Guiding principles are short statements describing the core values that drive decision making. For the finance organization, which touches all other parts of the business, guiding principles matter because they define how finance interacts with the rest of the company. Often, finance organizations need to clarify their guiding principles to keep focused on what is important.
Guiding principles should clearly communicate what the finance organization holds to be important, what behaviors demonstrate that value, and how those behaviors should impact the people it serves. Principles should encompass behaviors, qualities, characteristics, and outcomes the organization strives to achieve. Guiding principles should inspire employees and help give a sense of purpose to their work by serving as a reminder of the end goal. They will also help prioritize what comes first when things get busy, and resolve conflict by pointing employees back toward the goal. Below are a few key steps to developing guiding principles:
If the finance department is like a ship, the mission statement is the map that shows the way to the desired destination. A mission statement is a broad overview that defines the role and purpose of the finance organization as a whole. It usually identifies the overall goal of Operations and includes service offerings, primary customers, and the level of quality Finance aims to provide. To create effective guiding principles, Finance must first have an idea of how they wish to operate in each of these areas. The mission statement creates a picture of peak organizational performance.
Guiding principles stem from the core tenants of the mission statement. Guiding principles act as the rudder that guides the ship along a certain path. When held steady, small adjustments to the angle of the rudder cause large changes in direction over time. In the same way, solid principles that are held over time can drastically change the way a finance organization performs. These principles should be made of three to five core tenants that are distilled from the mission statement, and should outline things that are most important for Finance to do. For example, if the mission statement promises efficiency for the company, a guiding principle could state, “Finance will maintain a continuous process improvement mindset.”
When a storm comes in, the crew must know what steps to take to keep the ship afloat. There must be a plan—a checklist of things that must happen to keep the ship on course. Supporting points for guiding principles take the more abstract, broad ideas and define how the organization will operate to make those ideas a reality (how the organization will remain on course). If the goal is to maintain an effective and efficient controls environment, Finance may decide to monitor and mitigate risks, simplify and standardize critical controls, and introduce a reasonable level of automation to reach that goal. Supporting principles will provide specifics about what the guiding principles look like on a day-to-day basis.
A lighthouse is much more easily seen on a clear night than a foggy one. In the same way, clear communication of the mission statement, guiding principles, and their supporting points is a great way to ensure they can be put into action. An energy company’s finance department printed and hung large copies of their guiding principles in all conference rooms, as well as on the finance and accounting office floor. When issues arose, the principles were always close by to provide a guiding light. Key stakeholders should have a clear view of the organization's overall goals, have the plan/steps to accomplish them, and reference those steps often.
Clearly communicated, effective guiding principles are the first step in transforming your finance organization and moving forward to achieve corporate goals. They provide clear and memorable definition of the behaviors, standards, and values that will improve and grow the organization and its people.
Trenegy is a non-traditional consulting firm helping businesses transform their Finance organizations. To learn more, email info@trenegy.com.
