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CHAPTER ONE
1.1 BACKGROUND OF THE STUDY
In the mid 80’s, prior to the introduction of Structural Adjustment Program (SAP), Nigerian
political economic environment was stable for local and international investors for the
establishment of various type of industries.
Significant portion of foreign direct investment in Africa was channeled to Nigeria economy
in the mid 80’s to the end of 1990. During this period of near stability, investing in Nigeria
economy doesn’t require too much feasibility study and closed monitoring performance.
Nearly all newly establish industries do “break-even” within the first three years of their
operations, this indicates a growing economy with substantial level- playing field for every
investor. The consequence of this scenario was that, the economy operates as a seller- market
without any impact of competition. (Jim Patt, 1998)
During this era, the role of finance division in measuring, advising on company performance
was very limited and most often it is to satisfy statutory regulators agencies and un-
sophisticated stakeholders. This situation does not create an effective or prominent role for
finance division in companies to really measure the performance of business vis-à-vis
competition and developed “growth-strategy” for future expansion as the economy improves
(Barrings Bottling Report, 1993). With the decline in the world economy, its snow-ball effect
on the 3rd world economy particularly, the Organisation Petroleum Exporting Countries
(OPEC), Nigeria economy begins to show signs of discomfort through persistent “balance of
payment deficit” various dislocation of resources which inadvertently lead to the invitation of
International Monetary Fund (IMF) to diagnose Nigerian economy.
All international economic indicators used, clearly shows the economy is in dire need of
surgical prescriptions, while all the signs clearly indicates serious economy problems
looming in the very near future. Majority of industries in all sectors of the economy that used
to be buoyant and had ignored necessary performance “scenario- building-model” suddenly
awaken, from their, “it is a seller-market syndrome” that all thing being equal, the company
can sell whatever is produced without any serious threat from competitors. Consequent upon
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government official pronouncement of stringent economy policies and the introduction of
internationally induced “Structural Adjustment Program” on the premised of turning Nigeria
economy round was announced. (Beverage World International, 1996)
The SAP introduction, unexpected nails the coffin of many industries that had been under the
myopic illusion of being an efficient-company. The concept of “SAP” revolves around the
following which signpost the need for the economy and the key industry players to re-
diagnose and re-structure their companies for the keen competition that SAP intend to bring:
1. Liberalization of trade
2. Determination/floating of Nigeria currency through the establishment of foreign
exchange market- where naira exchange rate to key major international currencies could
be determined via inter play of demand/supply.
3. Privatization/conclusion of key government parastatals.
4. Removal of subsidy form petroleum related products i.e. petrol and fertilizer, introduction
of tight fiscal and monetary policies guidelines in consonance with the spirit of free-
enterprise.
The significant impact of SAP greatly enlightened major and serious minded investors that
the key to survive in Nigeria economy of today is to have an efficient and effective
professionally man finance division that is dynamic, very proactive within the corporate
mission/vision of the company business goal. (Barrings Bottling Report, 1993)
The fundamental changes that occurred as analyzed above between 80’s till now have
made many known and potential investors to show adequate interest and developed
appropriate tools of measuring company operating performance within their industry-
group and their economic environment. (7up Company Report, 1997)
7up Bottling Company, in the mid 80’s managed the fortunes of their business empire
through crude accounting/financial model that fails to highlight key performance
indicators vis-à-vis their competitors and other known and unknown external variables.
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With the introduction of floating exchange, the basic tools of managing industry was
introduced i.e. Financial Planning Model (F.P.M), Budgeting and budgetary controls
model, management operating systems model, inventory/production schedules model and
financial investment model were all introduced. Also recruitment of quality staff in all
aspect of company operations, complement the various professional tools of business
management tools of trade/ marketing logic concept that can match competition
innovation in the market place were introduced. (Jim Patt, 1998)
7up Bottling Company engaged the services of a renowned world consulting firm to fully
diagnosed and re-organize/re-structure all aspect of the business with the sole aim the
objectives, mission and vision of making the Bottler re-aligned its focus for the
challenges and competition that the company face the years to come. It is obvious that for
a competitive advantage in today ever changing business environment, the role of finance
division in company operating performance management can not be over emphasized.
1.2 STATEMENT OF THE PROBLEM
While emphasis are placed on profitability and growth of the necessary apparatus that
will consistently serve as a watchdog on investment strategy growth potential strategy
and performance management strategy, the 2008 global financial crisis has changed how
we judge market trends, how we look at companies results and how much we trust the
leaders of many enterprises. (Accenture, 2008) It also affects how certain business
functions are regarded. Although finance and accounting has been evolving continuously
through its history, however, it is difficult to claim that the traditional finance function is
at its utmost strengths and reputation today – at least challenges is growing and many
people claim if proper financial control were in place the crisis might have not been so
severe or long. (James deSantis, 1999)
In essence, the importance of finance division is of top most priority as play vital role of
the organization’s decision making, in tough times, finance executives of all ranks
(controllers, assistant treasurers, chief financial officers etc) are primarily regarded as
cost cutters and administrators of financial controls rules and regulations. (Slang, 2006)
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Top executive have expanded their skill sets in many ways that are valuable now and in
the subsequent economic recovery. These new qualities make for a more high
performance finance executive who is heavily influencing the direction of many
companies.
1.3 RESEARCH QUESTIONS
Every research concerns a problem demanding appropriate solution. (Olu Ojo, 2005). The
finance department of any organization is surrounded with so many questions some of
these questions are listed below
Questions in personal finance revolve around:
1. What role will finance play in the performance of a company and how?
2. Can finance play a strategic role in achieving company performance?
3. How can an organization plan for a secure financial future in an environment of
economic instability?
4. How much money will be needed by an organization and when?
1.4 RESEARCH OBJCETIVES
This study is aimed at examining how finance division play key role in the decision making of
the organization and how this decision affect the corporate performance of an organization. To
meet this objective this study will focus on the following specified objectives:
1. To determine the role of finance in the performance of a company.
2. To see if really finance division/department plays a strategic role in company
performance.
3. To know how organization plan their financial future in an environment of instability.
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1.5 RESEACH HYPOTHESES
Hypotheses 1
Ho: There is no correlation between the role of finance and company performance
management.
H1: There is correlation between the role of finance and company performance
management.
Hypotheses 2
Ho: Finance department does not play greater strategic role in company performance
management.
H1: Finance department plays a greater strategic role in company performance
management.
1.6 SIGNIFICANCE OF THE STUDY
All companies know that they need a finance function to support their operations.
However, not many companies know how much they should invest (including payroll,
training, office space and computers) in this function. As a general rule, the amount to
invest corresponds with the role of the finance function in supporting your company’s
success. (R.G Voorhees, 2007).
In many companies, the major role of the finance function relates to the handling of cash
receipts and payments, and the maintenance of accounting records for compliance with
financial reporting and tax requirements. (Keith Ward, 1992) While these are important,
the finance function could play a more active role (including custody of assets,
budgeting, working capital management, monitoring financial performance) to support
your company’s strategies and operations.
To determine the role of your company’s finance function, an easy starting point is to
review the factors that will make your company’s strategies and operations successful
and then list those factors to which the finance function can contribute. The next step is to
compare the requirements for the finance function to its current operation. If the current
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operation falls short / needs to be revised, a plan needs to be revised a plan will then be
set up to enhance the finance function. With this approach, you will ensure that your
investment in the finance function is well justified and will provide a satisfactory return.
1.7 SCOPE AND DELIMITATION OF STUDY
The project is centered on the role of finance in company performance management.
Various activities expected of a finance department in an organisation were x-rayed to the
responsibilities currently carrying-out within the overall mission and vision of the
company under review. Sequent to the fact that critical area of operation where their
performance falls short of desired expectation is further investigated. Further emphasis
was centered on the pro-active nature of the role of finance division in ensuring the
company overall goal within the available resources is achieved at minimum cost of
operation.
The areas of investigation is limited to the essential role a dynamic “finance division” is
expected to play in a very competitive industry in which 7up operates. Also, the project is
restricted to finance division, a unique sub-system within the organization. In the course
of this it was realized that substantial input to the critical role of finance division is to
play, flow from operations department of the company. The activities of these department
i.e. production, planning, scheduling and control, sales, marketing and distribution,
administration has a direct impact on the activities of finance division.
Some of the limitations of the study include the limited time that was given to carry out
this project, inadequate resources which made it impossible for researcher to cover other
companies, sample size which is small compared to the total number of workers in the
company. Another limitation is unwilling attitude of the respondent to supply information
and fill questionnaires as well as problem of retrieving questionnaires.
1.8 OPERATIONAL DEFINITIONS OF TERMS
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Finance: Finance is the science of funds management. Finance includes saving money
and often includes lending money. The field of finance deals with the concepts of time,
money and risk and how they are interrelated. It also deals with how money is spent and
budgeted.
Accountants: Someone who maintains and audits business accounts.
Budgeting: A summary of intended expenditures along with proposals for how to meet
them.
Inventory: The value of a firm’s current assets including raw materials and work in
progress and finished goods.
Inventory control: Supervision of the supply and storage and accessibility of items in
order to insure an adequate supply without excessive oversupply.
Profitability: The quality of affording gain or benefit or profit.
Investor: Someone who commits capital in order to gain financial returns.
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CHAPTER TWO
LITERATURE REVIEW
2.1 HISTORICAL BACKGROUND OF THE SUBJECT MATTER
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Contemporary literature had come up on various concept of performance management in almost
every facet of business environment. Financial positions are demanding and rewarding as well.
Finance executives have to maintain a balance between control and creativity. A control
orientation is essential in order to establish accountability. Even companies with strong
product/service offerings and dynamic marketing organizations require accountability to achieve
their potential. Yet, it is almost impossible for a company to succeed simply because they have
strong controls. High performing organizations flow seamlessly from one activity to the next
because they focus on the business, which, in turn, drives every aspect of the company, including
controls, creativity, etc. These companies generate the energy and resources for growth as well
as financial strength. Finance executives can lead and model creativity, energy and
resourcefulness by the way they do their jobs.
As with other modern professions, it is difficult to track back precisely when and where finance
and the accounting profession were born or who were their first civilization, key to important
phases of history, among the most important professions in economic and business, and
fascinating. Accountants participated in the development of cities, trade, and the concepts of
wealth and numbers. Furthermore, James deSantis (1999) writes that “evidence of accounting
records can be found in the Babylonian Empire (4500 B.C), in pharaohs’ Egypt and in the Code
of Hammurabi (2250 B.C). Eventually, with the advert of taxation, record keeping became a
necessity for governments to sustain social orders”. Although the first ‘accountants’ seems to
have been around since humans have started to use money in their transaction, the first person
whose name we can find in the history books is Luca Pacioli (1447-1517), who is regarded as the
father of accountancy. His groundbreaking work of Summa de Arithmetical, Geometria,
Propotioni et Proportionalita was published in 1494 in the renaissance Italy. Although Pacioli’s
‘Summa’ has dedicated only few chapters to finance his concepts created the foundation of
modern finance. Pacioli described the basis concept of double entry bookkeeping with making
references to memorandum books, journals and ledger. Furthermore, he suggested that all entriesto be translated to a single monetary unit- which in the context of 15 th century is quite
remarkable. Also governance structures in the middle- age were different of today, as the CFO
website puts that “once upon a time, business bankruptcies resulted in jail time (if you were
lucky), treasurers defend their funds with a sword and financial planning was tested by plagues
and fire”. “Key virtues of the finance person at that age were to be known for his honesty
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strength, courage, martial experience, suspicious mind, and self- restraint”. (R.G. Voorhees,
2007).
2.2. FINANCE AT THE END OF 20TH CENTURY
After the short travel in history, we come back to modern day finance. Using the definition of
Riahi- Belkaoui (1995) “Today accounting is generally regarded as being the systematic
development and analysis of information about the economic affairs of an organization. In fact,
one of the most important purpose of accounting is to communicate relevant information
between and among producers and users of such information”. Accordingly, a key enabler of
modern they finance was the standardization of accounting systems. International Accounting
Standards Board (IASB) defines the ultimate aim as ‘to provide the world integrating capital
markets with a common language for financial reporting’. This has been achieved by the creation
of reporting standards to provide a functional framework for the finance function. Therefore, by
the dawn of the 21th century we need to acknowledge that finance and accounting has become a
truly international or moreover global function.
The traditional finance roles existing in most organization are (Pike & Neale 1993): Financial
accounting, concerned with recording the financial transaction and reporting to the stakeholder
of the company. Corporate finance focusing on fund raising for the business. Management
accounting’s priority is the decision support for the management via monitoring of controls.
Even if these roles seem cover the full spectrum of the business, unfortunately all of them are
internally oriented and focused at the past. In the rapidly changing environment external focus
and the use of benchmarking techniques are essential as much as orientation towards the future
to aid strategic business planning. Studies show (Slang, 2001) that many finance managers still
consider their main task to be transactional processing and spend considerably less time for
reporting and even less on internal controls.
With the advert of technology, globalization is having a substantial impact on the finance
organization, the finance organization’s overall performance is lagging, lack of alignment
between finance and the business impedes progress, use of benchmarking is not widespread, and
change is needed in how enterprises manage risk.
2.2.1 THE 21TH CENTURY FINANCE FUNCTION
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While there were hundreds of books on financial methods, accounting standard there were
relatively few studies made in the area of how finance could be able to help business grow
further in the current challenging environment. The concepts proposed in this article and the
forthcoming international study is showing an alternative scenario to tackle these issues. The
study which is being carried out currently is comparing UK, French and Hungarian financial
management practices. Acknowledging the complexity of international research we will use
anchoring vignettes (G. King, 2004) to facilitate cross cultural comparability.
One of the criticisms of traditional finance function is that it spends too much time on analyzing
the past instead of looking into the future. While learning from the past is also important,
however, supporting strategic planning without looking into the future is hardly possible. Similar
problem is the orientation of focus, which in most cases inward looking. Finding finance people
who are outward focusing and using benchmarking techniques are still very rare nowadays. The
traditional inward and past focused orientation limits finance capabilities to help the enterprise
gain competitive advantage by closely monitoring completion via benchmarking or to gain
further market trust by providing accurate forecasting.
In the last decades a new concept has arise suggesting the need of orientation change. “Strategic
management accounting is normally regarded as an integrated management approach drawing
together all individual elements involved in planning, implementing and controlling a business
strategy. Thus it clearly requires an understanding of the long-term goals and objectives of the
organization. There must also be a comprehensive analysis of the environment in which the
business both is and will be operating”. (K.Ward, 1992)
When we look at how finance could be more competitive in the long term there are 6 key areas
suggested to be in focus:
Information Systems: In today’s changing world speed of reaction is past of competitive
advantage, therefore obtaining the right information at the right time and making it
available to the right people is the key in order to succeed.
Forecasting: Finance is one of the functions where reputation does matter so foreseeing
the results with great accuracy- make a difference in the eyes of the shareholders and
financial markets.
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Outsourcing: Outsourcing allows the enterprise to focus on its strategic agenda by
freeing up resources from non- core activities. The efficiency gains would drive down the
costs and increase profitability which would allow funds to be invested again in
innovation activities. The future expectation is that outsourcing trends will continue and
the energy that finance will spend on transactional or control measures would reduce
significantly.
Use of Benchmarking: Inward focus is not enough anymore; the organizations must be
looking outside and compare themselves to competition. ‘Without proper benchmarking,
CFOs may be driving their enterprise, but they are driving it without a road map’.
(Accenture, 2008).
Risk Management and Control: Enterprise are taking risks everyday at each decision
that they make, however, the related exposure and the mitigating actions could make the
difference of achieving competitive advantage or losing the profits.
Business Partnering: Change of mindset is crucial. Ultimately finance is a service
department so it needs change the way it counteracts with the clients, active decision
support and close involvement into strategy formulation is key.
Another emerging concept is the Integrated Finance Organization, which operates with single set
of facts, using a common EPR system and is governed by information standards throughout the
organization. A major benefit is ability to provide information faster and more efficiently than
currently dispersed systems. Once it has been setup it could provide major savings. However,
initial investments and the need of extensive change management program are key obstacles of
implementation.
2.3 THEORETICAL FRAMEWORK
There are three management literature reviewed that revolves round the above quotations,
which are essentially the 'base-case of performance management. One of the articles describes
the use of performance management and the principle of programming management to avoid
undetected signal of company failure. The key issues covered centered on the following
important KPIs:-
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• Programme management: is essentially about the cascade of corporate goals slide-
down into specific activities, then followed with a well proven theoretical framework
to achieve the desired goals.
• Goals: These are qualitative aims for the company, whose purpose is to set direction
by providing criteria against which to take corrective decisions. For example, a
decision on the appropriate level of expansion strategy in new product development
would be affected by whether the corporate goal was to excel as a leader over arch-
rival.
• Objectives: These are quite specific and need to be smart - specific, measurable,
achievable, relevant and time-bound.
• Strategy: Within the context of performance management is the "how to achieve our
objective," namely the identification of opportunities between a company and its
environment for "value-creation."
• Plans: Once the 'how to' has been defined the next stage is the 'what to’.
• The hierarchy of measures outlined above points to the approach conceptually
developed for performance measurement, namely vision (expanded into goals and
objectives) to strategy and hence to critical success factors (CSF) and the Key
Performance Indicators.
The relationship between the two is shown in Fig. 1, to indicate the links between the role of programme management and its relationship to the management of the ongoing business.
Further, it is futile to have a strategy without a programme to implement it. A programme
without strategy context is like a ship without a compass. All large investment should be
evaluated as programmed and also assessed their contribution to the organization’s CSF and
performance measure within the KPI framework.
It will matter little if a programme is performing well on the internal cost, time, and quality
criteria, (the operation was a success), if the KPIs are heading south (the patient died).
This article reviewed summarizes the critical linkages between corporate goal, objectives and
strategy that must be monitored through KPI, critical success factors etc.
PERFROMANCE MEASUREMENT PROGRAMME
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Fig 1
Another Literature reviewed under performance management concept is the benefits model
concept by Malcom Smith - Management Accounting Journal (1998).
The key focus of this model is to improve the fortunes of the business at critical stages of its
operations i.e.
• A definition of the 'Base-case' for KPIs.
• The tolerance limit trend the Base-case would follow under the do 'nothing option'
with carefully defined initial assumptions.
• How the programme-benefit model is 'intended to improve the company KPIs above
the standard Base-case trend.
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• Consequent upon these initiatives and initial assumptions, the next steps is to
compare 'forecast-benefit' with the actual measure performance for corrective -
action.
• Also, Kaplan and Norton (1992) demonstrate that performance measures are
important in most management control systems by establishing targets in a
performance measurement system, actual results can be compared against target to
enable feedback, which is at the care of most management-control. Managers often
use a range of financial and non-financial performance measures. The concept of
"Balance Score Card" is one relatively recent example of this combination of
financial and non-financial.
Another interesting ref:- Fitzgerald (1991-1996) in his empirical research into performance
management in real sector of the economy. Fitzgerald & Monry 1996, pp. 106-107 make the
following performance measure system recommendations.
Know what you are trying to do Draft a range of measures
Extract comparative measures to assess performance outcome.
Report results regularly
Drive the system down from the top.
Also, a lot of information was generated from the company records, Annual Reports and
Financial highlights as it relates to finance function.
2.3.1 CHARACTERISTICS OF FINANCE DIVISION
This is the heart-beat of any organisation be it for profit or non-profit activities.
Both corporate goals, strategy, plans, actions and operational strategy will be coordinated
and translated to investment plan.
All business decisions end in finance division, providing the necessary funds.
As the heartbeat of the company it must be professionally managed. Every finance and
accounting staff must have pre-requisite qualifications comparable to their level of
competence and assigned responsibilities within the overall goal of finance division.
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Within the historical antecedent of Seven-Up Bottling Company, finance division is
structured as follows:
- Financial controller
- Chief Accountant
- Management Accountant
- Treasury Manager
- Chief Internal Auditor
- Legal Officer
- Insurance Officer
2.3.2 DUTIES & ROLES OF FINANCE DIVISION IN COMPANY PERFORMANCE
MANAGEMENT
KEY FINANCE STAFF-TITLES JOB CLASSIFICATION
Head of Finance Coordinating all activities related to finance and
accounting and also provided adequate financial
resources to meet operational needs of the
organisation.
Central Accounts Handles all statutory related accounting matters.
Management Accounts Handles all aspect of management information i.e.
Strategic Performance Management Focus, KPIs,
CSF, Budget and Budgetary Control, Costing -
Systems etc.
Internal Audit Coordinating and investigating systems and control
procedures.
Treasury Handles funding activities cum cash flow and
disbursement of cheques to creditors.Legal Services Handles all aspect of business transactions - legal
implication with third party.
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Insurance Services Handles all aspect of business related to Insurance
implication with third party.
2.3.3 WHAT IS PERFORMANCE MANAGEMENT?
This is a modern day concept developed through various approaches tested with the objectives of
assisting business managers, accountants and other business executives, acquire a broader-based
view of business and appreciate why this improved approaches are becoming an increasingly
critical business imperative.
Also, it is a combination of business measurement techniques that are of particular relevance to
manufacturing and service sector of the economy. It emphasis that companies must adopt a more
enlightened approach to assessing and managing company performance vis-a-vis internal and
external environment variables. If they do not embrace this concept, they will have increasing
difficulty in coping with the challenges they face and achieving the goals they set themselves.
Where they adopt it, they will be starting to focus on what is really important, be able to manage
resources more effectively, measure and control progress towards their goals. This will also
create capability for a performance-enhancing and continuous improvement culture to fl
WHO NEEDS PERFORMANCE MANAGEMENT?
Essentially, various approaches i.e. Theory of Constraints... TOC, Activity Base-Costing... ABC,
Throughput-Accounting, Balance-Score-Card, 'Process-Maturing-Model'... PMM;
'Benchmarking Model' and other strategic management tools were developed to assist various
sectors of economy with the sole aim of signaling early warnings of business-failure and/or
necessary bottlenecks against business success.
In line with the case study, management of Seven-Up Bottling Company from very top - down
must attuned their business imperatives to performance management in order to constantly scan,
through various 'relevant business model' for signal that can derail the business-goals. Particular
of importance is the finance division whose main focus in the light of historical evidences to play
more substantive role by, for example.
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• Making more of a contribution to strategy development of the business.
• Acting as change agent
• Becoming more involved in integrating non-financial with financial information
amongst others.
2.3.4 HOW DO YOU MEASURE ORGANISATION PERFORMANCE
EFFECTIVENESS?
Within the context of finance functional role... the financial performance of a company as a
whole is not sufficient to gauge the health of the business. The formulation of strategic goals and
the monitoring of their achievement is a complex exercise for an organisation. Often times,
setting appropriate standard measurement, do lead to disagreement as to it effectiveness and howthey are to be weighted to provide an indicator of overall effectiveness.
Strategic performance management should be developed within the context of how the company
is performing across a whole series of dimensions i.e. financial and non-financial measurement.
Financial measures should encompass traditional cost accounting and modern-day strategic
management accounting tools as earlier mentioned -Emphasis should be focused on setting
standard of performance and benchmark against actual and variation monitor for continuous
actions.
Any evaluation of organizational performance effectiveness must include an evaluation of
relative performance compared from two perspectives - aligned with internal standards and
competition - by linking performance measures with critical success factors, finance division can
then assume a key role.
However, the critical factors for organisations success may be dependent on many variables,
some of which are neither easily measured nor quantifiable, like financial-information. Rather
than base the 'horizon' of measuring organizational performance effectiveness on financial
report, it is of interest to venture away from purely financial measures to include a non-financial
influence, the main focus here is the concept of "3 Es" framework commonly used in
management information reporting.
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• 'Efficiency' - concerned with utilization of equipment and the efficiency of the
workforce.
• 'Economy' - concerned with optimum use of resources.
• 'Effectiveness' - concerned with the achievement of outcome. The drawback of this
model is as follows:-
• It does not help in the measurement of qualitative non-financial to a logic points-
level.
• It provides no indication of the variables weighting which would allow an integrated
overall measure to be formulated.
• Its focus is undeniably internal, in circumstances where we require a measure which
also reflects competitiveness and external conditions.
Another model to this is the 'balanced-scorecard' which provides an alternative which might offer
improvements that establish a multi-variety approach which demands that the business be
perceived both internally and externally.
• 'Financial' - how do we look to shareholders? 'Customers' - how do they see us?
• 'Innovation and Learning' - how do we continue to improve and create value?
A number of performance measures are generated to reflect each of these four perspectives.
Financial - Cashflow, Sales Growth, Market Share, Profit & Lost &
Balance Sheet, Internal Product - Costing etc.
Customer - Sales from new products, on time delivery; cooperative
partnership with advertising agencies etc.
Internal - Technological ranking, cycle time, unit-cost, yield,
productivity, breakages, glass replacement cycle.
Innovation - Time to develop - new accounting packages for better
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Management information reporting, 'time to market;' process-time, product
focus, brand management, change management process, business process
re-engineering.
In summary, performance measurement must, more closely reflect a customer orientation, in
order to encourage motivation and commitment among the workforce. In consequence research
in "management interactive," see satisfied customer and motivated employees, as the true asset
of the company.
2.3.5 WHAT ARE THE FUTURE ROLES OF FINANCE DIVISION?
Given the scenarios painted above and in the case study, finance division in any modern
manufacturing environment must respond to the new challenges, and position their function to
take an informed view using experience and knowledge; rather than rigidly insisting on
traditional systems which are not of value in getting information to general and top management.
More so, the key to success for finance function must be to facilitate cross-team performance
measurement in both a more holistic management approach and a more productive way of
operation. In doing this, pro-active management will then trigger danger signals for intervention
if performance deviates significantly from target without adequate explanation or planned
correction.
In Seven-Up Bottling Company, management has established key performance indicators (KPIs)
- which each operating group i.e. Production Engineering, Sales and Marketing, Human
Resources, and Feet Maintenance must fulfill. This are based on research and experience of the
past, on the level of performance the company must achieve to remain efficient and continuously
win "repeat business" from their dealers and consumers.
In order to fit into this new phenomenon of business performance model, finance division must
be flexible in approach and ready to work as team with operation staff, in the introduction of
increasingly sophisticated computer system or information technology package which is helping
radically to alter the finance function in many organisations. This terminology allows "finance-
function" time to work with management team in developing change-processes, assessing
customer profitability, and making a broad range of data/information more widely available.
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Given the different skills required for the new role, it should recognizes that other profession in
the organisation may be better placed to exploit the need for improved performance
measurement if they do not move quickly and be on top of it. In consideration of the challenges
finance division aspire to, and seek to develop a new role, it is important they have total
business-knowledge of the environment (internal & external), industry analysis, in order to
consider whole range of pressures in the business. There is clearly a big gap to be filled and
many challenges to be overcome in this new crusade.
2.3.6 WHAT ARE THE ATTRIBUTES OF A SUCCESSFUL COMPANY?
One must not forget the classical case of many finance-houses, 4 th generation banks and host of
textile industry that collapsed as a result of these key indicators
• Finance and Banking Sector- Financial collapse
• Textile Industries - Unrecognized risk of external competition
• World IBM Computers - Lack of recognition of market changes.
Failed to realize that more rounded measure of performance are required. Profit should not be the
main focus of measuring how successful a company is.
A key attribute of a successful company must therefore be to have performance measures, which
amongst other things advise and guide executive decision effectively.
In addition, KPIs can play an essential part in developing a widespread understanding of how the
various parts of the business operate together. For this, to be meaningful, experience of the past
had shown that management must 'buy-in' to the 'KPI structure.' With associated improvement
goals, improves communication r and understanding, thus established a common vocabulary of
improvement across the company.
In order, to trigger successful improvement actions, information about business performance
needs to be predictive and to focus on the causative factors of performance. Responsible line and
top managers want an early indication of opportunities or to spot trouble ahead. For this to be
achieved, they need a better approach to information management in order that they and their
staff can take well-informed decisions which can move the organisation towards its vision for the
future and strategic objectives.
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Financial information alone will not help a company to evolve rapidly, better knowledge is
required if the company is performing across a whole series of dimensions. While financial
measures cannot be used as the sole basis for business performance management, they will
continue to play a vital role. Profit to many investors is still seen as a key measure of success and
is still required.
The inadequacy of financial measure is further explained:-
• They do not cover the broad balance of factors which influence and are affected by the
company's activities.
• They fail to recognize the build-up of enterprise value or to record its decline.
• Another factor which must be recognized is the important role of ‘culture’ of an
organisation critically plays and influences its economic performance.
2.3.7 WHICH APPROACHES TO ADOPT FOR PERFORMANCE MANAGEMENT TO
WORK?
In view of scenarios already painted, how can finance division fulfill this emerging role in
modern-day business-management? Exploit the new IT packages capabilities and help create a
performance enhancing culture.
This approach will be discussed under
• Implementing quality information system
• Balancing the change agenda
• Ensuring effective customer focus
• Aligning teams to achieve process maturity.
Quality Information Systems: For finance division to be very proactive and probably on top of
modern day performance measure model and respond to the Kaplan and Drucker challenges, it
must embrace systems of developing on information rich approach to management information
and will obviously require significant information technology support.
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While research by Robert and Kaplan believe that today's systems are largely independent to
meet the need for fully integrated reporting, development part is clear..... By year 2000,
management reports and control systems will be fully integrated, with a common set of
information, entered once and accessible to all, supporting both internal and external reporting.
With the parameters of quality information describe above, the management systems will
provide performance management information for operational and strategic control and accurate
measurement of product and customers profitability. This is a vision finance division must
subscribe to and perhaps, it must include organizational knowledge - a relatively new and rapidly
developing concept. Systems must be developed that gives executive’s capability to question for
instance, the quality of budget assumptions.
Consequently, internal information is needed to inform and direct tactics, but for a wealth
creation strategy in performance management, organized information about the environment,
about market, about customers and non-customers, technology, and changing world economy are
essentials.
While emphasis is on this, finance division can assist the process of moving on from today's
emphasis on financial data integrity towards the long-term goal of quality information linked to
systems and database - graphical demonstration of the above process is shown below.
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Fig 2
Change process - information systems passing through the four stages.
Balancing The Change Agenda: One method of ensuring that attention is given to the "critical
a strategic driver of success is to form a broader set of performance measures into a "balanced-
score-card."
Fig. 3 below is a conceptual framework of "balance-scorecard" ... Seven-Up Bottling Company -
currently pursuing this ahead of company vision 2010.
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Customer Focus: In the current competitive and tough environment, in which most companies
in Nigeria operates, it has become obvious that all organisations must focus on meeting the
actual and potential requirements of their customers, providing services that "Add-value" and
enhance performance.
The dilemma facing organisations in creating value for customers is how to increase services and
lower costs without risking product quality - this is currently the focus in Seven-Up Bottling
Company. The first hurdle involves capturing customer or dealers needs. Balancing a flexible
and responsive focus on customer needs with the old concept of "hard-targets" - (ref. John
Hawkes - Chief Marketing Officer of Macdonald's Restaurant) of traditional performance
measures can be difficult.
As one of the useful criteria of performance measurement, in food and beverages industry i.e.
Barring Bottling Company. Every one in the company needs to feel they are helping to market
the company. If all employees are focused on the dealers/customers and are marketing the
company every day, then its workforce becomes a formidable force. However, there is danger, in
a solely customer-dealer approach because performance management concept is a "totality-
model" where customers needs require balancing against those of other stakeholders, especially
the financial requirement of shareholders.
Consequently, finance division, have a key role to play in providing a second element which is
an operational understanding of the profitability of customers relationship.
2.3.8 MANAGEMENT TEAM-BASED ALIGNMENT - LEADING TO PROCESS
MATURITY
Currently, Seven-Up Bottling Company had engaged the services of Arthur Andersen Consultant
to carry out comprehensive review of its entire-business operation under the concept tag:
"Enterprise transformation Project as a significantly important and powerful
measurement/approach its required to succeed in its vision 2010 - therefore, achieving success
require Seven-Up to align the performance of different department across the organisation with
the overall strategic vision and more importantly customer requirement.
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An effective method of feedback needs to be developed to keep everyone together. Also, in
order to enable team and cross functional working, there is need to have a clear and common
understanding of the share - processes, without this, it is very difficult to set process performance
measures to achieve the required process-result emanating from Annual Budget Exercise,
Budgetary Controls, Product Standard Costing and Variance Analysis etc.
A strong 'management-team' orientation towards business processes would be encouraged
through the benefits of business process re-engineering or redesign.
As part of the company on-going redesign of its business processes. It is evidently clear that the
entire process views of the business need to become fully defined and then optimized over-time
in order to achieve the goal of continuous improvement.
A model of the development process maturity is given below; - A guide from Seven-Up Bottling
Company.
What is a Balanced-Score-Card? - This is a technique that recognizes that companies need
measures which view the organisation from a variety of stand points, including, for example, the
needs of key stakeholders. In particular, more externally focused measures are required as well
as those covering the key area of organizational development for the future.
The Score-card concept provides the cornerstone of a strategic management system. Business
executives are forced to clarify their thinking by reviewing the simultaneous impact of their
actions from each of these perspectives. One of the key benefits of the approach is its ability to
identify strategic conflict and to communicate strategies within the organisation.
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Fig 3
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Fig 4
Finally, various business performance improvement techniques approaches and concept widely
used have been mentioned, clearly it is not exhaustive.
However, the 'key' to success is not only determining which approaches are most relevant in a
particular manufacturing or service sector of an economy, but also making the approaches work
together.
An integrated approach is the secret to leveraging dramatic and sustainable performance
improvement. Performance management is being adopted by most companies in response to
operational business priorities and not just an accounting agenda.
Performance measurement provides an on-going, self sustainable approach to these key business
issues rather than the current un-aligned ad-hoc initiatives.
Finance division in an organisation must act fast to identify and implement performance
management concept.
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2.4 CURRENT TERND IN THINKING
The finance function consists of the people, technology, processes, and policies that dictate tasks
and decisions related to financial resources of a company. Depending on the organization and the
industry in which it operates, this function may be simple or complex. Some finance functions
are overstaffed that is, they rely on individuals to perform both advanced and simple tasks while
others are highly automated relying on people for decision making and policy setting
exclusively. Regardless of the ratio of people to technology, the goal of the finance function is to
serve the organization’s financial /accounting needs while laying a platform for the future. This
means handling clerical tasks, providing information to the organization and setting financial
policies and strategies that will serve the company in the future. To succeed in these three broad
areas, the small and emerging business must be prepared to develop a finance function that bothsuits its needs and can adapt to the growth and changes of the business. The first step is to
develop an adequate finance function. To do this, it is important to understand the component
parts.
2.4.1 COMPONENT PARTS
The finance function consists of two basic component types: (1) concrete components and (2)
soft components. Concrete components include all aspects of infrastructure includingtechnology, software applications, and processes, as well as the people who manage them. Soft
components include the standards, strategies, models, and vision that drive the
finance/accounting aspect of the business. Each component stands on its own to an extent;
however, ultimately all components must be woven together in a way that serves the overall
organization objectives. It is not enough that all component parts exist; rather they must exist in
harmony with one another, yielding synergies that serve the company's needs today and provide
for the future.
Concrete Components
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The term infrastructure, in this context, refers to all relevant concrete components of the finance
function. These components may already exist in the organization in some fashion, although they
are not thought of as infrastructure. Regardless of how they were classified, these components
were assessed for their usefulness and either purchased or developed. In order for certain tasks to
be undertaken on a regular basis, tools and processes must be put in place to manage them. Items
of infrastructure can be classified into three major categories: (1) finance organization, (2)
information systems, and (3) processes.
Finance organization: This refers to the people responsible for conceptualizing, implementing,
and following through with all finance and accounting related tasks and initiatives, as well as the
technological tools they employ. The finance function works best when people with the right
qualifications are matched with the right tasks. When the proper technological tools are put in themix, the finance organization will excel and serve the needs of the organization.
• Staffing: Enlisting the right people for the job is a challenge in any business. When
certain aspects of the finance organization (namely infrastructure) are lacking, it is easy
for employers to lose sight of essential employee skill needs. For example, the position of
Director of Budget and Forecasting may require Information Systems (IS) skills because
no IS organization exists. Finding a Director of Budget and Forecasting may be difficult
enough, but finding one with advanced IS skills may be impossible. Finance personnel
typically rely on technological tools to do their jobs; however, they may not be so
knowledgeable at maintaining the technology. If substandard tools are provided to
professionals, they may have to fend for themselves when it comes to managing the
secondary demands of the job (making their computer work or administering software)
rather than focus on their primary objective (managing the budget and forecasting
process). This human element of the finance organization can be a powerful resource for
the organization if the right people are a part of the team and if they are allowed togenerate and implement new ideas. Expecting people to not only perform their tasks but
also to optimize the way their function fits in with the business will provide value to the
organization and provide meaningful career development for employees. Personnel
should be allowed to isolate all business needs and drivers, determine the impact of these
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on the organization, and are rewarded for the business strategy/planning that results in
achieving organization’s goals.
• Technology: Nothing is more important than providing people with the right tools for the
job. This means appropriately configured computers, communication devices, and
planning tools. Simply buying the best technology may not always be the answer. A
mistake repeated every day by executives and business owners is falling prey to a
vendor’s claim that if the smartest or best machine is purchased, the users’ objectives will
be met. The nature of the tasks to be performed must be taken into account before staffs
are outfitted with technology. Will desktop computers suffice or will staff need laptops
instead? Will finance staff need cell phones or other types of communication linkage?
How about planning devices do staffs need personal digital assistants or other wireless
devices to share documents and information remotely? Knowing whether staff will be
performing tasks in one central location or performing tasks on the road will drive
decisions for technology.
Information Systems: refers to the backbone technology servers, switches, operating systems,
protocols, and software applications that will drive the finance function. Distinguished from
technology defined earlier, information systems have a broader impact on the entire platform of
the organization’s technological capability. This term is used more on a macro-level as opposed
to the term technology. Information systems give organizations the ability to gather data in the
business environment and translate it to knowledge. They also provide the ability to
communicate information and data within and outside the organization. Information systems
provide a basis for evaluating customers while allowing them to provide feedback to the
organization. This aspect of infrastructure also allows the organization to link with information
systems of customers and companies in the same industry to achieve synergies in buying,
forecasting, billing, and collecting customer payments.
Processes: These are the protocols and procedures that envelop information systems. They
leverage the impact of information systems and bridge the gap between raw systems capability
and company specific needs. Processes cannot be generic but must be customized and suited for
a particular organization’s needs. To develop processes, the business owner/manager must have
an acute knowledge of the organization and what it is trying to accomplish. To succeed in
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process development, knowledge of employee capability, thresholds of technology, and limits of
systems also must be firmly grasped.
Soft Components
Soft components of the finance function are the more advanced considerations of the function
itself. Policies, standards, strategies, and analysis paradigms are examples of soft components.
These components cannot be bought or replicated necessarily from an outside source; rather they
are developed internally. It is management’s responsibility to develop the soft components of the
finance function and maintain them as the company grows and adapts to its environment. The
existence and relevance of soft components are good litmus tests for the strength of management.
Companies that are lacking in this area put the organization at risk and leave development of the
finance area to chance. Allowing the finance function to evolve on its own without a vision
driven by strategies and formed with standards could create more problems than it solves.
Developing finance strategies, standards, and policies may be a luxury for the small and
emerging business owner when compared to the day-to-day necessities of keeping the
organization running. It is important to note, however, that most soft components of the finance
function are not developed overnight. In fact, rarely are they complete or relevant for very long.
Soft components are always developing and changing as the business organization changes.Developing them should be embraced as an aspect of organizational culture. Although an
organization may be able to enjoy success in its early years without attending to these
components of the finance function, eventually issues in the business itself or business
environment will demand them. For example, infrastructure may suit a small and emerging
business in the short run, but increasing demands for information and new ways to serve
customers may necessitate change in this area. Absent the vision for development or the strategy
for addressing future data needs, the finance function always will be a step behind, which will
result in perpetual short-term decision mode. This may be costly in the long run as managers
purchase unsalable technology to solve an immediate need, only to find themselves repurchasing
more technology a short time later to accommodate evolving needs.
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Well-thought-out soft components will make development of all aspects of the finance function
second nature. For example, developing financial analysis paradigms that are relevant to the
organization’s business fundamentals will drive IS needs. These paradigms will in turn drive the
level of qualifications of personnel. Strategies then can be developed that implement relevant
software applications, technological tools, communication devices, and so on. This web of
impact illustrates how all aspects of the finance function cascade off the soft components.
Practically speaking, the small and emerging business owner may not be focused on the mid- and
long-term time horizon. Therefore, codifying areas of vision, strategy, and policy in the finance
area may not be practical. It is important to note, however, that being aware of developing soft
components at the early stage of the organization will greatly benefit the business owner/
manager as the business matures. The high rate of change in the business in its early years may
render soft components irrelevant overnight. Laying a foundation of thought and intent to
develop this aspect of the finance function will become that much easier as the business
owner/manager matures with the business and becomes savvier in developing strategy.
CHAPTER THREE
RESEARCH METHODOLOGY
3.1 INTRODUCTION
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This chapter presents an insight to the historical background of the case study, a restatement of
research hypotheses, research design, and population of the study and sampling as well as data
specification. It also explains method used in carrying out this research.
But for the purpose of this study we adopt the method of questionnaire with regards to the survey
method, which deals with the basic information in which questions relevant to the research
would be obtained from the respondents.
Furthermore, this chapter discloses the population of the area being investigated, including the
types of data, sources of data, the method used in presenting the data collected and how they are
analyzed.
3.2. RESTATEMENT OF RESEARCH HYPOTHESES
The research hypotheses formulated for testing in this study are:
Hypotheses 1
Ho: There is no correlation between the role of finance and company performance management.
H1: There is correlation between the role of finance and company performance management.
Hypotheses 2
Ho: Finance department does not play greater strategic role in company performance
management.
H1: Finance department plays a greater strategic role in company performance management.
3.3 POPULATION OF STUDY
The population of the research is made up of the staff of 7up Bottling Company PLC. They
consist of individuals of different cultures, sex, educational qualifications, background and
perception. With a population of about 1,500 staff the information obtained from this population
would be used to test the hypothesis earlier stated.
3.4 SAMPLES AND SAMPLING TECHNIQUES
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Given the large size of the workforce of 7up Bottling Company PLC the company that consist of
about 1,500 staff, it would be necessary to obtain a sample for the study consisting of elements
that are representatives of the entire population.
Thus, a convenient sample of one hundred (100) staff would be selected from employees at
various positions of 7up Bottling Company PLC in Lagos. The sample consists of staff from
office level to top management level in the organization.
A cluster sampling technique was adopted in order that all elements in the population would be
given an equal chance of being included in the sample and also avoids engaging the subjective
judgments of the researcher.
3.5 DATA COLLECTION INSTRUMENT
The data required for this study would be obtained from primary and sources. The primary data
would be obtained via questionnaires administered to staff of various departments of the
organization.
3.6 METHOD OF DATA ANALYSIS
The research would make use of table to present the collected data. The method of simple
percentage would be used to analyze the data generated from the study while the correlation
method was adopted in testing the hypotheses.
3.7 LIMITATION OF THE METHOD
No matter how experience and knowledgeable a researcher might be no matter how much effort
he may put into the statement of his methodology, some imperfection are likely to occur. This is
so because every research work has some extraneous circumstances beyond the control of the
researcher that can serve as clog in the conduct of a research project. Here, the methodology is
limited to responses received from respondents of this case study.
CHAPTER FOUR
PRESENTATION OF DATA, ANALYSIS AND DISCUSSION
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4.1 DATA PRESENTATION
This chapter is designed to present the data collated from the field into a descriptive and
analytical form. Hundred questionnaires were distributed to the staff of 7up Bottling Company
Plc, Lagos State. However all the hundred questionnaires administered on the sampled
population were found usable.
SECTION A
Socio-demographic characteristics of respondents in the questionnaire survey:
4.1.1: Gender
Table 4.1: Sex distribution of respondents.
Frequency Percent
Male 58 58.0
Female 42 42.0
Total 100 100.0
Source: Field Survey, 2010
From the frequency distribution above, it is observed that 47(47.0%) of the respondents are malewhile 53(53.0%) of the respondents are female.
4.1.2: Age
Table 4.2: Age distribution of respondents.
Age Frequency Percentage
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18-25 years 66 66.0
26-40 years 30 30.0
41 & above 4 4.0
Total 100 100.0
Source: Field Survey, 2010
From the frequency distribution above it is observed that 66(66%) of the respondents are within
the 18-25years age bracket, 30(30%) are within 26-40 years age bracket while 2(4%) of the
respondents are within 41 and above age bracket. This indicates that the majority of the staff
strength is made up of young men and women.
4.1.3 Academic Qualification
Table 4.3: Distribution of respondents according to academic qualification.
Qualification Frequency Percentage
OND 5 5.0
HND 15 15.0
B.sc 55 55.0
Masters and its equivalent 25 25.0
Total 100 100
Source: Field Survey, 2010
More than half of the population which represents 55% is graduates, 5% are OND holders, and
15% are HND holders while only 25% of the respondents have postgraduate qualifications.
4.1.4 Religion
Table 4.4: Distribution of respondents according to religion
Religion Frequency Percentage
Christianity 60 60.0
Islam 40 40.0
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Others - -
Total 100 100.0
Source: Field Survey, 2010
From the frequency distribution above 60% of the respondents are Christians while 40% of the
respondents are Muslims.
SECTION B
This section is tied to the usefulness importance and relevance of finance division in measuring
performance management.
4.1.5 How many years of experience in finance division?
Table 4.5: Distribution of respondents according to years of experience.
Years Frequency Percentage
2-5 years 20 20.0
6-10 years 45 45.0
11-20 years 25 25.0
20 & above 10 10.0
Total 100 100.0
Source: Field Survey, 2010
From the frequency distribution above, 20% of the respondents had 2-5 years experience, 45% of
the respondents had 6-10 years experience, and 25% of the respondents had 11-20 years
experience while 10% of the respondents 20 & above years of experience.
4.1.6: Is finance division responsive to management information requirement of the
company?
Table 4.6: Distribution of respondents on is finance division to management information
requirement of the company?
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Frequency Percentage
Yes 73 73.0
No 20 20.0
Not Sure 7 7.0
Total 100 100.0
Source: Field Survey, 2010
From the frequency distribution above, 73% of the respondents ticked yes, and 20% of the
respondents disagree while 7% of the respondents are not sure.
4.1.7: Is finance division proactive to event happening within the company?
Table 4.7: Distribution of respondents on is finance division proactive to event happening
within the company.
Frequency Percent
Yes 70 70.0
No 25 25.0
Not Sure 5 5.0
Total 100 100.0
Source: Field Survey, 2010
From the frequency above, 70% of the respondents agree about this view, 25% of the
respondents said No, while 5% of the respondents are not sure.
4.1.8: Do finance division play unique role during plants/depots expansion strategy?
Table 4.8: Distribution of respondents on unique role of finance during plants/depots
expansion strategy?
Frequently Percent
Yes 96 96.0
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No 3 3.0
Not Sure 1 1.0
Total 100 100.0
Source: Field Survey, 2010
From the frequency distribution above, 96% of the respondents feel that finance play unique role
during plant/depots expansion and 3% of the respondents do not think finance play any role
while 1% of the respondent are not sure,
4.1.9: What is the quality of staff in terms of skill and knowledge?
Table 4.9: Distribution of respondents on quality of staff in terms of skill and knowledge?
Frequency Percentage
Good 85 85.0
Average 15 15.0
Fair _ _
Poor _ _
Total 100 100.0
Source: Field Survey, 2010
From the above distribution, 85% of the respondents agree that the quality of their staff in terms
of skill and knowledge is good, and 15% of the respondents are of opinion that the staff is
average.
SECTION C
This section is related to the role of Finance Division in the organization.
4.10: Performance of an organization is a function of the Finance Division.
Table 4.1.10: Distribution of respondents on whether the performance of an organization is
a function of Finance Division.
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Frequency Percentage
Strongly Agree 47 47.0
Agree 44 44.0
Undecided 6 6.0
Disagree 3 3.0
Strongly Disagree _ _
Total 100 100.0
Source: Field Survey, 2010
From the table above it can be concluded that 45% of the respondents strongly agreed that the
performance of an organization is a function of the Finance Division, 44% of the respondentsagree, 6% of the respondents were undecided, while 3% of the respondent disagreed about this.
This shows that most of the correspondents believe that performance of an organization is a
function of the Finance Division.
4.1.11: The effectiveness can enhance growth and profitability of the company.
Table 4.11: Distribution of respondents on whether the effectiveness of finance division can
enhance growth and profitability of the company.
Frequency Percentage
Strongly Agree 75 75.0
Agree 15 15.0
Undecided 8 8.0
Disagree 2 2.0
Strongly Disagree _ _
Total 100 100.0
Source: Field Survey, 2010
From the frequency distribution above, 75% of the respondents strongly agree that the
effectiveness of Finance Division can enhance growth and profitability of the company. 15%
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also agree with the other 75%, while 8% of the respondents are undecided 2% of the respondents
disagree.
4.1.12: The role of Finance Division if proactive can signal danger before it occurs.
Table 4.12: Distribution of respondents on role of Finance Division if proactive can signal
danger before it occurs.
Frequency Percentage
Strongly Agree 25 25.0
Agree 65 65.0
Undecided 2 2.0
Disagree 3 3.0
Strongly Disagree 5 5.0
Total 100 100.0
Source: Field Survey, 2010
From the frequency distribution above 25% of the respondents strongly agree, 65% of the
respondents agree while 2% of the respondents are undecided, 3% of the respondents disagree
and 5% of the respondents strongly disagree.
4.1.13 Finance Division play crucial role in managing overall operation of the company.
Table 4.13: Distribution of respondents on the crucial role of finance division in managing
overall operation of the company.
Frequency Percent
Strongly Agree 30 2.0
Agree 20 8.0
Undecided 10 6.0
Disagree 25 46.0
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Strongly Disagree 15 38.0
Total 100 100.0
Source: Field Survey, 2010
From the distribution above, only 25% of the respondents disagreed with this point, 10%of them
are undecided while 15% of the respondents strongly disagree, 30% of the respondents strongly
agree while 20% of the respondents agree that finance division play crucial role in managing
overall operation of the company.
4.1.14: Finance Division serves as an invaluable source of management information in an
organization.
Table 4.14: Distribution of respondents on Finance Division serves as an invaluable source
of management information in an organization.
Frequency Percent
Strongly Agree 18 18.0
Agree 62 62.0
Undecided 8 8.0
Disagree 8 8.0
Strongly Disagree 4 4.0
Total 100 100.0
Source: Field Survey, 2010
From the above distribution, it can be seen that 18% of the respondents strongly agree with this
opinion, 62% of them agree to it, 8% of the respondents are undecided also 8% of the
respondents disagrees while the remaining 4% of the respondents strongly disagrees.. It can
therefore be said that majority of the respondents are of the view Finance Division serves as an
invaluable source of management information in an organization.
4.1.15: Finance Division has the comprehension of business knowledge of the organization.
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Table 4.15 Distribution of respondents on Finance Division has the comprehension of
business knowledge of the organization.
Frequency Percent
Strongly Agree 4 4.0
Agree 2 2.0
Undecided 6 6.0
Disagree 42 42.0
Strongly Disagree 46 46.0
Total 100 100.0
Source: Field Survey, 2010
From the above distribution, only 4% of the respondents strongly agree, 2% of the respondents
agree while 6% of the respondents are undecided, 42% of the respondents disagreed while the
remaining 46% of the respondents strongly disagree. From this, it is clear that the respondents
strongly disagrees that Finance Division has the comprehension of business knowledge of the
organization.
4.2 Analysis on Hypothesis Data
Data on hypothesis were analyzed in respect to the information provided by the respondents on
the administered questionnaire.
4.2.1 Hypothesis Testing
Hypothesis 1
Ho: There is no correlation between the role of finance and company performance management.
H1: There is correlation between the role of finance and company performance management.
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The table below show that the p value = 0.012 and since it is less than 0.05 at 95% level of
significance, we will reject the null hypothesis which states there is no correlation between the
role of finance and company performance management and accept the alternative hypothesis
which says that there is correlation between the role of finance and company performance
management. This information is shown in the table below.
Correlations
THE EFFECTIVENESS OF
FINANCE DIVISION CAN
ENHANCE GROWTH AND
PROFITABILTY OF THE
COMPANY
THERE IS A POSITIVE RELATION
BETWEEN THE ROLE OF
FINANCE AND COMPANY
PERFORMANCE MANAGEMENT
THE EFFECTIVENESS OF Pearson correlation
FINANCE DIVISION CAN sig. (2-tailed)
ENHANCE GROWTH AND N
PROFITABILITY OF THE
COMPANY
1
100
.251
.012
100
THERE IS A POSITIVE Pearson Correlation
RELATIONSHIP Sig. (2-tailed)
BETWEEN THE ROLE OF N
FINANCE AND COMPANY
PERFOMANCE
MANAGEMENT
.251
.012
100
1
100
Source: Field Survey, 2010
Hypothesis 2
Ho: Finance department does not play greater strategic role in company performance
management.
H1: Finance department plays a greater strategic role in company performance management.
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The table below shows that the p value = 0.018 and since it is less than 0.05 at 95% level of
significance, we will reject the null hypothesis which states that finance department does not
play greater strategic role in company performance management and accept the alternative
hypothesis which states that finance plays a greater strategic role in company performance
management. This information is shown in the table below.
Correlations
THE ROLE OF FINANCE
DIVISION IF PROACTIVE
CAN SIGNAL DANGER
BEFORE IT OCCURS
FINANCE PLAYS A
GREATER STRATEGIC
ROLE IN COMPANY
PERFORMANCE
THE ROLE OF FINANCE Pearson Correlation
DIVISION IF PROACTIVE CAN Sig. (2-tailed)
SIGNAL DANGER BEFORE IT
OCCURS N
1
100
.236
.018
100
FINANCE PLAYS A Pearson Correlation
GREATER STRATEGIC ROLE Sig. (2-tailed)
IN COMPANY PERFORMANCE N
.236
.018
100
1
100
Source: Field Survey, 2010
CHAPTER FIVE
SUMMARY AND RECOMMENDATION
Summary of the research/conclusion drawn: - The concept of performance management
is relatively new in the company despite been in existence for over four decade.
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The traditional role of finance division as the keeper of the number is declining. The financial
numbers are seen as less central to business management and improved systems are making
production easier.
It is therefore believe or could be deduced from the case study of Seven-Up Bottling company
and various happenings within the external environment that finance functions can seize a wider
role on change enabler and catalyst: This is the new challenge.
However, one also wonder how many accountants with finance related activities will actually
seize the opportunity that “performance management” offers to enable more effective business
transformation capability. Those, who do grasp the opportunity, will considerably increase their
own capacity to survey and subsequently thrive by helping their organisation achieve change
rapidly.
Some employees between Heads of Functions and operations staff who responded to the survey
want improvement in management information systems for decision-making.
Within the systems and approaches now exist; what is at question is the continuing role of the
independent finance function. Many companies require greater insight into the competitive
market place and also they desperately need more knowledge about he costs and value of
satisfying that “market demand”.
Finance division with the right focus and also aspired to drive the business towards its goals,
must be prepared to work with others to develop a “performance management approach” and
hence drive forward the development of the business in which they work.
Further, the role of a cross-tea, performance facilitator is emerging as someone who is able
dramatically to leverage the power of information.
Finance division should think carefully about whether this is a role they want to play and the
consequences for them of not becoming involved. In furtherance of this, the introduction of more
formal and integrated performance management approach should itself be seen as an overall
change in management style.
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The system should allow senior management to demonstrate that high performance does
matter and is awarded. This will foster an environment within which opportunity exists to
mobilize and multiply the talents and creativity of the workforce.
RECOMMENDATION AND SUGGESTION – FEEDBACK TO MANAGEMENT
Various problems since revitalization program commenced were carefully studied and also
procedures established for decision-making were highlighted in the course of the interview. They
have been exhaustively listed in an earlier section.
The following changes/processes for aligning performance measures are suggested to overcome
multi various business problems.
It is obvious that some of this changes/process involves expenditure and capital investment, but
the management can take these up in a phased and planned manner as and when visible.
• Comprehensive accounting software package that capture quantitative and qualitative
data of “a total business”.
• Monitoring of brand equity
• Trade support services that enhance customer performance and image building campaign.
• Refurbishing and continuous overhauling of fleet of trucks to cut down on cost of
operation per fleet route – trucks, thus boost contribution-margin.
• Build a conducive working environment
• Develop a comprehensive performance measurement model that encompasses “total
business concept”.
• Continuous improvement and innovation through staff training and development of skills.
• Develop through finance function systems for tracking variances and corrective.
REFERENCES
Accenture (2008): The Changing Role of the Finance Organization in a Multi-Polar
World – High Performance Finance Study.
Barring Bottling- Monthly Regional Operating Performance Report, 1993.
Keith Ward (1992) ‘Strategic Management Accounting’. Butterworth-Heinemann
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ISBN0750601108
Pike Neale (1993) Corporate Finance & Investment, Pearson ISBN978-0-273-69561-5
David Slang (2006) The Changing Role of Finance. Finance, Management and Accounting.
Business Partnering, Finance Role/KPA/KPI
James deSantis (1999): A brief history of accounting, Research Paper, Ensign Articles
January 1999 20-26.
Kaplan R.S. & Norton D.P (1992): The Balance Score Card- Measures that Drives Performance.
Harvard Business Review. Jan-Feb.1992 71-79.
Peter Drucker (1995): The Information Executives Truly Need. Harvard Business Review.
Math & Smith (1998): Benchmarking Finance Function. CAB Review.
Riahi-Belkaoui (1995) Evaluating Capital Projects, Quorum Books 2000,
ISBN1567203574
IASB (2001) International Accounting Standards Board, www.iasb.com
IBM (2008), Balancing Risk and Performance with an Integrated Finance Organization ‘The
Global CFO Study 2008’.
Miller, L., U. Rajan, and P. Shimpi (1989c), ‘Funding SPDA liabilities: An application of
realized return optimization’, Chapter 8 in Fixed-Income Portfolio Strategies, Fabozzi, F.J.
(Ed.), Cambridge, MA, Ballinger Publishing.
Minton, B.A., and C. Schrand (1999), ‘The impact of cash flow volatility on discretionary
investment and the costs of debt and equity financing’, Journal of Financial Economics,
Vol. 54, pp. 423–460.
Van der Meer, R., and M. Smink (1993), ‘Strategies and techniques for asset-liability
management: An overview’, The Geneva Papers on Risk and Insurance, No. 67, April,
pp.
RESEARCH QUESTIONNAIRE
Am an MBA student of the Department of Management and Accounting, Obafemi Awolowo
University (OAU), Ile-Ife Nigeria investigating the role of finance function in company
performance management. Kindly assist in the completion of this questionnaire to the best of
your knowledge and ability. Information supplied will be used for academic purpose only.
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SECTION A: SOCIO/DEMOGRAPHIC CHARACTERISTICS
Please indicate your answer marking (x) in the relevant box provided for each option.
PERSONAL DATA
1. Sex Male [ ] Female [ ]
2. Age 20-25yrs[ ] 26-30yrs [ ] 31-35yrs [ ] 36-40yrs [ ] 41& above [ ]
3. Educational Background OND [ ] HND [ ] B.sc [ ] Masters and its equivalent [ ]
4. Religion Christianity [ ] Islam[ ] Others [ ]
SECTION B
This section is tied to the usefulness importance and relevance of finance division in
measuring performance management.
1. How many years of experience in finance division
A = 2-5years B = 5-10years C = 11-20years D = 20-25years
[ ] [ ] [ ] [ ]
2. Is finance division responsive to management information requirement of the company?
Yes [ ] No [ ] Not Sure [ ]
3. Is finance department proactive to event happening within the company?
Yes [ ] No [ ] Not Sure [ ]
4. Do finance division played unique role during plants/depots expansion
strategy?
Yes [ ] No [ ] Not Sure [ ]
5. What is the quality of staff in terms of skills and knowledge?
Good [ ] Average [ ] Fair [ ] Poor [ ]
SECTION C
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DIRECTION: Below are items developed to survey your opinion or feeling about the role of
Finance Division in this organisation. For each item chose the response that best reflect your
opinion.
There are five responses as follows:
Strongly Agree =SA Agree =A Undecided= U Disagree = D Strongly Disagree = SD
Your responses will be of immense assistance in improving the role of Finance staff in company
performance management. Your responses will be kept highly confidential.
ITEM SA A U D SD
Importance of Finance Division
• Performance of an organisation is a function of the Finance
Division
• The effectiveness can enhance growth and profitability of the
Company.
• The role of Finance Division if proactive can signal danger
before it occurs.
• Finance Division play crucial role in managing overall
operation of the company.
Source of Information
• Finance Division serves as an invaluable source of
management information in an organisation.
• Finance Division has the comprehension of business
transaction knowledge of the organisation.
• Finance Division interprets policy of an organisation in the
course of business transaction process.
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