Using OKRs in the Finance Function

OKRs (objectives and key results) have become a key part of every CFO’s and FD’s strategy and development planning. Financial executives setting to drive their company forward can leverage OKRs in the finance function to set collaborative goals for a cohesive approach throughout their organisation. Finance OKRs allow FDs and CFOs to align the company’s operations with its wider strategy to optimise results.

Although OKRs in the finance function relate to day-to-day operations, they are not a management methodology. Instead, they solve a common pain point for finance teams by connecting actions with the company’s strategic priorities to provide a roadmap.

CFOs and FDs who utilise OKRs improve the focus and alignment of their finance team while collaborating with other departments. Companies at every stage of their development can use OKRs within finance functioning to achieve short-term and long-term goals.

A CFO and their finance team will develop OKRs that focus on the company’s operation and its overarching financial strategies, including overhauling processes and underperforming systems.

At FD Capital, we recruit senior financial executives who are team leaders, utilising OKRs to drive their companies forward. Explore your CFO and FD recruitment options by contacting our team today at recruitment@fdcapital.co.uk.

Why CFOs and FDs Use OKRs

OKRs (objectives and key results) is a simple but effective methodology for goal setting and monitoring across every department. Finance teams use OKRs for performance management. Thought leaders have been increasingly incorporating OKRs into their operations to accomplish their financial and strategic goals.

CFOs use OKRs to balance day-to-day actions with wider objectives, better aligning strategy with operations. Companies that utilise OKRs are better aligned between departments.

The objectives with OKRs are drawn from the company’s strategic goals, whether it’s replacing underperforming systems or driving growth. The finance team will be involved in the key results of every department as its their metrics and data insights that track performance.

Why CFOs and FDs use OKRs in the finance function:

• Align the financial department’s goals with the company’s wider objectives.
• Provide clarity for how tasks feed into the overarching strategy.
• Motivates the financial team by offering a wider lens through which to see their work.
• Provides accountability for the department’s work and results.
• Improves communication between departments and promotes more collaboration.

How OKRs Have Become Part of Every CFO’s Job

OKR frameworks might seem like the bread and butter of every CFO’s job, but it’s only in recent years that they’ve become widely adopted. The OKR framework was first made popular by Google, which credits its success and continued growth to its focus on OKR as a goal setting and monitoring tool. It quickly became widely adopted by other companies across the tech industry, including Dropbox, Oracle, LinkedIn, and Twitter.

CFOs have adopted OKRs as their role evolves outside of purely a finance role to focus more on performance management and strategy. OKR is an adaptable framework that can be utilised across every department, including marketing, operations, sales, and finance.

OKRs are a vital component of a CFO’s role when driving revenue and business growth. They’ll be actively involved in developing the company’s strategy and lead OKR planning within the finance department and throughout the organisation. The CFO plays a unique role in the company’s wider OKR planning as it’s the finance team that will usually provide the KPIs (key performance indicators) that determine the success of an OKR.

CFOs will leverage OKRs as a way to assess the performance of their financial department and the company’s wider strategy. OKRs are developed and discussed by the C-suite team and senior leadership with a cross-department focus.

The Benefits of Finance OKRs

Most financial departments get stuck on two things – focus and strategy alignment. CFOs and FDs who implement OKRs in their department can provide focus and alignment to the work that their employees, and the wider company, undertake.

OKRs provide a CFO with:

• Objectives to align the company’s strategy with day-to-day operations.
• Key results to monitor that can be tracked by the finance department’s KPIs and data metrics.

Finance teams that use OKRs experience better workflow and collaboration across departments. CFOs and FDs can further optimise OKRs by utilising automation tools.

There are several advantages of using OKRs within finance teams.

• Provides clarity

Individual OKRs are developed with a clear objective in mind. Every OKR provides the finance team with a measurable objective, allowing them to prioritise day-to-day activities for more efficient output.

• Strategy alignment

OKRs align the financial team’s working objectives with the company’s overarching strategy. It ensures that every action being taken by the department is working towards a measurable goal to drive growth.

• Promotes data-driven decisions

Data plays a vital role in OKRs by providing the key results that an objective’s success is measured by. CFOs and FDs that build their operations around OKRs are more likely to promote data-driven decision-making.

• Encourages departmental collaboration

OKRs encourage collaboration between departments with overlapping objectives. CFOs and FDs now spend most of their time engaging with other departments as their role evolves beyond finance to take a greater strategic focus. Utilising OKRs gives CFOs and FDs a more holistic view of their operations.

OKRs in Finance Departments

Every finance team will have its own operational and strategic goals, from improving budget planning to strengthening its auditing process. OKRs can be applied to any goals that a finance department has, including:

• Accounts payable/receivables
• Asset management
• Budgeting
• Financial strategy
• Invoicing
• Inventory management
• Payroll
• Revenue
• Taxes

Setting OKRs for Finance Departments

Establishing OKRs involves aligning the financial department’s goals with the company’s overall strategy and objectives. They offer a framework and structure with measurable goals to improve the finance department’s performance to drive results and growth throughout the organisation.

We’re breaking down the step-by-step process of setting OKRs for finance departments.

1. Understanding what OKRs are

The finance department must understand what OKRs are before they start developing them. While OKRs are made up of objectives (O) and key results (KRs), it’s the projects and day-to-day operations that bridge the gap.

Objectives can be short-term or long-term. Most finance departments will have quarterly objectives that are clear and concise. It’s advised to start with two or three objectives when a finance team takes on board OKRs for the first time.

Key results are the outcomes that the finance team is working towards. They provide a measurable goal to the objective and should be SMART goals (specific, measurable, achievable, relevant, and time-bound). Most objectives will have three key results.

Each key result should have a project attached to it. You can consider these projects as the to-do list to achieve each objective. The finance department will want to have a clear understanding of the company’s strategic goals before setting OKRs.

2. Establish a focus

Developing OKRs requires the finance department to identify several focus areas, usually for that quarter. These focus areas will differ between finance departments but may include:

• Auditing
• Automation
• Compliance
• Forecasting

3. Define SMART objectives

Every objective should be SMART – specific, measurable, achievable, relevant, and time-bound. The CFO and finance team should determine what they want to achieve before setting out their objectives.

Potential objectives for a finance team include

• Optimising budget allocation for improved efficiency
• Ensuring accurate financial reporting
• Improved cash flow management
• Complete regulatory compliance

4. Measurable key results

Key results must be quantifiable and measurable to track the finance team’s progress and performance. These key results will use metrics, data, and KPIs that are likely already being gathered by the finance team.

5. Limited number of OKRs

It’s easy for a finance team to go overboard with OKRs. Most departments will only have 3 to 5 objectives per quarter or cycle.

6. Review and update regularly

OKRs should be reviewed and updated regularly in line with changes in the company and from feedback provided by the CFO or FD. There should be enough flexibility in the OKRs to ensure that they remain relevant and aligned with the company’s current needs.

Examples of Finance OKRs

We’re sharing an extensive range of OKRs that your CFO or FD can choose to repurpose for their finance department. A finance team will typically choose 3 or 4 OKRs to prioritise per quarter.

• Payroll OKR

A CFO or FD may choose a payroll OKR when the company is being expanded with new employees who need to be paid correctly and on time.

Objective: improve payroll processing accuracy and timeliness

Key result: reduce payroll calculation errors by 8%

Key result: increase the number of employees paid on time by 20%

Key result: increase employee satisfaction by 15%

• Accounts Payable/Receivable OKR

A part-time CFO or FD may choose to overhaul the company’s procedures and systems when they enter the role.

Objective: Simplify and improve the efficiency of internal payment procedures.

Key result: 90% of invoices categorised

Key result: Reduce late reporting by 20%

Key result: Reduce the processing time for payments by 50%

• Inventory Management

Companies that are rapidly expanding will want to prioritise inventory management to prevent revenue loss and ensure accurate record keeping.

Objective: Improvement of inventory management

Key result 1: Double the number of inventory checks per day

Key result 2: Automate inventory processes

Key result 3: Reduce inaccuracies and discrepancies to less than 5%

• Financial Planning

Data and forecasting are vital for CFOs and FDs to monitor KPIs and track performance.

Objective: Improve the accuracy of financial forecasting

Key result 1: Reduce variant between forecasted and actual expenses by 6%

Key result 2: Increase the accuracy of revenue forecasts by 15%.

Key result 3: Implement monthly financial forecasting

• Financial Reporting

CFOs and FDs bring transparency to scaling businesses. Enhancing financial reporting is often a priority for new financial executives.

Objective: Improve the financial reporting process.

Key result 1: Close monthly books 20% faster.

Key result 2: Boost accuracy of financial statements by 15%

Key result 3: Issue statements within 4 business days to boost communication with the board and stakeholders.

• Regulatory Compliance

Companies that operate in highly regulated industries will want to focus on ensuring the right compliance systems are in place.

Objective: Ensuring the company meets its regulatory compliance needs.

Key result 1: 100% compliance with industry regulations.

Key result 2: Conduct quarterly compliance reports.

Key result 3: Introduce data protection measures that meet GDPR regulations.

• Mergers and Acquisitions

CFOs and FDs will update their OKRs quarterly to match the focus of the company’s current operations. If the company is preparing for, or undergoing, a merger and acquisition, there should be OKRs associated with it. These OKRs will usually be more long-term and not focused on solely one quarter.

Objective: Develop and deliver on a M&A strategy

Key result 1: Due diligence of potential acquisition opportunities within 2 months.

Key results 2: Complete 1 acquisition by the end of the financial year.

Key result 3: Integrate processes and systems for newly acquired companies within the first 6 months.

Why CFOs and FDs Use OKRs

Developing effective and well-structured OKRs is not as simple as drafting out a handful of bullet points. It’s a strategy development method that can take several quarters and OKR iterations to get right.

Understanding why CFOs and FDs use OKRs can enable financial executives to deploy them more effectively. There are three main reasons why OKRs are a vital strategy tool for CFOs and FDs in every industry.

1. Insight into real-time finances, including spending

Cash flow is everything for SMEs and start-ups. OKRs help give CFOs and FDs control of their company’s finances by making it easier to monitor its real-time spending.

2. Streamline financial processes

OKRs help to streamline financial processes while mitigating financial risk and maintaining adequate cash flow. Having OKRs in place is vital for keeping track of the company’s financial strategies and can help streamline its financial processes. CFOs and FDs can have real-time data and visibility with OKRs.

3. Ensure accurate financial data

OKRs offer an extra set of metrics by which to ensure that financial data is accurate. Automated OKRs are ideal for helping companies turbo-charge their digital transformation.

Are you ready to take your company to the next level with a CFO or FD using OKRs? Get in touch with our team today by contacting us at recruitment@fdcapital.co.uk.