This document contains a presentation by John Cachat on what quality professionals must know about chief financial officers (CFOs). It discusses how quality and finance professionals have more similarities than differences with their focus on documentation, audits, risk management, and metrics. However, there is often a disconnect between their approaches. The presentation advocates for quality and finance to work together using management accounting focused on cause-and-effect analysis to improve business performance metrics. It provides an example of using various data points to understand how to increase profits on new products.

1. Copyright John Cachat
What All Quality
Professionals Must
Know About CFOs
John M. Cachat
jmc@peproso.com
440-915-2650

2. Copyright John Cachat
About John M. Cachat
• Driving Business Performance
– Helping companies align their business and technology
– Focus on people, process, and then the technology
– Subject matter expert on business process management
– On-going research into next generation of technology for enterprise
systems
• 28 years experience in enterprise systems
– USAF Research Project (1985)
– Founder of enterprise quality software company (1988)
– Chair of ASQ technical committee on computerizing quality (1992)
• Trusted advisor to global organizations, government agencies,
and professional groups
http://www.linkedin.com/in/johncachat

3. Copyright John Cachat
Housekeeping
Phones are muted
Use the question
block for questions Copy of presentation
available upon request

4. Copyright John Cachat
Today’s Discussion
• Quality professionals need a better
understanding of financial terms and
approaches
• CFOs need a better understanding of
Quality terms and approaches
• Everyone needs to learn how to
significantly improve situations over
which they have control
4

5. Copyright John Cachat
Are We That Different?
Finance – SOX, GAAP Quality - ISO
Documentation Documentation
Training Training
Audits Audits
Risk Management Controls
5

6. Copyright John Cachat
Are We That Different?
Finance Quality
Likes Numbers Like Numbers
Like Process and Audits Like Process and Audits
Talk about Cash, Profit, etc Talk about PPM, CAR, Cpk, etc
Reports what has happen Can explain why it happen
6

7. Copyright John Cachat
The Disconnect
• Finance has been consumed with GAAP and
audited financial statements for external
reporting
• Operations is not happy with standard
financial reports
– Operations ability to understand?
– Financial ability to provide information?
• Great gains can be made from “management
accounting”
7

8. Copyright John Cachat
Quality Costs Model
• Prevention - Cost to
prevent mistakes
• Inspection - Cost to
find mistakes
• Failure- Cost of
mistakes – internal &
external
8

9. Copyright John Cachat
Management Accounting
• Information for internal business support, not
external financial reports
• Great gains can be made by Quality and
Accounting working together
• The main focus should be cause and effect
analysis
9

10. Copyright John Cachat
Cause and Effect Example
Increase Profit on New Products
10
PEOPLE
MFG PROCESS
EQUIPMENTPRODUCT
DESIGN PROCESS PURC PROCESS
INCREASE
PROFIT ON
NEW PRODUCTS

11. Copyright John Cachat
Increase Profit on New Products
11
INCREASE
PROFIT ON
NEW PRODUCTS
0
20
40
60
80
100
120
Design Proto Pre-Prod Production
Program A
Program B
Number of Engineering Changes by Product Stage

12. Copyright John Cachat
Increase Profit on New Products
12
INCREASE
PROFIT ON
NEW PRODUCTS
Process Capability by Product Stage
0
0.5
1
1.5
2
2.5
3
3.5
4
Design Proto Pre-Prod Production
Program A
Program B
Cpk

13. Copyright John Cachat
Increase Profit on New Products
13
INCREASE
PROFIT ON
NEW PRODUCTS
Supplier Changes by Program
0
2
4
6
8
10
12
New
Suppliers
Suppliers
Dropped
Same
Suppliers
Program A
Program B

14. Copyright John Cachat
Cause and Effect Example
14
PEOPLE
MFG PROCESS
EQUIPMENTPRODUCT
DESIGN PROCESS PURC PROCESS
INCREASE
CUSTOMER
SATISFACTION
REDUCE
COST OF
NONCONFORMACE
INCREASE
MARKET SHARE
REDUCE
INVENTORY LEVELS
INCREASE
PRODUCTIVITY

15. Copyright John Cachat
Corporate Performance Management
15
D-
D
B-
E
A-
C+
Overall Score
Last Period
4/1/09 - 6/30/09
Current Period
7/1/09 - 9/30/09
B+
C-
C+
B
C
Human Performance
C+ D+
Corporate Responsibility Performance
Top Line Summary of Assessment Score Current Reporting Period
Example, Inc
7/1/09 - 9/30/09
Ticker Stock Price
EXA $3.70
Sustainable Performance Index (M1)
A 850-1000
Index
C+ B 700-849
C 550-699
D 400-549
E 0-399
Pillars of Performance Scores Last Year
7/1/08 - 9/30/08
D
B-
E
Innovation Performance
Operational Performance
Financial Performance
C+
B
February-01
August-01
March-02
September-02
September December March June September
Actual Industry Avg. Alert
695
www.3ppartnersdls.com
Deb Shumar

16. Copyright John Cachat
My Quality Projects Never get Funded!
• You have a lot of
great projects to pick
from
• You have limited $$
to invest
• How do you decide
which project to
fund?
16

17. Copyright John Cachat
Finance Terms
17
• Return on Investment (ROI)
• Net Present Value (NPV)
• Internal Rate of Return (IRR )
• Payback Period

18. Copyright John Cachat
Things to Consider
• Formal training on performance management
• Cause and effect workshops
– Multiple departments
– What makes these numbers go up / down
• Business process and data collection analysis
• Technology support requirements
18

19. Copyright John Cachat
About Us
John Cachat
jmc@peproso.com
440-915-2650
Contact
Proven expertise in
corporate performance
management systems
Rapid Solution
Development™ process
Services
Assess Current Status
Develop Short and Long
Term Plans
Develop Specific Solutions
to Your Problems
Assist in ROI Analysis
19

20. Copyright John Cachat
What All Quality Professionals Must Know About CFOs
&
Contact:
John Cachat
jmc@peproso.com
Copy of Presentation
&
Request a Demo
Visit:
http://peproso.com/webinars
Future Webinars