Archives For chief financial officer

Jamie Lyon

By Jamie Lyon, head of corporate sector, ACCA

There’s a new kid on the block for business service delivery and it could be a threat or a major opportunity for finance chiefs. We’re all pretty familiar now with the advent of finance shared services and outsourcing, but Global Business Services goes one step further, leveraging sourcing methodologies, organisation structures and operating locations to create a cross-functional business support operation across HR, IT, Finance, Procurement, delivered under one governance framework. In theory it should mean greater business efficiencies, better visibility on end-to-end processes across the organisation, better insight into organisational data, and greater organisation flexibility and scale. There are, however, few examples where all support functions are wrapped around this new delivery framework – it’s an aspiration rather than a reality for most right now, with some but not all of the “GBS” boxes ticked, and it could be that GBS is more of a marketing term to signify a major business transformation, when it reality what we’re talking about is still finance transformation for many….

So what’s the implication for CFOs of GBS aspirations?  There’s plenty of evidence that those organisations which have GBS aspirations are typically putting CFOs in charge. With functional silos broken down, and processes managed end to end, the real prize for the finance organisation is that they should have access to a scale and scope of corporate data being brought together that they have previously unknown. This enhanced data visibility across the organisation, combined with new technologies and business partnering capabilities could help finance chiefs deliver the sorts of insights that truly make a difference to the strategic direction of the organisation, or which impact directly on bottom line performance.

But do many CFOs care about GBS or indeed want ownership? Are some likely to see it as a major political headache, riddled with enormous organisational complexity and logistical challenges. Could GBS be seen as a significant diversion from all their other responsibilities? CFO’s don’t have to “own” GBS to get the potential benefits, and it can be someone else’s problem. Maybe it should not sit within the CFO domain at all, perhaps the CIO or indeed the COO is better placed to ensure it has an appropriate seat at the corporate table.

One final note – if GBS aspirations are realised, moving finance operations and finance “service delivery” into a cross-functional structure and reporting model is likely to impact on the skills needed; it will almost certainly impact the career paths that finance professionals have access to.  These are some of the issues we have been raising in ACCA’s latest report. Co-authored with Deborah Kops of Sourcing Change: Global Business Services – a game changer for finance? we explore some of the questions which aren’t necessarily being asked. GBS has enormous potential for many businesses, but there remain a lot of unanswered questions.

This blogpost was first featured on CFO World website, November 2013

By Barry Patton, finance director Ireland, Intel

The finance organisation at Intel is very much an influential finance operation in the sense that we report directly through the finance organisation to the CFO, and we have a key role to play in continuously challenging and helping drive value for the operations – so we are very business and operational impact focused. However, with the advent of our shared service operation, both transactional finance plus ‘higher value’ finance roles moved across.

From a retained finance function perspective this has created specific talent development challenges for us because many of our entry roles to develop our talent were lost, resulting in a retained finance organisation structure which had small numbers of finance personnel at more junior roles, small numbers at very senior roles, and too many roles in the middle – so essentially a circular shaped, rather than pyramid shaped organisational structure impacting on traditional career development paths. There may be very rational reasons why, from a cost and standardisation perspective, shared services makes sense, but it has development and succession implications for the retained finance team which are not always thought through.

Solutions – creating development paths in the retained function

  1. Carve out new roles to facilitate development. We have systematically carved out roles, creating for example two junior roles rather than one senior post. This starts to rebalance the retained finance organisational structure and open up more career paths but critically it also allows us to intervene at the junior level and give people opportunities to develop the skills they will need upwards – we can take them on the journey and these are skills you can’t learn coming straight in at a senior level. It’s cost neutral but of course there is a headcount implication and we get measured on both – so we have to make the case consistently.
  2. Support development opportunities through rigorous talent identification programmes. We have a talent identification process in place called ‘repeat high performers’ – each year one-fifth of our staff will be given this performance rating and if they meet this two years in a row, this categorises you as high potential which helps drive mobility because hiring managers become interested in you and from a corporate standpoint at a manager level it puts these individuals on everyone’s ‘radar’.
  3. Create influence in the business and maintain finance ‘connectivity’ by exporting finance talent. We try and give finance people business operational experience. This allows us to retain finance staff outside of the finance function so that if we have a major capability issue in the function we can reach back out to the business and bring people back. We also adopt the same approaches across our geographic regions, monitoring which finance people are where and fitting them into the overall succession planning cycle. This is also critical in creating a strong finance reputation within the business and ensuring we are truly connected to the operation.

This case study appeared in an ACCA report on Talent and capability in global finance functions. As part of ACCA’s qualitative research leading organisations shared their approaches.

research-insights92

By Jamie Lyon, head of corporate sector, ACCA

Reading a lot of the commentary on finance and the role of today’s CFO you’d be forgiven for thinking that today’s finance function spends all of its time on strategy formulation and execution. I don’t doubt for one second how important the role of finance as a strategic business partner to the organisation is, or the critical role progressive CFOs increasingly play in strategic support to the organisation. But it is also worth remembering the role the finance organisation plays in what I would call the fundamentals – cost management, cash-flow management, finance operations and so on. There are of course differences and changes in priorities – the strategy of the business, the prevailing state of the economy, its industry sector – are naturally factors which shape and influence the focus of finance leaders and the function at any given time. But it seems irrational to think that great finance functions are still not held to account on the strength of control and financial management of the organisation. This indeed is at the core of its fiduciary responsibilities. It’s also critical to get this right if you truly aspire to supporting the strategic agenda of the business – these multiple aims of the finance organisation are not mutually exclusive. Having this bedrock of broad finance capability is also, of course, particularly relevant in a period of on-going volatility and growth challenges.

We recently produced a report examining the future needs of the finance function, and the implications for developing the capabilities needed. The report, the complete finance professional, draws on a wide range of studies, including ACCA research specifically with CFOs and other finance leaders, to test these ideas out. The conclusions were very simple. Great finance functions needs to be able to draw on a wide range of finance capabilities. They can’t survive on staffing their functions with people schooled on a narrow version of management accounting, and this isn’t particularly healthy for developing the capabilities needed in future finance leaders either. Let’s consider the roles some finance professionals perform to illustrate the point – can financial analysts drive truly effective decision-making if they don’t have a broader understanding of risk; can internal auditors perform their roles effectively without a strong grounding across financial and management accounting disciplines; can accountants with investment appraisal responsibilities get by with no awareness of tax, or regulatory changes which may have implications on project benefits…and so on. I don’t quite think so.

Secondly, with public debt, currency instability, emerging market growth, commodity price rises and many other signs of significant volatility, finance leaders themselves are in a huge period of flux, change and uncertainty; we know the role of CFOs continues to evolve but it’s the shear breadth of skills and knowledge that is now called into play; also given the level of volatility in the global economy we see a real call out to balance the quest for growth with the need for control – this ‘balanced finance leadership’ really is as a hallmark of the top finance job right now. The report also comes to other simple conclusions – a recognition that the changing face of finance operations with the advent of shared services, outsourcing, centres of excellence and the retained organisation demands both excellence in traditional finance capabilities (e.g. process mastery, transparency in controls, specialised finance expertise) as well as new capabilities (transformation, project management, dealing with change, customer centricity and so on); and that strong finance functions earn the partnering mandate best by ensuring effective finance stewardship of the organisation as a strong foundation; in short you can’t neglect one for the other, it doesn’t quite work like that.

At ACCA we continue to advocate the need for breadth and depth of financial understanding in finance functions today.

“The talent agenda is vital” says Richard Moat FCCA, Chief Financial Officer at Eircom Group and Chair of ACCA’s Accountants for Business Global Forum, in this latest video about the changing role of the CFO.

He adds: “To be an effective business partner, finance people have got to understand the commercial realities of the business – have to have a strong commercial link as well as experience in finance.”

Richard also talks about how managing cost, rather than growth, is a big priority for CFOs today.

The Changing Role of the CFO report explains how the financial and business landscape is changing: greater uncertainty for the global economy, fluctuating energy costs, rises in commodity prices, currency fluctuations, government deficits and cost cutting.

A return to old school?

accapr —  19 February 2013 — Leave a comment

tall building, modern CFO

By Jamie Lyon, head of corporate sector, ACCA

In a recent global survey of finance leaders by the ACCA and IMA (Institute of Management Accountants), there was one stand-out data point of significant interest on the priorities of CFOs. The data suggests an entire balance of different priorities, some of which are entirely consistent with the finance leaders growing mandate, particularly around business insight and risk, while others were more akin to their traditional finance responsibilities; cost management, control and working capital. This isn’t entirely a surprise and is consistent with soundings we get elsewhere across different markets. This is also a probable underlying story of re-adjustment post-crisis.

Pre-crisis, many CFOs were in deal-making mode and, over the last five years, merger and acquisition activity has generally been one-way traffic; it’s only now that we’re starting to see a potential surge. Pre-crisis too there was much talk of the role of finance as a business partner. The partnering agenda and drive for insight hasn’t gone away but there’s a sense post-crisis that most finance departments earn their spurs first and foremost on ensuring the business is effectively controlled, that it meets its regulatory requirements and that it protects and maximises the funds it creates. The crisis brought into focus sharply a refocus on the finance fundamentals, the importance of sufficient liquidity and strong financial control. Part of the rationale here also relates to the broader call out now for business practices that drive long-term sustainable performance.

To this end, CFOs have a tough job on their hands, balancing the need to develop financial strategies that are beneficial over the longer term, knowing most eyes continue to be on quarter-by-quarter results… and that’s no easy call for today’s finance leader.

Check out the full survey results here….