Performance management after the slump.

• Author: Driscoll, Mary
• Position: Company overview

Chief financial officers are not apt to relax when they hear talk of "green shoots," the new buzzword for signs of economic turnaround. Skeptical by nature, CFOs remain focused on strengthening performance measurement and management capabilities. Indeed, many have vowed to work more diligently to educate their organizations on the basic tenets of economic profit and how it is created or destroyed.

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According to recent research conducted by the American Productivity and Quality Center, a nonprofit business-benchmarking and research firm based in Houston, senior finance executives across multiple industries plan to stay on alert for new patterns in customer orders, liquidity squeezes, supply chain risks and a plausibly permanent repricing in the credit markets that has put affordable expansion capital out of reach for all but the bluest of blue chips.

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Some CFOs are asking their teams to craft granular analyses of product, market and customer profitability. Others are pushing for more frequent forecasts of revenue, pricing strength, costs, cash flow and pre-tax income. They want to be ready to invest when the recession abates and gross domestic product growth revives.

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Facing Realities

Christina Spade, senior vice president of Affiliate Finance and Business Operations at New York-based Showtime Networks, a unit of CBS Corp., notes that "consumer spending dynamics have been changed dramatically by the downturn, but that doesn't mean good opportunities won't come back."

Relevant scenario analysis can keep a company adaptive and poised to pounce when a clear opportunity pops up. "You have to be ready to invest wisely if, for example, additional investment money becomes available; money that was not contemplated in the annual budget," she says. In fact, finance must make scenario planning a top priority--now more than ever.

"You should be constantly working with the business side as they engage in the early stages of new product development and distribution strategies. Options for going to market with pricing discounts may emerge, but the risks posed to your margin have to be carefully weighed versus the potential for increased volume," adds Spade.

Before the slump, when the capital markets were awash in liquidity, it's fair to argue that CFOs were less inclined to put every investment idea through a truly tough evaluation process. Showtime Networks is, so far, surviving the recession with its growth record intact--thanks largely to its programming strengths and current hit shows. But also in part to the CFO's...