Operational excellenceaz370354.vo.msecnd.net/vnext/PDFs/Empowering... · operational excellence. In the upfront, we explore emerging technologies that are changing how business is

Microsoft

EMPOWERINGFINANCE

Operational excellence

| 2Microsoft | 3Microsoft

“Excellence is not a skill. It is an attitude.” -Ralph Marston

Microsoft


Microsoft

Briefs provide an overview of important and emerging topics.

Briefs | 30

Bytes offer a quick glance at some new data, insights, and ideas.

Bytes | 18

EMPOWERINGFINANCE

6 Operational excellenceA brief look at how Microsoft is helping fi-nancial executives achieve operational excel-lence.

10 uFAQ | The Un-frequently Asked Questions

Answers to the questions you’ve always had but never wanted to ask.

14 Master presentationsBecome an Presentation Master. Grow your skills with these tips and tricks that will help you nail your next presentation.

16 Emerging Help grow your business with some of the emerging technologies and ideas that are changing the world, including the Internet of Things, the Sharing Economy, and Hyper-loop.

44 The balancing actFrom work-life to balancing process and in-novation, explore a few of the challenges CFOs face and how to find the best balance.

60 Activity based workingLearn how this latest workplace trend can help transform your business and drive op-erational excellence.

Empowering Finance

PerformanceControlComplianceCollaborationStrategyInnovation

Deep Dives are informational and educational articles written to provide knowledge and help improve your work.

Deep dives | 42


urbulent times in the 1970s created a large, long-lasting shift in the role of the Chief Finance Officer. As a result of slow growth and high inflation, CFOs were forced to leave the comfort of their offices to face new operational challenges on the front lines. This transition from port-

folio manager to operations manager was a huge change in the job description of these financial leaders. Forty years later, a challenging economic climate has once again forced CFOs into an operations role to help cut costs, create a more agile workforce, and have more over-sight of compliance.

T

Today’s challenging economic climate has forced CFOs into an operations role to help cut costs, create a more agile workforce, and have more oversight of compliance.

CFO

.com

, 201

4


Percent of CFOs who said that operations was a high pri-ority or their highest priority.

15+85+V85%

EMPOWERINGFINANCE

At Microsoft, we’re work-ing to help our clients achieve operational excellence. We’re using the Internet of Things to help CFOs get a more comprehensive view of their business opera-tions than has ever been possible, our productivity tools help teams work more efficiently, and all of our tools are built with industry leading security.

In this edition of Re-imagine Finance, we are tackling the topic of

operational excellence. In the upfront, we explore emerging technologies that are changing how business is being done, answer simple questions that frequently arise for finance executives, and learn about tools for better managing your business.

The first step in achieving operational excellence is to understand the scope of business operations, so throughout the publi-cation we explore many

different elements that are relevant to CFOs and financial leaders, includ-ing aligning executive teams, balancing inno-vation and process, and becoming more respon-sive. We further our exploration by sharing strategies to help address the evolving challeng-es today’s CFOs face, including balancing work and life, managing cor-porate social responsibil-ity, and how new ways of working can save money and make their teams more productive.

As we’ve said before, the goal of Reimagine Finance is to share ideas

and information about topics that matter to you. We live in a world where businesses looking to succeed need to face operational challenges head on. We hope this information can help you better understand the challenges businesses are facing and provide you with strategies to help you prevail.

Thank you,

Microsoft Worldwide Enterprise & Partner Team --

Empowering Finance

Microsoft

At Microsoft, we’re working to help our clients achieve operational excellence.


SECTIONS

Performance managementCollaboration & innovationBusiness strategyControl & compliance

Microsoft


uFAQAnswers to the questions you’ve always wanted to ask

How do corporate inversions work?A corporate inversion, or tax inversion, is when a compa-ny relocates its headquarters to a lower-tax nation, typically while retaining the majority of its material operations in the origin country. This “relocation” is often done through a merger or acquisition of a foreign en-terprise. Companies use two common techniques to avoid taxes and save money during an inversion: stripping and hopscotching. (cont’d below)

What is stripping and how does it work?Stripping is a lending tech-nique used to avoid taxes and save money by companies who have moved their headquarters abroad. When a U.S. firm relo-cates its headquarters abroad, the new foreign parent com-pany “lends” money to the U.S. firm, which must be paid back. The U.S. firm then deducts the interest payments it makes to the parent company reducing its taxable profits, thus “strip-ping” them from its balance sheet.

What is hopscotching and how does it work?Hopscotching is an investment technique used to avoid taxes and save money by companies who have moved their head-quarters abroad. If a foreign subsidiary sends its profits di-rectly to a U.S. parent corpo-ration, the U.S. firm must pay

taxes on these profits; however, if funneled through a foreign parent company, the money can be “invested” in the U.S. without paying U.S. taxes.

Is the cloud safe?As the cloud’s presence grows within corporate IT, serious questions regarding safety and security have increased as well. So is the cloud safe? While there is no simple yes/no an-swer to this question, here are some things to be aware of.

An important question to ask is:, “safe compared to what?” If security concerns are prevent-ing you from migrating to the cloud, don’t think of cloud se-curity as a zero sum game--no IT system, internal or cloud, is bulletproof.

Many internal IT systems face a large number of vulnerabilities, such as using legacy software, that cloud solutions eliminate. Reputable companies who pro-vide cloud solutions are staking their business on the security of their cloud, thus they are likely investing more resources into security than most companies would invest in their own IT se-curity.

On the flip side, one thing that makes the cloud (particularly public clouds) vulnerable to at-tacks is that the consolidation and volume of data stored in the cloud makes it an increas-ingly valuable target for hack-

ers. By disrupting service to a cloud provider, multiple clients can be harmed, instead of a targeted attack against a single company.

Lastly, not all clouds are created equal. There are different types of clouds to consider--private, public, and hybrid--that have different security costs and benefits. And always be sure you are using reputable cloud service providers.

What is reverse factoring?Reverse factoring, sometimes referred to as supply chain fi-nancing, is a financial arrange-ment that leverages the favor-able credit rating of a large, stable buyer to secure capital for their suppliers more easily and at a lower interest rate than they might otherwise qualify for. In an era where financing has been difficult to come by, many national governments have been encouraging com-panies to use tools like reverse factoring to increase the avail-ability of financing for smaller companies.

Most often, reverse factoring is initiated by the buyer and in-volves a large pool of suppliers. The suppliers sell some of the buyer’s receivables to the bank, as proposed by the buyer, and the bank, in turn, extends favor-able terms based on the sale of the receivables, while the sup-plier agrees to extend the buy-er’s payment terms.

uFAQ Master Emerging

Microsoft


Investors have taken notice of activist investors and CFOs should tooWhat is an activist investor?An activist investor is an indi-vidual or group that purchases a substantial volume of a public company’s shares with the goal of effecting major change within the company. This is sometimes done through “purchasing” a seat on the company’s board.

Companies that are misman-aged, have excessive costs, are struggling to remain profitable, or have other fixable problems are often seen as great targets

for activist investors.

Mainstream activist investors like Carl Icahn, Kirk Kerkorian, and Bill Ackman have earned the at-tention of Wall Street by posting remarkable results. According to a Capital IQ study, after just one year, activist targeted stocks beat the Russell 3000 by an average of eight percentage points. After two years, this margin grew to 10.7 percentage points, and af-ter three years, it swelled to 17 percentage points.

Despite the strong numbers, some remain unconvinced that activist investors are the cause of the success. In a recent interview with Fortune magazine, NYU professor Yakov Amihud said, “It is hard to say whether the ac-tivist investor is doing anything beneficial for the company or is just a good stock picker.”

Regardless of the reason, the numbers are impressive. Inves-tors have taken notice of these activists and CFOs should too.

It is hard to say whether the activist investor is doing anything beneficial for the company or is just a good stock picker.”

-Yakov Amihud, NYU Fortune interview

What is activity based working?

Activity based working (ABW) is both a new way of working, as well as an office structure. With activity based working, em-ployees are not given their own workstation or desk. Rather, the broader workspace is set up with predetermined activity areas where employees can conduct specific tasks, which may include collaboration, socializing, in-novation, focus, and education spaces. This layout is designed to eliminate personal ownership of spaces while creating team

ownership of the workplace. It also boasts the benefits of help-ing employees concentrate bet-ter, be more productive, improve collaboration, and increase activ-ity in the workplace.

Microsoft’s new Amsterdam campus has implemented activi-ty based working, and the results have been astounding. Sales have increased 51% while real estate costs have been reduced by 30%, saving the Dutch sub-sidiary $644,000 annually.

Empower workers with more freedom

while still holding them accountable

for results.

What is machine learning?Machine learning refers to a sys-tem that is capable of acquiring data and automatically applying that data to improve its perfor-mance. Machine learning sys-tems continuously self-improve as additional data allows them to make optimizations based on ac-tual performance.

Machine learning systems learn in two ways, supervised or unsu-pervised. Supervised learning is a technique that requires a defined

response measure and is the primary technique used in pre-dictive analytics. In other words, it needs information pre-pro-grammed that tells it what it is looking for.

Unsupervised learning is a tech-nique that is used to find pat-terns in unlabeled data and is used in anomaly detection, text mining, and clustering. The sys-tem isn’t given any initial learning parameters, thus it can be great for discovering new patterns.


| 13Microsoft

The unsupervised machine may be able to group common patterns, such as the dark and light areas that make up a face, but without an explicit definition of what a “face” is, it may not be able to distinguish a human’s face from a dog’s face.

The supervised machine is given instruc-tions on what a human face is and isn’t. Because of this, it can learn the subtle dif-ferences and can then determine whether an image is a human face or not with a high degree of accuracy.

X

X

Supervised

Unsupervised


Tips for mastering presentations1. SimplifyIf you want to land your message, you need to simplify. With presentations, less is often more. The average adult atten-tion span is somewhere around 10 minutes. So overcome the urge to tell your listeners every detail and focus on the key points you want them to understand. Don’t miss the oppor-tunity to tell your audience one thing by trying to tell them ten.

pro tip_use an appendixDraft a detailed presentation, then put all of those slides into an appendix and create one slide to present for every five appendix slides. Reference the appendix as needed.

pro tip_hyperlinkUse PowerPoint’s hyperlink feature to jump between data slides in your appendix and your main presentation slides as specific questions arise.

Master presentations


3. Easy on the effectsWith all of the effects available in Pow-erPoint, from WordArt to Animations, it’s easy to overuse effects. Effects should be used to enhance a message, such as an animated line or arrow to call out a trend that might otherwise go unnoticed, or to keep users from jumping ahead.

pro tip_limit animation time Keep the total animation time under 300 ms. For multiple items, use “Start With Previous” to keep short.

6. Design with intentWhen reading presentation tips, re-member that no two presentations are exactly alike. Your audience, your con-tent, the room, and the desired out-come should all be taken into consid-eration when designing a presentation. When telling a story, using large format pictures with limited text may work well, but this may not work when presenting year end financial data. Be deliberate with your decisions, and design your presentation for its intended purpose.

Try Sway!Sway is a new app from Microsoft for expressing your ideas in an entirely new way, across your devices. It enables you to create and share a polished, interac-tive, web-based canvas of your ideas. It features easy to use tools that allow you to drag and drop content from a variety of resources. Learn more about Sway at www.sway.com.

Freytag’s pyramid of dramatic structure

exposition

complication

risin

g ac

tion

climax

falling actionresolution

To learn more about Microsoft Sway, visit www.sway.com.

2. More graphics, less textText-based charts are difficult to read and interpret, especial-ly when being projected. Simplify information for the viewer with visualizations and graphics that articulate your message.

pro tip_try PowerPoint appsApps now available in PowerPoint make it easy to do every-thing from host a live poll to display beautiful graphics.

4. Plan the outcomeWhen writing a presentation, think about your desired outcome. Do you want people to ask questions or just agree and then be on their way? Once you’ve established your audience goals, you can better plan slides for the de-sired outcome.

pro tip_save the questionsDon’t get derailed by questions that will be answered later. When appropriate, ask your audience to hold their questions.

5. Tell a storyA great presentation tells a story. Dra-mas generally include the exposition (background and problem), the rising action (build towards climax), the cli-max, and falling action (the result of the climax), and the resolution.

pro tip_start with the scriptWhen writing a presentation, write your narrative before you start creating slides. This will help you focus on the overarching story before exploring the details.


Internet of thingsSince the early days of the Internet, the dream has been to create an ecosystem of products, from kitchen appliances to HVAC, that were somehow all connected and integrated. The Internet of Things (IoT) is just that: the interconnection of unique devices within an existing Internet infrastructure.

The Internet of Things has become a reality thanks to near ubiquitous Internet access, smaller sensors, and cloud computing, but despite the millions of devices that are already connected to the Internet, the IoT is still in its infancy. Most experts believe the IoT will be the next big boom. A recent Gartner study projected that by 2020, there will be nearly 26 billion devices on the IoT.

For businesses, the Internet of Things means having more data available for monitoring and improving products. This means more efficient energy management, remotely monitored health devices and emergency notification systems,

better infrastructure management, and home automation. Beyond the products themselves, IoT connectivity opens the door for an array of other business solutions, like remote service and support options for customers.

Despite the amazing opportunities that IoT presents, it is not without its challenges, the greatest of which revolves around privacy and autonomy. Being constantly connected to the Internet means being constantly monitored. This is particularly worrisome for the users of wearable devices but extends to other connected devices whose usage may provide insights into our lifestyle and behaviors. The other large concern is security. The security vulnerability of these connected devices was recently put on display by a group of hackers who posted live feeds of thousands of private web and security cameras on the Internet, including web-connected baby monitors.

The true power of the IoT has yet to be seen, but is it already set to be a game changer.


Sharing economyThe sharing economy is a system of sharing human and physical resources between participants, including the creation, distribution, and consumption of goods and services. While sharing economies have existed for a long time, technology has amplified these systems by providing a simpler and more streamlined way to connect. Some of the larger and more popular companies leveraging the sharing economy are Lyft, Airbnb, and TaskRabbit. Lyft, for example, allows anyone to provide a ride to a stranger in return for a “donation.” Crowdfunding platforms, like Kickstarter and Indiegogo, are another type of sharing economy. These companies have already had a large impact on their respective industries, and have drawn much scrutiny. Many have tried to skirt regulations by using the argument that they are simply individuals providing services for each other, as friends might, and should not be held to the same regulatory standards as a formal business would be.

HyperloopIn response to the approval of California’s high-speed rail, entrepreneur Elon Musk expressed his disappointment by tasking his team with finding a better option. The result is Hyperloop, a high-speed transportation system that sends passenger capsules through reduced-pressure tubes. The initial concept estimated the capsules could move at speeds upwards of 760 miles per hour and could deliver you from San Francisco to Los Angeles in just 35 minutes. This could not only revolutionize passenger travel but freight transportation as well.

Although it’s still just a concept, the project has been moving forward with help from private firms and a crowd-sourced group of roughly 100 engineers. While it may seem like a wild idea, some involved with the project have estimated the system could be a reality within the next 3-5 years, and to speed development, Musk and team are currently building a test track for companies and students to test pods.

Emerging


Bytes

Microsoft


Performance management

Performance Innovation Strategy Compliance

APQC, 2012

their company will increase its focus on maintaining financial discipline.

82% of CFOs said

Cycle time (days) between completion of annual consolidated financial statements and the release of earnings

topperformers

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25

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17+51+26+4+2

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Number of systems generating information for close process (by revenue)

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the fastest: annual cycle time

the slowest: annual cycle time

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24,000,000,000,000,000,000Humanity creates 2.4 quintillion bytes of data per day

Most popular targets for financial process improvement

Percent of CFOs who cited supply chain interruptions as a top risk

57+43+V43%

Percent increase in reported expected annual earnings growth by CFOs between Q3 and Q4 surveys

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APQC, 2014

CFO

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3



Collaboration & innovation

Millennials Branding, 2013

45% of Millennials will choose workplace flexibility over pay.

68+73+85+100++210.7%

15.8%

2010 2011 20142012 2013

CFO turnoverA study by Crist Kolder Associates showed that in 2014, CFO turn-over slowed down after a 3 year trend that spiked in 2013. Sec-tors with the highest turnover included health care (17%), industrial (17%), services (14%), and retail (14%). Consumer goodssaw the lowest turnover (6%).

30+70+U30%of MBA students at the top 10 US and non-US business schools are

female.

Important sources of innovation in emerging marketsWhen investing in emerging markets, emerging-market executives placed greater value on sources of innovation than their developed-market executive counterparts.

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Millennials appear to be an un-trusting generation, with only 19% agreeing with the statement that “most people can be trust-ed.” This is a major shift from previous generations, particu-larly Boomers who appear very trustworthy.37+40+31+19Trust issues

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difficult to work with

hardworking

team player

problem-solver

entrepreneurial

Generation gap

Percent of U.S. respon-dents who agreed each generation displays the following characteristics

Baby boomersGeneration XMillennials

Del

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, 201

3

59% of BDMs and 62% of higher eds rated college graduates C or lower in preparedness for their first jobs.

CPercent of non-Millennials that agree that Millennials offer different skills and work styles that add value to the workplace.

26+74+V74%

Is your company’s CFO qualified to be the COO (or other title as head of operations) at your company?

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Business strategy


CFOs believe that their finance operations could be more efficient.

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Months post Schedule 13D filings 373020Outperformance by acivist-targeted stocks

Top industries for anticipated M&A deal increases

Tech Health care Alt energy Oil & gas Banking

Activists deliver top returnsActivist investors are on the rise, and the results show why. In a study by Bloomberg, activist investors beat the S&P 500 by 17 percentage points, with average gains of 48% between 2009 and 2013.

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Sustainable and responsible investing in the United StatesSustainable and responsible investing is on the rise, forcing businesses to consider their social and environmental impact.

Overlapping StrategiesESG Incorporation Only Shareholder Resolutions Only

Are companies with female directors a lower risk for acquisition?Recent research at the Leeds University Business School showed that young companies with one female director had a 27% lower risk of becoming insolvent than comparable firms with only men on the boards. The researchers believe that diversity, rather than a specific number of women, is the key, citing past research showing that more diverse groups generate more innovative thinking in problem solving activities.

Community investing is on the riseWhile growth in global in-vesting frequently makes the headlines, local in-vesting is also on the rise. Recent data from the US SIF shows that communi-ty investing is on the rise, jumping over 228% in the last decade to roughly $64.3 billion in 2014. b+0+0+0+0+0+4+8+20+42+641997

2001200520102014

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Business leaders cited sustainability as the top emerging issue for 2015, ahead of healthcare regulations, rev rec, globalization, and aging workforce.

Us

SIF,

2014

US SIF, 2014

Increase in institutional investor policies restricting investment in weapons manufacturers in the past 2 years.

4x

Percent of business leaders who believe that M&A activity will increase in the next 24 months.

16+84+V84%Percent of 2014 global M&A deals that were classified as corporate inversions.

95+5+V 5.1Percentage points by which activist investors beat the S&P 500 between 2009-2013.

17

Del

oitte

, 201

4

Capital IQ, Q

1-Q3 2014

Deloitte, 2014


1. Adverse regulatory changes

2. Breach of contract

3. Transfer and convertibility restrictions

4. Civil disturbance

5. Non-honoring of financial obligations

6. Expropriation

7. Terrorism

8. War

Control & compliance


EY, 2

013

reported that bribery or corrupt practices occured frequently in their countries.

39% of CFOs

Changes in corporate tax rates

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35.0% United States

12.5%Ireland

Are tax rates to blame for the rise in inversions?Typical corporate tax rates in the United States vs. Ireland.

Survival in a downturnIn a recent global fraud survey by EY, CFOs showed that hard times lead to hard decisions. When given a list of possibly questionable actions, 47% of CFOs felt that one or more would be justified to help their business survive an economic downturn, with 15% saying they would be willing to make cash payments to win or retain business, a 67% increase over the previous year.

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435+65+U35%more likely to engage in fraud in companies where they appointed

the top four executives.

Fraud takes teamwork

CEOs are

Percent of companies that spend less than $500,000 on SOX compliance annually

39+61+V61%Percent of companies that spend over $1 million on SOX compliance annually

72+28+V28%

OECD

Tax Database, 2014M

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, 201

3

Competitive Enterprise Institute, 201358+0+45+0+43+0+33+0+31+0+24+0+13+0+7+0

58%

45%

43%33%31%

24%

13% 7%

Biggest political risk concerns for investors in developing countries

Annual cost of federal regulation, more than the world’s tenth-largest economy.

$1.86trillion

University of M

ichigan Law, 2013


“If you can’t describe what you are doing as a process, you don’t know what you’re doing.”

-W. Edwards Deming

Microsoft

| 30Microsoft | 31Microsoft Microsoft

Briefs




Executive alignment

Percent of CMOs and CFOs who believe that misalignment has had a significant negative impact on their company’s success and growth.

55+45+V45%Percent of marketers who failed to deliver quantifiable results to their executive team.

30+70+V70%Percent of CFOs who feel there is poor alignment between IT and business strategies.

56+44+V44%


CEOMoving too slowlyIn the fast changing business envi-ronment, many CEOs worry that their teams aren’t acting with enough ur-gency.

Not enough dataDespite a surge in dashboards and analytics, many CEOs feel that they don’t have the data they need to make strategic business decisions.

Lack of controlWith the many moving parts in a

Consider another point of viewTo better align with other department leaders, it is important for financial executives to understand their points of view, what their unique challenges are, and what keeps them up at night.

company, many CEOs feel that they don’t have full control of the compa-ny’s direction.

OverloadMany CEOs feel overwhelmed and stressed by the their ever expanding to-do list, urgent issues, and limited time.

CIOSpeedCIOs often worry about their ability to address and keep up with the fast changing technology landscape.

Uncertainty Whether from security threats or new technology investments, CIOs are frequently stressed by the many unknowns and uncertainties that are consistently lingering over their heads.

Talent managementAs IT plays an increasing role in many organizations, many CIOs struggle to recruit and retain the talent needed to meet demands.

CMOChangeTechnology is changing both market-ing and the role of the CMO. Many CMOs worry about staying relevant and informed.

Data overloadCMOs worry about managing big data, making it actionable, and how to embrace analytics without stifling creativity.

CHROEmployee engagementAs the employee landscape changes with the emergence of the Millennial workforce, CHROs worry about how to keep employees engaged and mo-tivated.

The C-SuiteAs ofter departments have become very data driven, many CHROs strug-gle to find their place at the executive table and worry about losing their voice.

Activ

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tern

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2014

Fournaise Marketing G

roup, 201478+65+24+0+0+0

78%

65%

24%

Growing influenceOver the last half century, the CFO’s role and in-fluence has grown significantly. According to IBM’s 2013 Global C-Suite Study, the CFO’s collaborative influence (65%) was ranked second only to that of the CEO (78%). The influence of other roles was sig-nificantly lower (24%). This expanding power may create conflicts with other business officers who feel they’re losing power to their CFO.

Improve executive alignmentMake sure that there is open and free communication between team members to make sure that everyone is on the same page.

Keep all parties involved in senior level discussions. This may surface unforeseen is-sues and keep team mem-bers from going rogue.

Set clear and consistent ex-pectations to ensure every-one is working towards the same destination.

Know when to lead and know when to follow. Some-times another team member may be better equipped.

COMMUNICATE BE INCLUSIVE

Conflicts and misunderstand-ings often result from a fail-ure to truly listen to someone else’s point of view.

LISTEN

Eliminate any personal opin-ions, grudges, or goals that may interfere with the suc-cess of the organization.

ALL BUSINESS

FOLLOWEXPECTATIONS CFO Publishing Corp, 2013



Process vs. innovation

Collaboration & innovation

Process vs. innovationWith increasing demands from shareholders, CFO frequently look to operational efficiencies as a solution to cut costs and improve short-term returns. The problem is that too much pro-cess can stifle innovation. Killing innovation can kill the long-term growth of an organization.

The balancing actCFOs need to balance where and

Does processkill innovation?As companies push for greater efficiencies through tighter processes, innovation is suffering. Is it possible for companies to push process and remain innovative?

how they operationalize differ-ent business processes. While many processes may benefit from more structure, innovation requires a degree of unstruc-tured thinking that is unbound by the rules which a strict pro-cess creates.

Types of innovation This does not just mean to oper-ationalize all activities except for R&D. Remember that innovation can come from anywhere and there are many different types of innovation. It may come in the form of new processes, improved products and services, new ways to connect with customers, or an entirely new business model. In-novation isn’t just an activity, it’s

a mindset and a culture. When applying new processes any-where, CFOs need to consider the potential negative impacts.

A place for process?While process can hurt innova-tion, when applied correctly, it can also enhance it. CFOs should create processes for employees to surface new ideas, filter ideas to make sure opportunities that are pursued align with business objectives and strategies, explor-ing and validating new concepts, and a process for communicat-ing (and protecting) business innovations. The process should not impact how the work is done, but rather provide checkpoints to make sure that innovation can surface and remain aligned with other business activities.

Innovation is not just an activity, it’s a mindset and a culture

“The Six Sigma process killed innovation at 3M. Initially what would happen in 3M with Six Sigma people, they would say they need a five-year business plan for [a new idea]. Come on, we don’t know yet because we don’t know how it works, we don’t know how many customers [will take it up], we haven’t taken it out to the customer yet.”

-Geoff Nicholson, 3MZDNet interview

1 Come preparedDon’t just throw people into a room with whiteboard. Come prepared with necessary notes and a plan.

2 Define objectivesClearly define objectives for participants, and the desired outcome of the brainstorm.

3 Eliminate “but”Don’t allow the word “but.” Focus on the words “and” and “or.” “But” kills free exploration, where “and” and “or” encourages it.

4 Get the right peopleFocus on the right people. This doesn’t always mean the people closest to a project. Sometimes outside perspectives help.

5 Extend ideasDon’t stop at creating new ideas. Devote brainstorming time to extending existing ideas.

6 Follow upDon’t end the brainstorming at the end of the meeting. Follow up on ideas. It will inspire and motivate new thinking.

Six tips for betterbrainstorming

Unstructured

A largely undefined process where instances vary based on the environment, people, and context of the situation.

Semi-structured

A process where portions are structured but others are left unstructured for exceptions where the model doesn’t fit.

Structured

A strictly defined, end-to-end process where all pro-cess instance permutations are accounted for.

Process types

Gre

g Sa

tell,

2012

growing

complexityOver the past 15 years, the number of procedures, vertical layers, interface structures, coordination bodies, and decision approvals needed have increased between 50 and 350 percent, according to a 2011 study of U.S. and European companies by the Boston Consulting Group.

Innovation matrix

Prob

lem

Domain

not

wel

l defi

ned

well d

efine

d

not well defined well defined

Breakthrough innovation

Basic research

Sustaining innovation

Disruptive innovation

Innovation in areas where the problem is well defined but there is no clear path to a solution. Often the result of a paradigm shift in thinking.

Clearly defined problem and requirements. The challenge lies in creating a solution that fits these defined criteria.

Discovery of how things work. No clearly defined outcome but necessary for all other types of innovation.

Often thought of as new approaches to old products and services (like digital cameras), where the problem wasn’t fully realized until the solution arrived.


Customerexperience


Responsive process

Percent of business process leaders who feel that agility is critically important.

18+82+V82%Percent of time managers spend writing and preparing reports.

60+40+V40%

Defining responsive“Responsive” is defined as “re-acting quickly and positively.” For businesses, this translates to greater agility while improving processes, systems, and decision making. Businesses can increase their responsiveness by develop-ing four areas: personalization, automation, collaboration, and consolidation. These different ar-eas are rarely exclusive and can be leveraged throughout an or-

Becoming more responsiveWith technology evolving at such an incredible pace, businesses looking to thrive in this new digital environment need to become more responsive. But what exactly does becoming more responsive mean?

ganization in a variety of ways.

PersonalizationTechnology now allows busi-nesses to customize experiences in real time. No two customers are alike. They require different information to make decisions. Personalizing your process can ensure that both your customers and employees have access to the right information at the right time.

AutomationAutomation systems allows busi-nesses to be more nimble. By au-tomating systems and processes, businesses can streamline tasks that previously required a large amount of manual input or even perform tasks that weren’t possi-

ble before.

CollaborationTechnology allows for real-time collaboration, no matter where workers are. Communication is one of the biggest keys to run-ning a successful business, but as businesses grow in size, so does their complexity. As a result, com-munication and collaboration be-come slower and more prone to error. By enabling faster and eas-ier communication and collabo-ration, businesses become more responsive and more efficient.

ConsolidationBusinesses are now dealing with massive amounts of information flowing in from dozens of different sources. By consolidating data and resources, business leaders are able to make faster, more informed decisions. Furthermore, business-es can become more respon-sive by consolidating assets and knowledge, reducing duplication of work and creating a more uni-fied customer experience across different global business groups.

Oxf

ord

Uni

vers

ity P

ress

, 201

4

Process killing responsiveness?A study of U.S. and European com-

panies reported that the number of procedures, vertical layers, interface structures, coordination bodies, and decision approvals needed has in-creased by as much as 350% over the

last 15 years. The study went on to state that managers spend an average of 40% of their time writing reports and as much as 60% of their time in coordination meetings.

“The benefits of executing on a good digital strategy will be short-lived or elusive if the enterprise is unable to achieve digital agility.”

-Iyengar, Partha, and MokGartner, Inc.

Forr

este

r, 20

12

Boston Consulting Group, 2012

Forrester, 2013

Cross-channel alignment How is information shared, and how do experiences extend across multiple channels?

Market agility How quickly is consumer data acquired, analyzed, disseminated, and applied?Market

Organization

Knowledge sharing How quickly and easily is new information shared through the organization?

Digital IQ How aware is the organization of new trends and emerging technologies?

Change management How does the organization handle change?

Process

Business intelligence How does the organization handle data analysis, and how is knowledge shared?

Infrastructure agility How does the business embrace and adopt new technologies and processes?

Operational architecture How adaptive is the organization to changes in operations?

Innovation How does the organization innovate and adopt innovation?

Supply chain How does the organization manage an existing and changing supply chain?



Control & compliance

Balancinggreen and “green”

Growing demand?Over the last few years, there has been much debate over the growth in consumer demand for environmentally and socially friendly products. While many people say they want responsi-ble products, purchase behaviors haven’t always reflected that. That trend is starting to shift.

The new baselineAlthough the number of indi-

The new balancing actToday’s consumers are demanding their companies be more socially responsible, so how can CFOs turn their companies green without going into the red?

viduals who say they’d pay more for responsible products has declined, there has been an in-crease in the percent of individ-uals stating that a business’s so-cial and environmental record is important to them (MRI Double-base). Interpreted another way, good CSR is the new baseline, and while consumers may not reward those who excel, they will certainly turn on those who fail.

Good for businessBeyond consumers, there are many places that CSR helps businesses. Research by the World Green Business Council has shown productivity gains of 8-11% in businesses that have taken initiatives to improve air

quality in their offices. The re-search also suggests that com-panies with a strong CSR record have an easier time recruiting and retaining workers, and a 2014 study by ASSET4 showed that companies with strong CSR performance have easier access to financing.

defining Corporate social responsibilityCorporate social responsibility, often referred to as CSR or corporate citizenship, refers to a company’s environmental and social welfare efforts that go beyond what is required by law.

defining

GreenwashingGreenwashing occurs when a company or group promotes themselves as socially responsible to look good but actually operates in a way that is environmentally or socially damaging.

Del

oitte

, 201

3

Triple bottom line

PlanetThe environmental impact of the organization. At a minimum, this means “do no harm;” however, many TBL organizations go beyond this minimum standard.

PeopleThe impact of an organization on its people and the community. The TBL model considers all stakeholders, not just those who are financially invested.

ProfitThe economic value of an organization. In the TBL model, profit extends beyond the traditional accounting definition to the full impact of an organization on the global economic environment.

The CSR mandateIn August 2013, the Indian Parliament passed a revised version of the nation’s Companies Act, which now requires companies over a certain size to invest 2% of net profits towards social benefit activities. India is the first country in the world to mandate CSR spending. The initiative is expected to generate as much as $3 billion annually to tackle issues that have long plagued India, including extreme poverty and childhood malnutrition.

@Microsoft• Bing for Schools brings ad-free

search to classrooms in the U.S.• Microsoft donates an average

of $2.6 million a day in software to more than 86,000 nonprofits around the world.

• Microsoft’s Employee Giving campaign has donated $1 billion to over 31,000 charities.

• Microsoft YouthSpark has helped more than 227 million young people.

• Microsoft’s modular data centers consume 50% less energy than traditional data centers.

Developed-market executives Emerging-market executives

49+72+0+49+68+0+45+68+0+44+64+0+45+6549%

49%45%

44%45%

65%68%

64%72%

68%

Minimizing environmental impacts

Providing a “living wage”

Promoting workers rights

Improving thelocal community

Enhancing the local infrastructure

Important social issues in emerging markets


“Excellence is a continuous process and not an accident.” -A.P.J. Abdul Kalam

Microsoft


Deep dives


CFOs are continually weighing competing options trying to find the right balance to deliver both long- and short-term success of their business, personal growth, and a positive, long-lasting legacy on the world.

Modern day CFOs face many challenges, from sparking innovation to protecting their organizations from risk. These decisions are rarely simple and the outcomes often include implications that stretch much farther than what is visible at the surface. CFOs are continually weighing competing options trying to find the right balance to deliver both long- and short-term success of their business, personal growth, and a positive, long-lasting legacy on the world. The following will highlight just a handful of the many competing choices that CFOs frequently face and will provide thoughts and tips that will help them find the perfect balance.

The balancing act

EMPOWERINGFINANCE

Microsoft


13% of managers were less likely to promote employees who took all of their vacation time, and employees who took less than their full vacation time earned an average of 2.8% more the following year than their counterparts who utilized all of their vacation days.

Any successful in-dividual will attest to the sacrifice and dedication that it takes to get to the top. In 2014, Forbes surveyed billion-aires and found that only 10.6% of them work less than 40 hours a week, with nearly 60% report-

ing working 60 or more hours. In the race to the top, not only has the work week gotten lon-ger, but em-ployees are

working harder. Re-search from the U.S. Bureau of Labor Sta-tistics shows a 34.5% increase in output per hour between 2000 and 2014 (de-spite only a 9.5% in-crease in real hourly compensation). In the 1970s, rough-ly 80% of workers took week long va-

cations annually; today, barely over half of Americans do so (Vox, 20014), with nearly half re-porting that they were “checking in” with the office while on vacation. About three-quarters of all private sector em-ployees in the U.S. get paid time off, yet over a third of those didn’t use all of their vacation days, often citing workload or fear of repercussion as reasons for not doing so (GfK, 2014). And these fears are not unfounded. A 2014 study by Oxford Economics found that 13% of manag-ers were less likely to promote employees who took all of their vacation time, and employees who took less than their full vacation time earned an average of 2.8% more the following year than their coun-

terparts who utilized all of their vacation days. In many offices, being the first one out the door is seen as a sign of weakness and long-hours are worn like a badge of honor.

Yes, being successful in your profession takes dedication—you have to put in the hours—but an emerging school of thought (backed by a lot of research) shows negative re-turns on those late nights in the office. A 2012 Harvard study found that overwork and insufficient sleep took a substantial toll on performance, costing American companies an esti-mated $63.2 billion a year in lost pro-ductivity. Sleeping too little—defined as less than six hours each night—was one of the best predic-

Overwork and insufficient sleep costs American companies an estimated $63.2 billion annually in lost productivity.

Excel by balancing work and wellbeing.

Work-life balance

Microsoft

The balancing act


The balancing act

tors of on-the-job burn-out, led to low-er employee satis-faction, more sick days, and increased risk of making er-rors. Every clinical study researching sleep, diet, fitness, and stress has shown that healthy habits in these areas increase performance, mem-ory, attention, and happiness (sources: too many to list). And in application, these results hold up. In 2006, Ernst & Young studied the effects of vacation time on their em-ployees. The inter-nal study found that for each additional 10 hours of vaca-tion that employees took, their year-end performance ratings improved by 8% and they were signifi-cantly less likely to leave the firm.

The data supporting a stronger work-life balance is endless; the funny part is that any great business leader could tell you this without needing to look at numbers, yet for some rea-son, we can’t seem to break this cultural pattern. We continue to believe that there

is a linear relation-ship between work hours and output, or at worst we think that it is a depreci-ating curve, but the undeniable reality is that the correlation between hours and productivity is a bell curve; after a certain number of hours, your net output will be lower than if you only worked for 5 hours that week.

But in case the de-cades of research from PhDs at Har-vard, Stanford, and Columbia (among many others) isn’t enough to encour-age you to pursue a better work-life balance for yourself and your employees, consider this: unused vacation time is a huge financial liabil-ity for organizations. Growing by $65.6 billion in the last year alone, America’s vacation liability is a staggering $224 bil-lion. The 2014 study by Oxford Econom-ics found that the av-erage vacation liabil-ity per employee was $1,898, with some companies averag-ing over $12,000 per employee. On top of this, employees for-

feited $52.4 billion in benefits due to “Use it or Lose it” policies, caps on accrued va-cation days, or expi-ration of those days.

While business lead-ers want to instill a culture of hard work by example, they need to also teach balance by example. If leaders and man-agers work late every night and don’t take time off, this will be the precedent set for employees. Several innovative compa-nies are now requir-ing and even paying for employees to take time off. Oth-er companies have moved to unlimited vacation days. Many case studies have shown this to be suc-cessful for a hand-ful of reasons. For starters, unlimited vacation days does not mean that em-ployees could simply take 3 months off unannounced. There are obvious param-eters and oversight to mitigate abuse of the system. Having unlimited days off removes the large employee stress of having to juggle a set number of days off and plan against

Growing by $65.6 billion in the last year alone, America’s vaca-tion liability is a staggering $224 billion. The average vacation lia-bility per employee was $1,898, with some companies averaging over $12,000 per employee.


The balancing act

unforeseen events. It also makes time off less stressful as it eliminates the feeling of a lost opportunity cost for the employee; time off is no longer a scarce commodity.

Unlimited vacation time is also better aligned with today’s modern work en-vironment. As work and personal lives are increasingly blurred—employees frequently working from home, re-sponding to emails after hours, check-ing Facebook at work, and logging in over their weekends—it is unrealistic to attempt to control how an employee uses every hour of their day. How can a company expect an employee to put in a 65 hour week before a deadline and then charge them to take the following Friday off? The model is broken. Fur-thermore, unlimited vacation rewards productivity and results, as employ-ees no longer feel obligated to linger

around the office in order to hit a 40 hour work week. And lastly, by remov-ing a fixed number of vacation days from an employee’s benefits package, it removes this liability from the books. Several companies have reported users taking less vacation days as they are not at risk of “losing” days at the end of the year, so employers may still need to give their employees a gentle push to take some meaningful time off.

Trust us, we know it’s hard, but if you want to excel, take care of yourself first. Or as sleep-advocate Arianna Huffing-ton puts it, “sleep your way to the top!” Literally. Instead of staying late to tack-le one more thing, remind yourself that you will get more accomplished tomor-row if you’re fresh. Shut it down and re-visit in the morning. That email will still be there waiting for you, we promise.

Lead by example. Take time off both for yourself and to set an example for your employees.

Finding balance

Do one thing at a time. When you’re working, focus on work. When you’re spending time with family or friends, allow yourself to be fully present.

Set rules, such as no emails after 8 PM.

Commit to the rules. Once you’ve allowed yourself to break a rule, the rule becomes meaningless.

Start small. You don’t need to move from an 80 hour work week to a 15 hour work week. Start with some small commitments, such as leaving by 5 every Wednesday.

Socialize your commitments. If you plan to leave by 5 on Wednesdays, tell your co-workers so they can plan accordingly.

Leverage technology. Automate time consuming tasks, leverage productivity tools to get work done faster, and use collaboration software to allow co-workers to pick-up where you left off.

Socialize expected seasonal workflows so you and your employees can better plan and coordinate time-off (i.e., don’t take two weeks off right before you’re supposed to close your books).

Just book it. Don’t wait for the perfect moment to plan a getaway. Find a week that will work and book flights. You can figure out the details later. Put it on people calendars early so they can plan accordingly.

Have faith in your employees. Know that the company won’t go out of business if you’re out of the office for a few days.

Use time off for employee development. Being out of the office can give your employees an opportunity tackle new challenges and grow. Take a week or two off and let your team figure out how to manage your workload, then you can return refreshed and explore new initiatives.

EMPOWERINGFINANCE


Einstein once said, “We cannot solve our problems with the same thinking we used when we creat-ed them.” This quote quite eloquently summarizes the con-flict between process and innovation. If we wish to innovate, we can’t work from

within the same par-adigm that we wish to i n n o v a t e . True inno-vation can only be a c h i e v e d when the

rules are broken, otherwise it’s just paint by number.

As CFOs look to as-sure the stability and growth of their or-ganizations, innova-tion isn’t a luxury, it’s a necessity. As Don Allan, CFO of Stan-ley Black & Decker put it, “Two thirds of

what you do in inno-vation is to maintain market share.” In a 2014 study by CFO Alliance, 95% of re-spondents agreed that creating a cul-ture of innovation was necessary to achieve their objec-tives, and they pro-jected spending in-creases to keep pace with technological advancements and innovation trends. Sixty-four percent of CFOs expect that new product devel-opment will increase in the next 12 months (Deloitte, 2014), and as companies are driving more inno-vation, CFOs and fi-nancial executives are playing a larger role in the process, providing informa-tion and analysis (31%), having a voice in decisions (31%), facilitating and lead-ing innovation (25%), and implement-

ing the innovations (13%).

Yet despite the gen-erally accepted ne-cessity for innova-tion, there is still conflict. CFOs are tasked with manag-ing expenses, en-suring returns on money invested into R&D, and keeping the company fo-cused on broader objectives. Fifty-nine percent of CFOs felt that innovation at-tempts only some-times return their capital (Deloitte, 2014), a reality of the fact that in order to innovate, you must be willing to fail. As they try to reign in their corporate ships through challeng-ing economic times, many are looking to do so by imple-menting tighter pro-cesses through their organizations. Sev-enty-eight percent

“Two thirds of what you do in innovation is to maintain market share.” Don Allan, CFO of Stanley Black & Decker

Create a process that drives innovation.

95% of CFOs agreed that creating a culture of innovation was necessary to achieve their objectives and projected spending increases to keep pace with technological advancements and innovation trends. Sixty-four percent expect that new product development will increase in the next 12 months.

Innovation vs process

Microsoft

The balancing act


The balancing act

of financial executives felt that their compa-nies would benefit moderately or substan-tially from making process improvements (CFO Research Services, 2010). So how can CFOs promote process without stifling inno-vation?

The answer is not one-dimensional, but there are a few overarching principles that should drive your approach. When applied correctly, process can be used to amplify innovation instead of squander it. Jonathan Oliver, Global Head of Innovation for Mic-rosoft, recently said, “I believe [process] is the only way to harness innovation. A spark of genius and new thinking can come from anywhere; however, it tends to be years in the making.” The balance starts with getting input from your innovators. The further re-moved business leaders are from the “on-the-ground innovation,” the more important this is. These innovators will be able to pro-vide honest feedback on where process is useful and where it limits their potential.

Business leaders should apply process to make innovation more nimble, streamlining systems for socializing and vetting ideas, as well as putting new products into market. Jonathan Oliver explains the importance of process for moving products into market,

“One of my rules with regards to true inno-vation is it has to be applied, lest it’s just an invention. I adhere to the old adage of 1% inspiration, 99% perspiration. You need pro-cess to get the perspiration part down and to apply. I’ve been impressed with how quickly Google goes from Lab to Street. Their mod-el is to test, learn, and iterate, so applying it quickly is key to success…but that really does take a lot of perspiration and process.

It’s all about balance and elegant transition between allowing creativity to flourish, than applying it without bankrupting the busi-ness that you’re in today.”

Recognize that innovation should be the cul-ture, not a task. Innovation may come in the form of a new product idea or an improved financial process. Provide a system to culti-vate innovative thinking throughout the or-ganization. Ultimately, innovation requires a little bit of working outside the lines, which can be a challenge for financial profession-als who can be extremely process and rule driven. Track progress and success, but know that the returns on innovation may be diffi-cult to quantify in the short-term. Keep your innovators pointed in the right direction, and have enough faith in them to let them do what they do best: create the future.

It’s a balance; you need to let go of control…just a little bit. Cost control maintains competitive advantages, but innovation creates it.

Finding balance

Start with guidelines and parameters. Innovation process needs the flexibility to break the rules.

Don’t chase. Focus innovation around business goals.

Use process to be more nimble. Create a process for socializing and vetting ideas, as well as moving innovations to market.

Innovation isn’t just about creating the unknown, it’s about connecting the dots in ways that no one has before.

Don’t’ get caught in your own bubble. What may seem like a good idea on the inside may be an obvious mistake to everyone else. Use outside sources for a reality check.

Map the innovation process and track what works.

Look externally for innovation. Sometimes it makes more sense to buy than to build.

Innovation is a culture, not a task. Provide tools to cultivate a culture of innovation.


Name: Jonathan Oliver

City: London, United Kingdom

Company: Microsoft

Title: Global Head of Innovation, Marketing

Education: BA, 1st class Honors in Media Production

Do you feel process kills innovation? How should companies balance these two necessities?

“Quite the contrary, I believe it is the only way to harness Innovation. A spark of genius and new thinking can come from anywhere; however, it tends to be years in the making.

One of my rules with regards to true innovation is it has to be applied, lest it’s just an invention. I adhere to the old adage of 1% inspiration, 99% perspiration. You need process to get the perspi-ration part down and to apply.

I’ve been impressed with how quickly Google goes from Lab to Street. Their model is to test, learn, and iterate, so applying it quickly is key to success…but that really does take a lot of perspi-ration and process.

It’s all about balance and elegant transition be-tween allowing creativity to flourish, then applying it without bankrupting the business that you’re in today.

So many businesses adopt the “see no evil, hear no evil” approach to disruption, because they don’t see the balance creating a innovative mind-set throughout.

It’s about understanding how you capture value and create value and deciding what parts of the business serve which best.

Without rules and process you have monkeys...eventually you will make it, but not in this lifetime.”

Jonathan Oliver, Microsoft’s Global Head of Innovation, shares his thoughts on balancing innovation and process.

Microsoft

The balancing act

InterviewJonathan Oliver


In today’s modern work environment, flexibility is increas-ingly important. Up-wards of 71% of of-fice employees work remotely at times (Turnstyle, 2013), an 80% increase since 2005. Of these work-ers, 37% work from multiple locations,

82% use many dif-ferent apps, and 53% use multi-ple devices (Forrester, 2013). More workers are using per-

sonal devices for work, and vice versa. Nine-two percent of workers believe that their smartphones should be enabled for both work and personal use (Tech-nology in Business, 2013).

To compound this challenge, a new

class of tech-savvy employees are flood-ing the workforce. These employees are savvy enough to im-plement their own tools, de-authorize software, and even find ways to work around company regulations that they feel inhibit their abil-ity to do their job. A 2013 McAfee study reported that 81% of employees use un-approved software and applications in the workplace, and that 35% of SaaS ap-plications used with-in companies are unapproved. Forty percent of IT work-ers said they use un-approved software to bypass compa-ny-regulated IT pro-cesses.

Yet at the same time that employees are requiring (and tak-ing) greater flexibil-ity to do their jobs,

the need for tight security is greater than ever. According to Microsoft’s Cyber-crime Center, over 1 million people are victims of cybercrime every day (2014), and IBM estimated the cost of a data breach in 2014 averaged $3.5 million. Employ-ees may be a com-pany greatest vul-nerability; in a 2011 test conducted by KnowB4, 43% of em-ployees clicked on a test phishing email sent from a trusted server. Other relaxed applications of secu-rity best practices by employees can also create issues. In a 2010 study by CRE-DANT Technologies, 52% of respondents said they could not remember what was stored on their USB drive, and 34% said at any given time, they didn’t know where their USB

A 2013 McAfee study reported that 81% of employees use unapproved software and applications in the workplace.

Excel by balancing work and wellbeing.

Balancing flexibility & security

Microsoft

The balancing act

According to Microsoft’s Cybercrime Center, over 1 million people are victims of cybercrime every day, and IBM estimated the cost of a data breach in 2014 averaged $3.5 million. Employees may be a company greatest vulnerability.


The balancing act

drive was. To compound the issue, 68% said that they shared USB devices with family members, friends, or colleagues, and 10% admitted losing a flash drive with compa-ny info on it. Twenty-one percent of people admitted to using more than 10 USB drives. In this evolving environment, it is important for companies to protect themselves while still allowing employees to access applica-tions that will make them more productive. Provide the right tools that employees need to excel at their jobs. According to Good Technology, there was a 3,000% growth in secure browsing applications between Q3 and Q4 of 2013. Instead of creating rules prohibiting certain uses, create a process that enables employees to work their way. A simple step is to require management authorization before installing any unap-proved software. Employees should also

be instructed never to download software from the Internet or software that they’ve obtained from home. Not only could they be exposing your company to security risks, but they may also be violating software li-censing agreements by doing so. Instruct them to go through IT or an approved ven-dor to obtain software licenses on their work devices. They should also be instruct-ed not to delete software that has been implemented by IT, such as virus scanning software.

Remember that in most cases, these em-ployees are trying to do the right thing. While it may cause a headache, complete-ly restricting their usage may limit their productivity, as well as make you miss out on an innovative new tool or process that could help improve your business.

Don’t create rules, create a process. Create a secure way for them to do the things they want to do. Otherwise, they’ll just do it on their own.

Finding balance

Provide the right tools. Get input from employees. This will limit employees from having to seek their own solutions.

Educate employees on security risks and how to mitigate them.

Make security the culture, not just something that gets done when people have spare time.

Provide secure access to corporate networks when employees are working remotely.

Provide receptacles for employees to shred sensitive documents.

Set aside time for seasonal security checks, such as a day for employees to change passwords and purge their devices of any unneeded locally stored data.

Create a document security naming system and provide direction on the level of care each tier of documents should be treated with. This gets rid of an “all or nothing” mentality, and allows special attention to be placed upon highly sensitive information.


Activity based working

Microsoft


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The work environment is changing. Technolo-gy has enabled the mobile workforce, Millennials are growing in number and rank, and the lines between personal and work—devices, time, and space—have become blurred. Work is turning into a function, not a location.

As business leaders seek to address these changes, they face an array of evolving challenges, such as rising costs and new security requirements. As a re-sult, Activity Based Working (ABW) has emerged as a popular new work trend. A 2012 study by Colliers International found that one in three organizations had already implemented or was planning to im-plement ABW and other flexible ways of working. CFOs looking to cut costs and increase retention, creativity, and productivity should take notice.


Work is turning into a function, not a location.

What is Activity Based Working?

Activity Based Working (ABW) refers to two things: a system for working and an office setup. As a system for working, ABW focuses on performance and work output instead of systems and process. Instead of micromanaging how and where the work gets done, man-agers help provide their employees with the tools and resources to do great work and hit deadlines. This not only allows employees to work in ways that they best excel, it helps pull business leaders out of the weeds, allowing them to spend more time on strategic plan-ning.

This system for working is translated into an Activity Based Working office setup, which is structured around activities rather than bound-aries for personal spaces. The broader workspace is arranged around a variety of predetermined activity areas for specific tasks, such as learning, focusing, collaborating, and socializing. No employees are assigned their own workstation, thus removing personal ownership of desk space and putting more focus on the team and the work.

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workplace conflict item, and the layout makes employees more active and less sedentary during the work day. Companies that have implemented ABW also re-port improved employee satis-faction, camaraderie, and colle-giality.

Smaller officesOffice space is often the second highest cost a company incurs, behind employee wages, and this cost is rising. A 2014 study by Cushman & Wakefield found that

The benefitsStrong performanceA 2010 study at the University of Innsbruck found that employees saw an 11-20% increase in per-formance on creative activities while working from home, yet a 6-10% decrease in performance on dull and repetitive tasks. The suggestion is that differ-ent work environments produce performance benefits for differ-ent tasks. With defined activity zones, Activity Based Working allows employees to work in an environment best suited for the tasks their working on, whether dull or creative, making employ-ees more efficient and produc-tive.

More collaborationBy defining activity areas for brainstorming, socializing, and meetings, Activity Based Work-ing makes teams more produc-tive. ABW layouts naturally facil-itate organic conversations and idea sharing. Both literally and figuratively, ABW helps to break down silos, giving team mem-bers easier access to managers and colleagues.

Team oriented focusBy removing ownership over in-dividual spaces, Activity Based Working creates a “me” to “we” mind shift. Employees no longer stress over the internal politics and envy that assigned work-spaces often create; all employ-ees share all spaces, levelling the playing field regardless of rank or tenure. Employees have a greater sense of ownership for the office as they now share a common

space and apply rules to use it.

Employee retentionEmployees, particularly younger employees, place a high value on work flexibility. A 2013 survey by Millennials Branding report-ed that 45% of Millennials would choose workplace flexibility over additional pay. Activity Based Working provides employees with this flexibility, which in turn creates a happier workforce. Removing ownership of work-spaces helps remove a common

who may have private offices. Quieter, introverted employees may also take great comfort in the safe-haven of their personal space.

Rejection of the conceptWhile many employees will be excited by the concept of Activity Based Working, some employ-ees may reject the idea. This may come from discomfort with a change in the status quo or from an unwillingness to give up their individual space. These employ-ees may claim ownership over certain ABW areas, which can be highly disruptive to the overall ecosystem.

Abuse of the systemWhile many employees excel while working remotely, some employees may take advantage of the extended freedom that ABW provides. They may use time working remotely to focus on personal projects or camp out in larger team spaces, deny-ing others the opportunity to use the space for its intended use.

ABW is not for everyone, nor is it one-size-fits-all, so business leaders will need to weigh the benefits and consider how their team would respond to the new approach.

global office rents increased by 3% year-over-year, averaging $39 per square foot in the US. Parts of Africa and the Middle East saw as much as a 13% increase. With an average employee workspace of 75 square feet (International Facility Management Associa-tion, 2010), the average company is spending nearly $243.75 per month for each station, a num-ber that does not feel too astro-nomical until you consider that workers only spend about 55% of their working day at their desk

(Sanlam Private Investments, 2014). This means that a com-pany with 20.25 office workers (U.S. average; U.S. Census, 2012) spends roughly $26,650 annually for office space that doesn’t get used.

Furthermore, despite the abun-dance of empty desks during the day, open meeting spaces seem to be a rare commodity in many offices. ABW layouts are designed to intelligently utilize space, helping to ensure that employees always have the nec-essary resources when they need them. ABW helps businesses save money by maximizing smaller work spaces, reducing wasted time in the office, and helping make teams more nimble and ef-ficient.

The drawbacksIndividual workspacesWhile removing individual own-ership of workspaces is often positioned as a benefit of ABW, for some employees, this may be seen as a drawback. Some em-ployees take a lot of pride in their workspace and may even take it as validation, a tangible and high-ly visible display of their rank in the company. This is most often seen with senior management



Your plans should be flexible enough for diverse teams to adapt their allocated zones to their needs.

Switching from a traditional work system to ABW takes some work and sacrifice from employees.

Identify your zonesAfter you’ve made the decision to adopt Activity Based Work-ing, step-one is to identify your zones. Build your zones around your teams activities and styles of working. Common zones include quiet zones for focus, isolation pods for personal use, small team collaboration spaces, large team collaboration spaces, open col-laboration spaces, and social ac-tivity areas. These will be adapted based on your team, your work, and your available space.

ImplementingNo fixed modelWhat does Activity Based Work-ing look like? It can look like anything you want it to; there is no fixed model. Your plans should be flexible enough for di-verse teams to adapt their allo-cated zones to their needs. This may look different for individual teams across the same organi-zation. Be flexible over time and adapt your system and layout to your team’s needs.

Team buy-inSwitching from a traditional work system to ABW takes some work and sacrifice from employees. Be-fore you make the decision, get buy-in from all team members. Discuss potential roadblocks and concerns early on to help ad-dress and mitigate these issues. Socialize the plans and get feed-back along the way; employees will have valuable insights into the working habits of the team that senior management won’t have. Getting buy-in and input from the team before and during planning will give them addition-al ownership over the space and the approach.

Quiet zones for focusIsolation pods for personal useSmall team collaboration spacesLarge team collaboration spacesOpen collaboration spacesSocial activity areas

Activity areas

What does ABW look like?

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Be sure to include IT early in the discussion, and work together to find a system that gives ABW teams the flexibility that they need without compromising security.

Go all inActivity Based Working is not just a system for lower-level em-ployees, it is for everyone. Don’t make exceptions or provide special privileges because of an employee’s place in the orga-nizational hierarchy. Managers and directors don’t get their own room, as these business leaders need to be responsible for mod-eling the required behaviors for making ABW work.

CommitDon’t let ABW turn back into an-other form of traditional work-stations. Commit to the system, especially early on when old habits may cause you to revert into familiar routines. Make sure that all of your team members are also committing to the new system.

Test, measure, optimizeWhat seems logical during plan-ning may not work so well in re-ality. Stay flexible as you launch, test different layouts, measure the usage of different areas, and optimize your space to maximize productivity and collaboration.

Get input from ITABW can place a large burden on IT, requiring better Wi-Fi connec-tivity, collaboration software, and telecommunications services. Other IT challenges stem from this new style of working. For ex-ample, ABW employees will need laptops to enable mobility in the office, which poses an additional security and increases the risk of devices being damaged. Be sure to include IT early in the discus-sion, and work together to find a system that gives ABW teams the flexibility that they need without compromising security.

Microsoft’s new Amsterdam campus at the Schiphol airport has moved to an Activity Based Working approach, which was called “2bPR” for “to be people ready.” The objective was to empower employees with more freedom while still holding them accountable for results.

The upfront research found that 49% of employees worked outside the building on a typical day. Now, with the new layout, roughly 800 employees use the space as their home base. Small spaces have been created to accommodate concentrated work, on-screen working, small teams, larger groups, and private individual stations. Everyone uses a laptop and there are no fixed phones. Additionally, the office is almost paperless, with people printing one page per day on average, down from 80 pages per day.

The results have been phenomenal. Sales for the Dutch subsidiary have increased by roughly 51%, real estate costs have been reduced by 30%, saving $644,000 annually, and over 22,000 customers have come to the building to see the new ways of working. IT, administration, and communication costs have been reduced while employee satisfaction has increased; Microsoft was recently named the best employer in the Netherlands.

ABW case study

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Managers and directors don’t get their own room, as these business leaders need to be responsible for modeling the required behaviors for making ABW work.

Q: How do we find someone in an emergency?A: Start with creating a shared set of rules for availability and ap-proaches for contacting co-work-ers. Socialize schedules, particu-larly to identify when someone is working remotely, and lever-age instant messaging apps, text messaging, and mobile phones to get a hold of someone should an emergency arise.

Q: What about cleanliness/germs?A: This problem is not exclusive to ABW offices. Adopt a “leave no trace” policy, encouraging employees to clean a space be-fore they leave. Provide anti-bac-terial wipes to clean up spaces after they’ve been used, and as

with a traditional office, encour-age hand washing. As ABW pro-vides the flexibility of remote working, set the expectation that if employees are feeling ill, they should work from home, no ex-ceptions.

Q: Should we provide any person-al spaces for employees?A: While ABW is built upon no personal workspaces, it is often useful to provide some personal storage for employees to stash personal belongings or lock up a laptop overnight.--

FAQQ: Is this the same as office plans with an open plan or hot desks?A: No. Both open plans and hot desks still rely on most work be-ing done at a desk, they just vary who is sitting at a particular desk on a given day. With Activity Based Working, different activities are conducted in different areas.

Q: Can we make exceptions for employees who really want their own space?A: No. ABW is designed to put the team first and is intended to function as a cohesive system. It is problematic when an individu-al exists outside the system. Both the individual and the system will suffer.

Q: Can we make exceptions for managers?A: No. Managers need to be re-sponsible for modeling the re-quired behaviors for making ABW work.

Q: Does this require buying all new furniture?A: While you may find it benefi-cial to get new furniture that bet-ter suits your activity areas, this is not a necessity. Be creative and adapt your existing furniture to the new Activity Based layout the best you can.

ABW is designed to put the team first and is intended to function as a cohesive system.


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Meetingminutes

MasterPresentationsStrong presentation skills are key for any financial leader. Mas-ter Presentations by simplifying your message, use more graph-ics and less text, and go easy on the effects. Also plan the out-come: what do you want people to do at the end of your presen-tation? Focus on telling a com-pelling story, not just sharing data points, and design with in-tent. Check out Microsoft’s new presentation tool, Sway.

EmergingIn this edition of Emerging, we re-view the Internet of Things. Since the early days of the Internet, the dream has been to create an eco-system of products, from kitchen appliances to HVAC, that were somehow all connected and in-tegrated. The Internet of Things is just that, the interconnection of unique devices within an ex-isting Internet infrastructure, and today this vision is finally being realized. The true power of the Internet of Things has yet to be

seen, but it is already set to be a game changer. We also explore the sharing economy, which is a system of sharing human and physical resources between par-ticipants, including the creation, distribution, and consumption of goods and services. Lastly, we re-view Hyperloop, the latest major project from Elon Musk. Hyper-loop is a high-speed transporta-tion system that sends passenger capsules through reduced-pres-sure tubes, able to go from LA to SF in just 35 minutes.

uFAQHow do corporate inversions work?A corporate inversion, or tax inver-sion, is when a company relocates its headquarters to a lower-tax na-tion, typically while retaining the majority of its material operations in the origin country. This “relo-cation” is often done through a merger or acquisition of a foreign enterprise. Companies use two common techniques to avoid taxes and save money during an inver-sion: stripping and hopscotching.

© 2015 Microsoft Corporation. All rights reserved. This document is provided “as-is.” Information and views expressed in this document, including URL and other Internet Web site references, may change without notice. You bear the risk of using it. Some examples are for illustration only and are fictitious. No real association is intended or inferred. This document does not provide you with any legal rights to any intellectual property in any Microsoft product. You may copy and use this document for your inter-nal, reference purposes.

Privacy Statement: http://www.microsoft.com/privacystatement/en-us/core/default.aspxTrademarks: http://www.microsoft.com/en-us/legal/intellectualproperty/Trademarks/EN-US.aspx

Our article on Activity Based Working (ABW) shows you how this new way of working can help cut costs and increase team per-formance. ABW is both a system of working and an office layout. As a system for working, ABW focuses on performance and work output instead of systems and process. Instead of micro-managing how and where the work gets done, managers help provide their employees with the tools and resources to do great work and hit deadlines. This sys-

tem for working is translated into an Activity Based Working office setup, which is structured around activities rather than boundaries for personal spaces. The broader workspace is arranged around a variety of predetermined activity areas for specific tasks, such as learning, focusing, collaborating, and socializing. No employees are assigned their own worksta-tion, thus putting more focus on the team and the work than any individual.

In our article, The Balancing Act, explores four major challenges CFOs seek to find balance with: work v life, flexibility v security, and process v innovation. The piece illustrates how you may get less done by trying to work more, how a new class of employees are requiring greater flexibility in the workplace, making IT securi-ty a responsive practice, and how to create a process that doesn’t stifle innovation. Each section concludes with some tips to help CFOs find their perfect balance.

Does process kill innovation?While process can hurt innovation, when applied correctly, it can also enhance it. CFOs should create processes to surface new ideas, explore and validate new con-cepts, and communicate business innovations. The process should not impact how the work is done, but rather provide checkpoints to make sure that innovation can surface and remain aligned with other business activities.

Activitybased working

Freytag’s pyramid of

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complexityOver the past 15 years, the number of procedures, vertical layers, interface structures, coordination bodies, and decision approvals needed have increased between 50 and 350 percent, according to a 2011 study of U.S. and European companies by the Boston Consulting Group.


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