For medium and large publicly-traded companies, the ability to meet and exceed earnings guidance consistently over time is essential to maintaining and optimizing shareholder value. The market has come to expect and demand transparency, visibility and predictability both with respect to market-facing communications and operations management. Executive teams are held highly accountable for responding intelligently in near real time to opportunities and changes in the overall market or operating conditions within the corporation.
At the same time, trends toward agile development and continuous planning offer a new opportunity to evaluate initiatives on an ongoing basis. Mastering these disciplines are coming to define best-in-class organizations. When complemented by a high-quality standardized investment management process captured in an effective technology platform, a new window opens to evaluate go forward initiatives from the impact on EPS (earnings per share) perspective. This can be accomplished by understanding the timing of various initiatives in terms of expense and revenue and identifying levers on discretionary spending that can be employed to optimize the ability to meet and exceed EPS guidance.
The context and level of detail required can only be found in an investment management framework implemented in a technology platform capable of delivering the actionable analytics required to provide real-time, high quality information and analysis. These capabilities facilitate the rapid decision making and time to impact required for effective use in an EPS optimization strategy on an ongoing basis.
In fact, an “EPS Optimization Dashboard” provides a powerful tool available to C-level, ePMO, portfolio, and operational executives when they are called on for recommendations on timely actions that can be taken to help ensure an organization continues to meet and exceed EPS guidance amidst shifting sands. The Dashboard institutionalizes the ability to execute these activities on-demand, in a consistent, high quality manner.
At a glance, an EPS Optimization Dashboard provides powerful analysis and a prescription for action clearly defining:
- Total spending on initiatives classified between compulsory compliance and regulatory spend versus discretionary spend.
- Discretionary spend in terms of committed versus non-committed funds based around definitions as basic as whether a project has commenced or more nuanced as to whether expenses include mostly third-party contractual commitments or direct employees or if project delay results in continuation of current expense streams in other areas.
- Classification of discretionary initiatives in terms of high, medium, low priority to facilitate scenarios for optimizing EPS impact, targeting projects in one or more classifications or, perhaps, overall initiatives in one classification combined with select projects in another.
- Impact on EPS of various action scenarios for a number of go forward periods, including impact of delay or deferral of projected benefits.
More sophisticated capabilities include the ability to understand the “float path” for execution of compliance and regulatory initiatives offering a possibility to delay operating expenses without increasing risk. Understanding emerging strategies with respect to capitalizing labor in specific circumstances and in conjunction with particular investments is important, as well. This is required to reconcile a cash versus P&L project view, the latter of which maps to potential impact on EPS.
However, regardless of the level of sophistication in a business case framework and governance model, once standardized and digitized in a platform, investments can be proactively managed through predictive analytics and other forms of actionable analytics. These frameworks and tools provide a highly-effective means for individuals marshaling digital transformation strategies and traditional program offices to compound impact by driving execution alignment and timing to support meeting and exceeding EPS guidance while still addressing operational objectives.