According to the 2016 Finance priorities survey conducted by consulting firm Protiviti, the top priorities for CFOs in the coming year are margin and earnings performance followed by cyber security, strategic planning, forecasting and budgeting. Personally I would add corporate services optimization to that.
In addition to this, KPMG in their ‘View from the top’ survey disclosed the opinion of global CEOs that the role of the CFO will increase significantly over the next three years, where a successful CFO will leverage the latest technology to add more value in global business challenges by getting more out of data and staff. This view is backed up by a recent publication by Deloitte CFO Frank Friedman on the future role of the CFO.
Remarkably, the same KPMG survey revealed that one third of CEOs did not feel their CFO is up to the challenge. During my experience of managing and supporting business transformation programs, I have come to consider a new approach which would provide the CFO with the tools and techniques to succeed.
The approach (which I introduce as ‘a philosophy for responsible and efficient business‘) suggests a collaborative structure for the management, control and development of corporate services to include Finance, HR, Commercial, IT, Environment and Ethics housed within a progressive and agile structure which promotes and encourages sustainable continuous improvement.
Corporate services structure
This whole philosophy can be represented by the graphic below, using an appropriate ‘temple’ structure to provide the visual aid and indexation to which further media will be tagged and assigned.
Acceptance of change
Culture, (more specifically resistance to change) is often the biggest barrier to improvement or transformation. There must be an acceptance of change, it must be believed in and driven from the top so that on inception of this new corporate services function, it has the chance to succeed.
Accepting change as part of ongoing operations involves understanding why change is required, the implications of maintaining the status quo, and support (including training, counselling and communications) to help all stakeholders.
Often, the separate functions of finance, HR, Commercial, and IT rub against each other, many with vastly differing power bases, political priorities, and skill sets. Some have opposing objectives, and most use excuses as to why they cannot work together. Ethics and Environment are mostly afterthoughts at best, and a ‘tick in the box’ for accreditation and certification.
If true business synergies, enhanced outputs, and ethical responsibilities are to be gained, this functional silo approach should be dissolved, and a new collaborative function constructed with each section of equal standing. The specifics of activities are personal to each business, but the format of the merged and extended corporate service function can be same.
According to EY in their recent survey, the CFO’s skills in analysis, reporting and control are in demand outside of finance. This places the CFO in prime position to lead this new corporate services function, and in order to meet growing requirements the CFO will need to leverage both the output synergies from working collaboratively and direct cost efficiencies that may result. (A recent article from Pickering Byrnes consulting further extends this thought).
But setting up the new function may not be enough. It must be accepted and believed in from the top; reinforced by supporting pillars to guide the function, create the right culture, ensure sustainability, and be responsive to changes in market demand; and be enabled by prevailing and appropriate technology.
Guidance and philosophy
Once change has been accepted and the corporate services function set up with the relevant activities, guidance should be provided using the 6 supporting pillars to ensure direction, control and sustainability;
- QMS (Quality management system)–Doing what you have always done, in the same way and with the same people will result in the same output at the same cost. If processes are mapped and integrated into everyday activities, lean principles can be employed with performance indicators assigned, managed and monitored at key stages in the process. Added to this are the regulatory requirements that should be integrated into the QMS where relevant to ensure compliance.
- Direction–Without direction how do people know where to go, whether they are all going toward the same destination, and working with each other rather than against? Vision, values, strategy, goals, and objectives are determined, collated, communicated, embedded and monitored from here.
- Control–This could also be classified as intelligent decision making. There is little benefit in having information and ideas if there are no decision makers willing or able to put ideas to action. Control begins with data, which needs conversion to on-time delivery of intelligence.
- Responsibility–As business leaders, employers, human beings, inhabitants of one planet, we are responsible to all stakeholders to do the right thing in the short, medium and long terms. We must take responsibility for our actions, placing good corporate ethics at the heart of our decision making and strategic aims.
- Structure–This is actually three items in one; structure type (i.e. pyramid, matrix, complex matrix); layers and spans of control (i.e. number of decision making points and the breadth of managerial responsibility); governance (i.e. having the right people in the right position anointed with the right power to own the processes and decisions that are required in that area).
- Pulse–This shapes culture and is central to the concept of continuous improvement. Keeping up to date with (or leading) trends and technology ensures the business model is always relevant. Change becomes the norm rather than a cyclical exercise, and is managed by a change or thought leader.
As well as the transactional requirements from the combined corporate services function, enabling technologies can support each of the 6 pillars, facilitating the intelligence gathering, providing up to date visualization and satisfying security and control requirements. Most modern ERP solutions perform integrated transactional requirements for Finance, HR, Commercial, and environmental activities. But few have the capability to extend out into supporting the 6 pillars.
In order to maximize the benefits from this model it is important that data be converted to information and presented as intelligence. This can be achieved by the correct implementation of a suitable ERP solution to enable the decision makers to make the right decision on time, with as much accurate information as possible, delivered against indicators, budgets and benchmarks presented in a logical and attractive manner.
Suitable ERP solutions that can accommodate all of this should have the following attributes;
- Integrated multi-functional transactional ability
- Data storage, tagging and quality measures
- A robust reporting and query engine
- A business intelligence layer that sits across the full range of functional data
- A business intelligence medium that allows output of graphical and numerical data on a number of sources including mobile.
- A process workflow layer that allows access to relevant documents and actions directly from the process diagrams
- An agile setup that works with a continuous improvement environment
- An enterprise operational intelligence layer that allows integration of a company’s strategy with results and forecasts from data held within the ERP.
- An integrated security layer that ensures a ‘one stop shop’ for information assurance
- A robust and searchable documentation layer that allows relevant electronic data to be stored and recalled where and when relevant.
Analysts such as Gartner often publish research to provide up to date analysis to assist in the search for suitable systems and vendors. A recent one can be found here.
During 2016 I will be expanding on each section in a series of papers designed to take the reader closer to understanding what they are, why they are important and how to implement them. I will be using the hashtags within each section on any social media feed I post that is relevant to this model, to act as a filing cabinet for future references, and aid the reader in understanding where it fits within the overall philosophy.
I would very much enjoy your company through this journey, by following my media postings and commenting as appropriate. Please connect using;