Fintan Somers, International CFO and change leader, SomersConsult

Fintan Somers, International CFO and change leader, SomersConsult

When I join the executive team of a business as CFO for the first time – whether it is a high performing team or not – I am very aware that I have a fairly brief honeymoon period. During that time, I need to evaluate where my function can add most value and develop a compelling program that makes a difference to the business. Then, the pressure is on to deliver.

Sometimes the agenda is thrust upon you. For example, a local, regional or global economic crisis or stress has put profitability and/or growth under pressure.  Sometimes it is less obvious. Whatever the business or environment you are dealing with, it is the responsibility of the CFO to shine a light on and put measurement around the material opportunities, risks, weaknesses or strengths that the management team should be focused on. No business is ever ‘just fine’.

In my experience, poorly performing businesses and management teams do not support and are not supported by an effective enterprise financial management culture (EFMC). The creation of this needs business ownership and leadership. Of course, finance can facilitate and support its development. However, unless leaders in the business really get behind it and push for it to happen, it won’t.

You can recognise an effective EFMC when everybody from top-to-bottom of the organisation:

  • Understands and owns the overall financial targets and their role in reaching those targets
  • Understands and executes the things that need to happen to reach the targets
  • Is looking forward, anticipating problems and opportunities that might affect financial performance, taking action to fix or mitigate the problems and/or exploit the opportunities
  • Communicates and manages problems and issues before they hit the reported results and opportunities before they are missed
  • Is focused on influencing and communicating key performance indicators that demonstrate traction on the things that matter
  • Understands the linkage between pay and performance

I can pretty much guarantee that if you see a poorly performing organisation, one or more of these factors needs improvement. And, of course, it starts with the leadership team. If they fail on or de-emphasise one or more of these factors then it is likely that this will be replicated all the way down the organisation.

The leadership challenge of creating an effective EFMC is a journey rather than a destination. One reason for this is that it has human complexity.

Irrespective of the tools that you introduce, the human dimension involved in developing and maintaining a strong EFMC can be the most challenging, not least the risk that a lack of transparency about financial performance and accountability suits some people very nicely – and this can include very senior people.

I have also observed that businesses with deficient EFMC will often make a lot of noise about the inadequacies of the finance function, the IT function, the HR function; indeed every function except the parts of the business that have the responsibility to make money! Sometimes this is justified. But, more often than not, you find that the people making the most noise are the people most unwilling to accept that they share the leadership responsibility in creating the culture and that to be successful you need to invest in those functions.

Communication, particularly in larger organisations, poses one of the biggest challenges in ensuring that the vast majority of people in the organisation understand the part they play in financial outcomes. I have been surprised at how often I have come across people who have worked for years for a business yet have little knowledge about how the business actually makes money.

What is absolutely certain is that you cannot create an effective EFMC if you do not have an effective finance team and other support functions. And many times I have seen how under-investment in or poor leadership of the finance function and other support functions is a big contributor to poor business performance.

In the next couple of months, I will look at Finance Function LIFT, which is my model for developing and executing Finance Function transformation.