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How Finance can Help Spring the Numbers Trap

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The more the issues of finance, cost discipline and meeting shareholder value rise in importance, the more we will see the CFO become regarded as the most important individual in the corporate hierarchy – Andrew Kakabadse Professor of International Management Development, Cranfield School of Management

Finance directors have a powerful role to play in springing the numbers trap and leading the conversations that keeps the business focused on how it will express its purpose and drive competitive advantage.  But the pressure to deliver the numbers in the short-term is immense.  Further, their role is broader and more complex than ever before and that complexity and ambiguity will only increase.  Post-financial crisis compliance and regulation is well intentioned but is overloading the finance function.

Double entry bookkeeping worked well in the industrial age, but is less effective in the connected age.  With the IRCC estimating that only 20% of company value is driven by the P&L and balance sheet and therefore 80% is driven by ideas, networks and people, finance needs to find a way to unlock the value of human capital.  Focusing only on the financial statements to drive value is no longer an option. Companies are about people, not numbers.

However, talent development has not kept pace, with a mismatch between the skills organisations need within finance and the skills a typical finance function has.  85% of CFOs say talent is a major concern according to research by the CEB[1] with few rating their direct reports as effective in the behaviors and skills that drive excellent performance. On average, finance professionals are most skilled in the areas that have the least positive impact on long-term value creation.

Development programmes and the professional bodies have typically concentrated on technical competence, however, without the appropriate behavioural skills, it is difficult for finance to gain the respect of the business and the markets and make progress on their strategic leadership of the business.

Former Deloitte’s partner Sally Fisher, a specialist in organisations and change, believes there is mismatch between the skills organisations increasingly need within finance, and the skills a typical finance function has.  Critical for CFOs and their functions to develop are:

  1. Relationship building – not just within finance, but across departments and the hierarchy, with an ability to break down silos.
  2. Communication – being articulate in written and verbal communication gives others confidence and ensures messages come with clarity and impact.
  3. Strategic thinking – focusing on the areas of most importance, and not being side-tracked by low-priority issues.
  4. Negotiation and influence – once strategic alliances have been formed, diplomatic skills and an ability to negotiate and influence will push forward your business strategy.
  5. Stronger commercial acumen – the core of the job is growing in importance, too. Just as hiding behind the numbers is not an option, a strong communicator unfamiliar with a spreadsheet will soon be found out.

 

In essence, this is about connection and being good with people.  It’s only through bringing together all of an organisation’s capital – numbers and people – and having the conversations that matter – conversations that put value at the heart, that finance leaders can spring the numbers trap and unlock value.  Impossible when your head’s buried in a spreadsheet.

 

 

 

 

 

[1] CEB April 2013 2,200 finance managers surveyed from 78 global companies.

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