Over the past twenty years I have served in a variety of international CFO roles with two large multinational banks and a bank in the Middle East.
All of my assignments have involved improving business profitability and many have necessitated transforming the finance function into a more effective support tool for the business.
What I have often found is that businesses that are not firing on all cylinders or are incapable of responding quickly to an external shock, have a finance function that needs improvements; to fix the business it is often necessary to fix the finance function to a greater or lesser extent.
So, in this series of articles I will be discussing how to build an effective finance function.
The series is aimed at CEOs and management teams who need some guidance as to the actions they should expect to see from their CFO to address their frustrations with perceived deficiencies of the finance function.
Of course, it is also aimed at CFOs and finance teams that are on the receiving end of negativity from their business and who could benefit from practical guidance on how to make things better. However, perhaps the most important audience is those who think that no change is required. This type of complacency is a recipe for failure and loss of edge – which is why all well-run functions incorporate constant change into their operating model. I am a big fan of the “only the paranoid survive” school of thought.
Having developed and executed several finance function transformations across a range of businesses and international locations, I have been struck by the similarity of the challenges faced by under-performing finance functions and, for that matter, under-performing businesses. Whether based in the Middle East, the UK, the US, Latin America or Europe, I have found that under-performers share many of the same or similar characteristics. In this series I will describe them.
I have also found that the operating model for an effective finance function is pretty standard. I have transformed several finance functions using a fairly simple operating model that I will share with you over the course of this series.
Over the years, I have developed a number of tools and processes for designing and implementing successful transformational change. These tools and processes can also be applied to transformation of other functions that share many of the challenges of finance, for example, risk and HR functions. These tools and processes are not, in themselves, enormously complex but assembling all of the components and executing them cleanly can sometimes be challenging and stressful.
So, let’s start at the beginning – what is the point of it all? What are the objectives of the CFO? Clearly communicated, these objectives will form the basis for much of what the finance team does. They also, to some extent, dictate the personality of the team.
The objective I use is:
Support the CEO and the executive team in building a sustainable and profitable business in a manner compliant with the policies and interests of the business.
This communicates three important levels of focus for the CFO and the team:
1. We are in the relationships business, supporting the senior management team(s).
2. We are in the building profitability business; we are not just scorekeepers, we influence outcomes.
3. We are in the line-of-defence business against unsustainable or non-compliant plans or actions. Again, we influence outcomes.
I have seen senior-level people endlessly debate this type of mission statement. In my opinion, you shouldn’t waste your time. And it does correlate fairly closely with the pithy strapline for the finance function of Lloyds Banking Group during my time there: “Insight and control at the heart of a winning business.” I couldn’t have put it better myself.