Why CFOs Make Poor Strategic Managers

 

Of course, a lot of ProjectManagement.com bits have been written about strategic management this month, about what it is, and how it ought to be executed. However, I haven’t seen much about what strategic management isn’t, so I’ll take the plunge:

Strategic management has nothing to do with asset management; therefore, those trained in asset management make poor strategists.

I know this flies in the face of much of what’s currently in textbooks on the subject, but it is undeniably true. When I was taking classes in strategic management, my textbooks appeared to be written by someone who was under the impression that low or mid-level management decided things like how many pencils to buy in a given month, and higher level, or “strategic” management, made decisions about the macro organization’s policy on buying regular or mechanical pencils for everybody. To these guys, strategic management is nothing more than asset management, writ large – and they couldn’t be more wrong.

The reasons they’re wrong are myriad, so I’ll just address the most obvious. Management at all levels and types is about making informed decisions. The source and residence of virtually all of the information your typical Chief Financial Officer (read: asset manager) receives originates exclusively from the general ledger. While the general ledger may be great for passing along things like the depreciation rate of the stuff in your warehouses, it has only one piece of information usable in the project management realm (actual cost of work performed), and absolutely nothing of use in the strategic management realm. As I discuss in my recently-released, must-have book Game Theory in Management, there are three kinds of management:

·         Asset

·         Project

·         Strategic

Asset management enthusiasts – give them credit – successfully inserted into the management science narrative that the point of all management is to “maximize shareholder wealth.” Wrong! That’s the point of asset management, but nothing else. The point of project management is to bring your project in on-time (or early), on-budget (or under), while meeting (or exceeding) all of your customers’ expectations with respect to quality, reliability, or other customer-defined parameters. The general ledger provides only one data point of the many needed in this area (noted previously).

The point of strategic management is to outperform your competitors, and your organization’s general ledger – remember, the source and residence of the CFO’s information – knows absolutely nothing that can help here. It can’t tell you what kinds of work your organization does best. It therefore can’t help inform the selection of work to pursue. And the general ledger processes zero data on what your competitors are doing, or why.

But you can’t tell any of this to some CFOs. No, they’re just convinced that they have all of the quantitative data needed to run the macro organization, and tend to treat anyone with a different business model view as being ignorant in comparison. Having to interact with this type of executive is not unlike being condescended to by a tarot card-reader, save that the tarot card-readers at least have a sense that people who disagree with them might not all be complete dolts.

How do you know if your organization’s CFO is such a one? It’s easy, really.  Just ask yourself, have you ever observed them weighing in on project or strategic management issues, based solely on information gleaned from the general ledger? If the answer is yes, you know two things: (1) your organization is about to make some uninformed strategic management decisions,  and (2) there isn’t anything you can do about it.