Financing Corporate Unity:Spending & Accountability Tips from Life Science Executives
Spending & Accountability Tips from Life Science Executives
Industry and regulatory uncertainty are forcing financial executives to reestablish company spending goals while instilling strong accountability benchmarks. Connecting with executives across the industry gives leaders new perspectives and greater tools to discover solutions to these financial challenges.
Spending and accountability trends are especially important for leaders to successfully navigate their companies toward growth. To understand more about spending and accountability, we turn to Jill McConnell, Vice President of Finance, U.S. Pharmaceuticals at GlaxoSmithKline, Alan Bucher, Vice President of Finance, Orthopedics and Tissue Technologies at Integra LifeSciences, and Sandra Clarke, Senior Vice President of Finance and CFO at Daiichi Sankyo, Inc.
All three executives, who will be leading discussions at this year’s Life Science CFO Strategic Governance Forum, explain how to spot spending and accountability problems within a company as well as how to solve them:
Spotting Signs of Trouble
Financial responsibility is a team effort. Collaborating with business units means being able to see the red flags. Open communication channels are essential to a proactive approach towards addressing potential problems.
For Jill McConnell, the ability to evolve investment strategies and re-prioritize as business needs change is crucial to a healthy financial culture. “Hearing that this is how they’ve always done it is a flag that the activities are ripe for re-evaluation,” she explains. “If a unit cannot speak to the current ROI of their spend or is hesitant to make trade-offs as new opportunities emerge, I know that I need to evaluate their spending trends.” Evolving investment and spending strategies is crucial to unit and company growth.
Preparing units and departments to grow healthy evaluation strategies begins with communication for Alan Bucher, “Having regular check-ins with unit and company leadership gives everyone time to prepare for new strategies while evaluating prior decisions. These standing meetings can help the unit grow while ensuring a positive relationship with finance.” Meeting with leadership also decreases the chances of unknown mistakes or financial difficulty.
Supporting Unit Leadership
Providing the resources and tools for unit leadership to make final financial decisions and prepare for successful investments signify a balanced financial culture. For Sandra Clarke, this balance comes from measurement, “Working with unit leadership means agreeing on what to track and measure –and how to do it. Having basic benchmarks in place among the entire leadership team sets a standard that we can all adhere to.”
Bucher and McConnell agree that trust needs to come next. Bucher explains, “We want leadership to see finance as a resource that can help guide them towards growth and success.” Encouraging unit leadership to seek guidance and resources from corporate and commercial finance can strengthen company relations and support financial goals.
Company & Unit Spending Goals
Enabling businesses to reach their full potential relies on setting realistic goals both for the unit and the company as a whole. These goals may be company-wide or business unit specific but should have at least some elements that are consistent to ensure alignment and shared purpose. “Investment and spending habits should be differentiated based on relevant factors such as growth drivers, key customers, stage of product lifecycle, etc.,” explains McConnell, “Company size and diversity may mean that company-wide goals are not appropriate for tracking success universally across the business, but linkage to the critical success factors for the enterprise should be clear so that all employees can see how they contribute to the overall performance.”
Bucher prefers to schedule an all-day review for the unit, “Leadership needs to work as a team to evaluate current spending habits and goals. Meeting at once and going over investments, ROI, and asking basic questions about what the unit needs and how we, in corporate and commercial finance, can help makes this collaborative meeting a win-win for all involved.”
Smaller companies, however, should be thinking about the big picture. “Department spending trends,” says Clarke, “will have a bigger impact in smaller companies. If you set high level group or unit spending goals, the accountability is less clear. However, if you set lower level spending goals, people may not invest in revenue growth opportunities for fear of being penalized on the spending. It’s important to have a process that allows flexibility or forgiveness for appropriate, approved spending deviations so you don’t negatively impact future growth.” Keeping size and industry in mind is also important in evaluating spending and accountability trends. If a company is comprised of different industries, different financial goals and benchmarks are necessary to promote company success.
Benchmarking Accountability and Success
Measuring the success of these goals is done through thorough benchmark analysis. However, defining those benchmarks can create tension within a company as every group wants to position their measures in a way that is most favorable for them. McConnell explains, “the hardest part about metric implementation is deciding on the right ones. The right lead indicators, proactively managed, ensure that your lag measures will perform as intended. Companies need to ask themselves about their growth, goals, and how quickly they need to see results – you need separate measures for day-to-day operational objectives as well as longer-term strategic priorities.” McConnell also suggests that companies need to always be thinking about future goals and opportunities – the measurement system needs to be flexible and fit-for-purpose.
Likewise, Clarke suggests focusing on few, key benchmarks, “Piling one measurement on to another will not yield better results. Taking few points of measurement and tracking those long-term will show company growth, spending, and accountability success over time.”
Bucher suggests paying attention to the budget –whether under or over, “Ensuring that a department is watching their budget and remaining accountable for any misgivings is crucial. Even if spending comes in under budget, we need to know whether that is positive or not. Was something forgotten? How can we accurately measure spending accountability in the unit?” Remaining aware of budget increases and decreases can help companies accurately map spending and investment strategies, post evaluation.
Accessing and utilizing the correct financial resources is the first step to evaluating and redefining spending and accountability success. This importance leads many executives to seek cross-industry collaboration and relationship. The ability to engage with a varied group of financial executives enables leaders from different business backgrounds to share best practices and easily navigate industry challenges.
For McConnell, this collaboration is crucial to learning from real-life experiences, “Connecting and hearing what other people are doing is so important in executive leadership. Hearing about real successes and failures from like-minded executives helps us enhance our processes, find solutions to challenges, or avoid mistakes others have made. Continuous learning is essential for executives because this is a time of rapid change, disruptive technology, and intense public scrutiny. Delivering steady growth and navigating complexity and change requires company-wide accountability and informed investment strategies.”
As a frequent attendee of Q1 meetings, Bucher has enjoyed the diversity of these events, “Meeting with small, medium, and large sized companies and knowing that we are all facing the same struggles is refreshing. We are able to connect and share our experiences to help one another find the solutions we need.” For Bucher, spending and accountability is about the big picture, “This is so important for executives because we need to help every single person in our organizations understand that they are part of the big picture, and that a budget is real money that defines our success and growth.”
Likewise, Clarke is looking forward to interacting with executive leadership, “I’m interested in knowing everyone’s challenges and sharing our practices in navigating those. Mixing industry as well will be helpful to see what other companies, in other industries, are doing to combat those same challenges.” Financial responsibility for Clarke is about promoting accountability to achieve success, “Accountability drives positive trends which in turn reinforce at atmosphere of success and personal responsibility.”
To learn more about spending and accountability in the life science industry, or to discuss pressing industry challenges with Sandra Clarke and Alan Bucher, register for the Life Science CFO Strategic Governance Forum, September 11-12 in San Jose, CA.
Missed the east cast CFO event with Jill McConnell? Read the recap here!