How does the role of finance have to change in the future?
We have to:
Be key decision-makers enabling the timely release of capital to the right strategic priorities in the organization
Strengthen the organization’s ability to create the flow of capital, and help leaders think differently about the concept of investments, not in the market, but investments into our own business.
We believe the following steps can help us make strides in that journey:
Migrate financial oversight and organizational structure to customer value streams, creating fewer financial decision-makers and a process that is informed by and dedicated to value creation as defined by your target markets.
Develop strategic resource deployment. This starts with the forecasting model, so it is not looking back, not aimed at a specific number, but rather identifies a goalpost based on desired outcomes. The entire philosophy of a budget implies that you “get” to spend it, and we have not yet been successful at breaking that mindset.
Key questions we need to ask are:
“What is the total available capital in the organization?”
“What is the best way for us to invest it to create value?”
Following agile thinking, we need to get to more “sprint-like” thinking in funding the business. Move to a shorter time frame for allocation of resources – requiring perhaps a quarterly request for funding, based on strategic priorities and evidence of value-aligned output.
Eliminate wasteful allocations. Deploy a responsive shared services concept – one that has a greater level of real accountability to the value chain decision-makers and is compared to industry. Cost overruns then cannot be “charged” to their customers, unless there had been discussion and agreement as to the increased costs and the value they brought to the customer through that value chain.
“But where then does this real financial expense get “accounted” for if the value chain does not absorb it?”
A process must be developed in which to deal with the cause of the spend and determine whether that cost continues in the organization. Recognize that the legal, external, compliance accounting and reporting are essential, and need to be looked at across the organization’s end-to-end processes to be truly value-add.
Redefine finance team functions and capabilities. Finance needs to help the business establish not only process productivity, price, unit cost, cycle-time, quality, and volume performance targets, but also value-add metrics that will actually correlate with the changes desired in the organization and measure the impact of value for the customer.
We cannot just hire “do-ers.” They need to have strong business and Lean/Innovation acumen as well. Strategic consulting skills are critical, as are strong relationship skills.
Finance should operate like personal trainers – holding the business owners accountable to staying lean and fit in the part of the value production they oversee.
Finance needs to be at the table, providing the critical analysis and a third-party viewpoint, able to provide an accurate pro-forma “what if scenario” based in reality.
Empower leaders with the right information to build the decision making “muscle” and encourage strategic and creative thinking.
Ideas to accomplish this?
Thinking rooms
Creativity training
Permission to experiment
We need to be intentional about it.
We all actually begin as creative people.
“Un-creativity” is learned.
We have to help people remember their creative capabilities.
We need to be able to identify what decision support is needed in order to enable manager-level decision making.
Our goal with this series has been to provide food for thought, the concept being to challenge, to ask the right questions and be willing to leave some of them unanswered. We want leaders, both inside and out of the Finance function to think, reflect, and consider how they can take action that will allow their business to thrive in the next generation. We want finance leaders to grow personally and encourage them to be willing to face their own “continuous improvement” in order to advance their value delivery.
To learn more about financial strategy and LEAN accounting with the Convene consulting platform, just click here.
About the Author
Marita LaChapell
Marita's 30-year career brings a unique skill set as an experienced CFO / CPA with financial analysis expertise, Enterprise / Information Systems knowledge, and Lean Six Sigma Black Belt experience in transforming operations. Combined, this enables her to assist business owners in tackling their challenges and growing profitably. Through her expertise as a wealth advisor and personal financial specialist (CKA®, CLTC®) she can advise regarding the most impactful ways to utilize your and your company's wealth.
To learn more about her consulting practice and connect with Marita, view her profile or connect with her here.