Canada: Re-Energizing Finance: The Organization Challenge

Last Updated: October 5 2012

Article by Kishan Dial

Like many other parts of companies, finance organizations haven't been spared recent belt-tightening. They've been trimmed down and streamlined, and in many cases, are shadows of their former selves. Doing more with less has become a new mantra. Yet whatever the size of their teams, the onus is on CFOs today to leverage every part of the finance organization to deliver value beyond traditional transaction processing and control. PwC and faculty at Wharton share insight on how top finance organizations can rise to the challenge.

While few balance sheets have been left unscathed by the Great Recession, some finance organizations have come to the fore—aiding their companies with forward-looking business insight that helped them ride out the toughest stages of the downturn, or even take advantage of it and grow. That was the case of Cox Communications. In 2008, shortly before the economic downturn, the Atlanta-based broadband communications and entertainment company decided to build on an already successful transformation program to draw its finance team closer to the business with new processes and systems. It was good timing, according to Bill Fitzsimmons, the company's senior vice president of corporate finance and chief accounting officer. "You don't want to wish for a downturn to happen, but we were ready to become more proactive in advising the business units," he says.

"The finance organizations that are the best now are the ones that have been working at this for years ... and have been able to adjust to the downturn and understand what levers they need to pull to support the business," says Gary Apanaschik, a partner at PwC.

Yet are those organizations the exception rather than the rule? More often than not, CFOs lament that their finance teams are overworked and understaffed. They have spent the last three years surviving the Great Recession, cutting to the bone to maximize productivity and efficiency. One consequence: Many finance executives are retreating to their traditional number-crunching roles, becoming reactive rather than proactive while burnishing their reputations for being ace cost-cutters and not much else.

Wanting finance to become a more strategic partner to the rest of the company is one thing; actually becoming one is another, points out John R. Percival, a Wharton adjunct finance professor. He says research at Wharton has found that "finance people aren't playing the kind of role their colleagues are hoping they would play" in providing more and better input during mission-critical meetings. "It is either that they don't feel comfortable participating in those kinds of conversations, or if they do, their input isn't particularly helpful," he states.

Finance's struggle to deliver on expectations is hardly a new phenomenon. "Years ago, when cost reduction came in, single ERP (enterprise resource planning) systems arrived, and things moved offshore, some of these organization were stripped down – and finance struggled to deliver value added decision support to the business," recalls PwC's Apanaschik. As a result, finance teams became more known for routine compliance and controllership activities – closing the books, processing invoices and so on – rather than for taking a broad view of how they could drive value.

Even if there were pockets of value-enhancing initiatives, the collapse of Lehman Brothers and the beginning of the long economic downturn in late 2008 caused another retreat. For finance executives, it was just one of many signals that being strategic partners would have to wait. Their companies were in survival mode. They were being called upon to lead swift retrenchments, leaving no stone unturned – not just in finance but across the entire company – to rein in spending and respond to plummeting businesses.

"When the recession started, you saw that drastic cost-cutting," recalls Don Rupprecht, a PwC partner focusing on finance transformation. Capital expenditure was frozen or slashed, projects were put on hold or cancelled, and across-the-board staff reductions were "indiscriminately" put into force, "without thinking whether it is really the right thing to do" says Rupprecht. In the wake of these staff reductions, finance teams have also had to make do with less. But whatever the size of their teams, the onus is on CFOs in a post-downturn world to leverage every part of the finance organization to work differently.

According to PwC and faculty at Wharton, the following steps can help top finance organizations rise to the challenge:

1. Reflect on where finance is and where it needs to be

CFOs can begin by making an assessment of where finance is today, and where it should be given the company's needs. One way to gain insight into how finance is perceived by the organization – and to learn more about what the company expects from it – is to initiate customer satisfaction surveys. Another, perhaps more critical, measure would be to hold individual discussions with other business units. Also, finance chiefs should gather information from the trenches – that is, find out from their own staff members what they think needs fixing, and solicit their suggestions on how to fix it. Armed with that information, CFOs can then create a roadmap to address gaps in performance.

To help build that roadmap, CFOs should consider the following questions:

  • What is your vision for finance in your organization?
  • How do your internal customers perceive finance today?
  • How well is finance meeting the needs of the business?
  • How is finance currently organized? What roles are staff fulfilling? Is there any redundancy?
  • What should a future organizational chart look like in order to increase performance and service delivery?
  • Does the organization's technology effectively enable critical processes?
  • How mature and reliable are your finance processes?

2. Know when centralization is right, and when it isn't

"Finance is all about balance," says Wharton's Percival. "Companies make sense when the whole is worth more than the sum of the parts. What that means is that we have to get the pendulum between centralization and decentralization right. And frankly, you can swing the pendulum too far in either direction."

To understand how much to let the pendulum swing, CFOs may want to begin by looking for physical proximity of finance staffers to internal customers. "If you have accounts payable people in every location across the country, that is not efficient," says Rupprecht. "If you have all your financial analysts sitting in a central location trying to serve their customers thousands of miles away, that's usually not the best way to satisfy the needs of the business."

The result is that finance at most companies is a mix of functions that are outsourced or centralized in shared service centers or centers of excellence, according to PwC partner Mike Boyle. "It's not all or nothing," he says. But the days are gone of highly decentralized models, with multiple back-office operations. Top CFOs today have organized finance activities like accounting, compliance, tax and treasury in ways that are both cost-effective and efficient, and put them under the leadership of a team of experts. Only when that happens, he says, can a CFO free up his or her own time to hone a vision for finance.

3. Build in efficiencies to 'play ahead of the ball'

How does finance become a trusted adviser to the rest of the company? That was a question asked at Cox Communications, which began with the rollout of a new accounting and supply chain system in 2004, recalls Fitzsimmons. In serving around six million business and residential customers nationwide as one of the largest cable TV companies in the U.S., Cox had become decentralized, making it difficult for finance to collect, aggregate and analyze performance data transparently, consistently, and accurately.

"Once you start to execute on that vision and you can bring people along, it's amazing how much power you get from moving away from what I call 'playing behind the ball' and trying to catch up," says Fitzsimmons. "Now we're able to play ahead of the ball and have people ready who can help the business when they need us."

The new system enabled finance to centralize all accounting work from out in the field, while standardizing and automating much of the routine work. Within five months of the project beginning, Cox's finance team completed the company's first centralized closing of the books and has since been building on that efficiency. Closes are now completed in the first three business days of every month. That's fast compared with other companies, and it could be even faster, says Fitzsimmons. But there's a limit for the need for speed, he insists, particularly if it gives finance time to monitor the quality of the information they're providing and "make sure there are no surprises" when it hands off reports to Cox's business analysts.

Because of such changes, "people really do trust why we are advising them in a certain way," says Fitzsimmons. "We can help them interpret the numbers, but we're not there with the primary purpose to be that old-school referee standing on the sidelines."

4. Put the business first, finance second

Whatever the design of an organizational strategy, one thing is clear: Finance can't work in isolation. According to Fitzsimmons, having a physical proximity to the business has been critical for bolstering finance's knowledge of the levers to pull to sustain and grow the $9 billion of revenue Cox is generating every year. "What I've tried to instill in terms of the spirit of what finance does is to be more in the business," says Fitzsimmons. He reminds senior managers that "while finance may be the core expertise that you bring to a team, the focus should be on the business [by asking]: What are we trying to accomplish to advance our services to our customers?" The result? Finance "is a much richer job than it would have been historically," he observes.

That may give some finance managers a jolt, especially if they're unaccustomed to working in cross-functional teams. The key in that case, says Wharton's Percival, is for CFOs to remind their staff that their job is to make sure everyone is fully aware of the financial implications for what is being proposed. "Maybe deep down, as a finance person, you might not think what's being proposed is the right thing to do, and you can make that clear in your financial analysis," he says. "But if people go ahead and do it anyway, you still did your job."

There's also plenty that CFOs can do to help increase their team members' comfort level in working side-by-side with the business. Education is one. Rupprecht recalls how the CFO of a hotel group held a two-day, global conference for its finance leaders where the majority of the time was used to discuss a new multimedia brand campaign rather than, say, the latest accounting standard changes, as would have been the case in the past. "They had lots of people from marketing there, explaining the value proposition for each brand, [and] the CIO explaining the value of the investments they were making in technology," he says, giving the firm's finance leaders insight into the business that would be useful in providing day-to-day support.

5. Fill the leadership pipeline

A CFO's organization strategy also needs to consider the global leadership pipeline, notes Jason Wingard, vice dean of executive education and adjunct professor of management at Wharton. During the financial crisis, "organizations have had the luxury, if you could call it that, of having employees held captive," with widespread freezes on hiring and promotions, and "highly qualified people with lots of institutional knowledge doing more and more, and in some cases, being asked to double up on responsibilities when there were layoffs." As the job market slowly re-opens, over-stretched staff may be eager to look for work elsewhere, and Wingard's concern is that CFOs are at risk of encountering deep holes in their finance organizations, which will leave their companies ill-prepared for growth.

Old methods that CFOs once relied on to fill key roles may no longer be as effective as they once were. For example, a traditional way CFOs have attracted, developed and retained finance staff was to offer rotating assignments, often away from company headquarters at key international sites, in operations or other parts of finance.

While PwC partner Mike Boyle says rotations within finance are strategically important to develop staff, he sounds a note of caution when it comes to more specialized functional areas. Rotational assignments are "great in theory, but today's world is so specialized," he notes, using the analogy of an American football team. If a coach rotated a quarterback through all the positions on the team, "that person would fail, and the team would be terrible," he says. Likewise, in finance, if a CFO rotates a top-notch treasurer—one who understands cash management, banking relationships, currency risks and so on—to a post in controllership, he or she "might have a serious problem back in treasury," he notes. "A CFO needs specialists and experts to cover complex areas."

Still PwC and faculty at Wharton say there is plenty that forward-looking, innovative CFOs can do to ensure their finance teams have the expertise they need. (A subsequent white paper in this series will specifically address how CFOs can build the bench strength they need to increase performance today and in the future.)

6. Be ready for continuous change

So if CFOs have re-organized their teams to leverage all available resources, clean up processes, boost finance's business acumen and increase their input into strategic decision-making, what's next? More change, say experts. Just like the businesses they serve, the services and support that finance provides can't be static.

The way PwC partner Tom Archer sees it, any plans for finance's future need to take into account a major change in how, and where, companies generate revenue. In all sectors, he says, the "underlying tenets" of how companies engage with their customers, the way customers purchase, the pricing and contracting mechanisms, delivery vehicles, and so forth are transforming the "DNA" of revenue. "Every day, that DNA is evolving."

Finance needs to prepare business leaders for whatever the new DNA may be. By way of example, he cites technology's impact on sales and marketing. While companies generally spend 25% to 45% of their revenue on sales and marketing, "my perspective is that under the new model, with self-service purchasing, mobile engagement, social networking and digital marketing, it's going to significantly reduce that cost paradigm," he says. "And because business unit leaders don't wake up every day thinking about how they're going to significant cut their budgets, the CFO is going to have to lead that thinking."

What's more, where that revenue will be generated will also change. According to a global PwC survey of CEOs published in November 2011 (15th Annual PwC Global CEO Survey), 62% of the 200 respondents expect a greater share of revenues to come from emerging markets in the next five years. Archer says that when the aggregate GDPs of major emerging countries surpass that of developed countries – "something we're being told will happen during our professional lifetimes, give or take 10 years" – some very large emerging-economy companies "will have built new business models under that new DNA, with faster innovation cycles, lower operating costs and so on." Archer wonders how many CFOs are aligning their finance organizations now to be ready.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions