Welcome to ‘My key KPI’, a new weekly content series where we ask CFOs and FDs what metrics and measures they use to drive their businesses forward.
The aim is to understand how different finance professionals, across a broad array of industries and sectors, use data to inform their decision making.
First up, we hear from Tim Wakeford, the former CFO of Cushman & Wakefield and currently Workday’s VP of financial product strategy.
My key KPI: Revenue and compensation ratio
Tim Wakeford has spent most of his professional life working in large corporates. Ask him how he ended up there and he’ll tell you: “It wasn’t planned”.
Wakeford, an CIPFA-qualified accountant, got his start in local government. He toyed with a career in politics before landing his first corporate job at an American consulting firm. It’s a career move that culminated with him as the UK CFO for Cushman & Wakefield, one of the world’s largest commercial real estate firms.
Just a few months ago, Wakeford made the switch to the ERP vendor Workday, where he’s the VP of financial product strategy. Despite the snazzy new title, Wakeford is still a CFO at heart.
When he spoke to AccountingWEB recently, we asked him about which metric he finds himself returning to, again and again. “I’m heavily biased by my professional services background, but my single biggest metric is revenue and compensation ratio,” said Wakeford.
“It’s all around how much of my revenue am I paying in staff pre-bonus and post-bonus. That’s the single biggest driver in many, many organisations.
“If I can line up my entire business by department and know the revenue they generated and the direct cost of generating that revenue, I can quickly point out the weak and strong parts of the business.
Wakeford’s predilection for revenue and compensation ratio returns to his philosophy of what makes a truly skilful CFO. “The key role for the CFO is determining what insight you want - which isn’t easy - and then taking it and imparting it back to your organisation. The question is: ‘How do I tell the story of my organisation?’”
For Wakeford that’s what makes revenue and compensation ratio such a powerful tool. It uses the numbers to sketch a portrait of the company’s performance. “I can grow that, I can protect this. I can look at an underperforming part and either take cost out or close it down. That’s insight for competitive advantage.”
But, he warned, metrics won’t matter much without consistency. Especially in a large organisation. “You have to say: ‘We’re going track these things from now on’. That means having the same account codes globally, the same data definitions globally, and then next year we can compare this year to next year.”
“Doing the same things the same way, the ability to see the numbers’ story grows exponentially. The numbers will tell you which questions to ask.”
About Francois Badenhorst
I'm AccountingWEB's business editor. Feel free to get in touch with comments, tips, scoops or irreverent banter.