logical and behavioral dimensions of decision-making (see chart on page 58).

Needs and Decision-making

There is no doubt that needs drive decisions. Accordingly, if we don't get the needs of the business right, or if...