Achieving agility: developing people
Do you want your business to respond faster to outside risks and opportunities? The finance team plays a decisive role in the shift to an agile organisation, but this new role can be a big change from finance's traditional contribution. A traditional finance team spends too much time looking backwards and processing unnecessary detail. Rather than joining the officers on the bridge, the finance team is too often below deck. Transforming the finance team is a highly rewarding process of coaching and alignment. Important spin-offs are a boost in morale and retention.
There are six key people-points about this transformation of the finance team.
Transformation is not a revolution
Make sure finance really understand the financial performance of the business
Get finance more engaged with the business
You will need some bean-counters
Flexibility and empowerment: the leadership role
Development and alignment: new job descriptions, new performance evaluation methods
This is not a revolution
Most finance teams are at a good starting point. They are already centres of excellence in working with numbers, using key business systems (not just the accounting systems), and analytical tools like Excel; in some cases they may be decent BI (business intelligence) users as well They understand book-keeping and accounting principles, and show a strong commitment to accuracy, integrity and safeguarding assets. And the Finance team often has some important relationships with suppliers.
Make sure the team really understands the financial performance
Despite the strengths above, I'm surprised by how often people in the finance team don't see the forest for the trees. AR knows which customers are overdue, but doesn't really understand how receivables affects the ability to hold stock or pay suppliers, and how that in turn affects customer service levels and sales.
Since a key success indicator of a transformed finance team is indeed seeing the forest, this must change.
I expect everyone in a finance team to know how the three core financial statements fit together. Hold regular financial review sessions for the finance team only. Share most of the analysis given to the management team. Rotate who presents the slides. This may confront some SME owners who are uncomfortable with information sharing. An effective finance leader with good influencing skills will cope with this :)
Increase engagement with the business
The finance team needs some people who are deeply interested in the business. These are people you can drop into the rough terrain. They have the awareness to detect when there is something happening they need to know about, and then use initiative to investigate further.
So, you need some people you can parachute into the business. A team of six should have one or two. Criteria for identifying candidates who have the right potential are contained in the downloadable position paper, below.
It's expensive and disruptive to solve all skill gaps by recruiting. I've worked in low-profile, out of the way organisations where you may not expect to find much talent, and yet I've always found people with this potential right under the nose of local management.
Team Balance: In defence of bean-counters
Finance must never leave behind the key requirement to be accurate, reliable and predictable in its core responsibilities. Of course, when this is all Finance does, it gets a reputation for bean-counting. However, bean counters have a valuable place ... if they are good bean counters. Even in a small team aim for one or two of these anchors. Such people are a trade off: they offer less flexibility and engagement with the business. So to earn their place, they must be highly reliable. When this occurs, they will be valued members of your team.
Flexibility and empowerment: the leadership role
Leadership in a transformed finance team should be more guiding than controlling. Firstly, as CFO you will rely on the judgement of your people to enforce business controls and raise concerns. Secondly, by being overly directive you take away initiative, you risk dulling judgement and you reduce ownership; if people feel personally accountable and responsible, they will present you with finished product, and if they don't, you have the wrong people. Let people define how they will meet an objective, don't tell them how to do it. In the process of working this out, they grow their own ownership of the task.
Development and alignment: new job descriptions
I structure the transformed finance team around four pillars. There are other ways to understand how you want finance to work. The vital points are
(a) people need to be aligned to the new mission for finance
(b) everything I discuss above must be reflected in how performance is assessed
The download (below) has much more detail, including some further reading on practical performance evaluations appropriate for SMEs.
Download the position paper
The download describes in some detail how I recommend approaching this.